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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

COMMISSION FILE NUMBER 0-15160

ADVANCED TECHNOLOGY LABORATORIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

WASHINGTON 91-1353386

(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

22100 BOTHELL-EVERETT HIGHWAY 98041-3003
P.O. BOX 3003 (ZIP CODE)
BOTHELL, WASHINGTON

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (206) 487-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

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 registrants' 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. [_]

On February 21, 1997, the aggregate market value of the voting stock held by
non affiliates of the registrant was $481,611,893 based upon the closing sale
price of $34.88 per share on the Nasdaq National Market on such date.

Number of shares of Common Stock, $0.01 par value per share, of the
registrant outstanding as of February 21, 1997: 14,100,970.

DOCUMENTS INCORPORATED BY REFERENCE PART
----------------------------------- ----

Annual Report to Shareholders for the fiscal year
ended December 31, 1996.......................... Part II (Items 6-8)
Part IV (Item 14)
Proxy Statement for the 1997 Annual General
Meeting of Shareholders.......................... Part III (Items 10-13)

EXHIBIT INDEX IS ON PAGE 22

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ADVANCED TECHNOLOGY LABORATORIES, INC.

TABLE OF CONTENTS

PAGE
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PART I
ITEM 1. Business.............................................................................. 3
ITEM 2. Properties............................................................................ 14
ITEM 3. Legal Proceedings..................................................................... 15
ITEM 4. Submission of Matters to a Vote of Security Holders................................... 15
PART II
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters................. 15
ITEM 6. Selected Financial Data............................................................... 16
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 16
ITEM 8. Financial Statements and Supplementary Data........................................... 16
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.. 16
PART III
ITEM 10. Directors and Executive Officers of the Registrant.................................... 16
ITEM 11. Executive Compensation................................................................ 16
ITEM 12. Security Ownership of Certain Beneficial Owners and Management........................ 17
ITEM 13. Certain Relationships and Related Transactions........................................ 17
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................... 17

PART I

ITEM 1. BUSINESS

STRUCTURE OF THE COMPANY

Advanced Technology Laboratories, Inc. ("ATL" or the "Company") is engaged
in the high-technology medical systems business. ATL develops, manufactures,
markets and services diagnostic medical ultrasound systems and related
accessories and supplies worldwide. The Company currently operates through 13
international affiliates and through local distributors worldwide.

COMPANY HISTORY

ATL was founded in 1969 and acquired by Squibb Corporation ("Squibb") in
1980. In 1982 Squibb acquired Advanced Diagnostic Research Corporation
("ADR"), a Tempe, Arizona company which was a leader in obstetrical and
abdominal ultrasound, and A.B. Kranzbuehler ("Kranzbuehler"), a European
ultrasound manufacturer and distributor of ADR products in Europe. In 1986
Squibb organized its medical equipment businesses, including SpaceLabs
Medical, Inc. ("SpaceLabs"), a manufacturer and supplier of patient monitoring
and clinical information systems, under a corporate holding company, Westmark
International Incorporated ("Westmark") and spun the companies off through a
distribution of Westmark common stock to Squibb shareholders on January 2,
1987. In 1992 Westmark shareholders voted to separate Westmark into two
publicly traded companies comprising two major operating subsidiaries, ATL and
SpaceLabs. Westmark shareholders received an equal number of shares of the new
separate public company, SpaceLabs, and Westmark changed its name to Advanced
Technology Laboratories, Inc., the same name as that of its remaining
operating subsidiary. ATL conducts a substantial portion of its business
through this domestic operating subsidiary, now known as ATL Ultrasound, Inc.

In May 1994 the Company acquired Interspec, Inc. ("Interspec"), a developer
and manufacturer of medical diagnostic ultrasound systems and transducers
headquartered in Ambler, Pennsylvania through a stock for stock exchange that
was approved by the shareholders of both companies. This acquisition added the
Apogee(R) product lines of Interspec to those of ATL, giving the Company an
expanded presence in the mid-range price and cardiology ultrasound markets.
During 1995 the Company consolidated Interspec's Ambler, Pennsylvania
operations with ATL's worldwide headquarters operations in Bothell,
Washington. In 1995 the Company reincorporated in the state of Washington from
its original domicile in Delaware.

In February 1997 the Company announced that it had entered into a memorandum
of understanding to sell its Nova MicroSonics division to the Eastman Kodak
Company ("Kodak"), which is establishing a worldwide presence in multi-
modality image management. ATL has been working cooperatively with Kodak for a
number of years in ultrasound image management product performance and
distribution. The Nova MicroSonics division manufactures and markets
networking, image acquisition and measurement products for use in ultrasound
data and image management by hospitals, labs, clinics and physician offices.
The Company expects to complete this transaction during the first half of
1997. After transfer of the division to Kodak, ATL will continue to work
closely with the Nova MicroSonics unit in the development and distribution of
image management products. The transaction is not expected to result in a
material gain or loss.

THE ULTRASOUND BUSINESS

ATL develops, manufactures, markets and services diagnostic medical
ultrasound systems that are widely used in a number of medical applications to
assist the physician in monitoring and diagnosing a variety of conditions,
such as tumors, inflammations, obstructions, cardiovascular diseases, fetal
development, and surgical assessment. Ultrasound systems provide a safe,
noninvasive and painless means of observing soft tissues and internal body
organs and assessing blood flow through the heart and vessels. ATL is one of
the leading suppliers of diagnostic ultrasound systems in the world. Its High
Definition(TM) Imaging (HDI(R)) and Apogee product lines

serve all major diagnostic ultrasound clinical markets--radiology, cardiology,
obstetrics/gynecology ("OB/GYN") and vascular medicine--and a variety of newly
emerging clinical markets. These product lines span a range of system prices
from mid to premium priced ultrasound products.

Diagnostic ultrasound products, upgrades and accessories sold for use in
hospitals, clinics and physicians' offices accounted for an estimated $2.3
billion worldwide market in 1996. The total medical imaging market, including
x-ray, MRI and CT imaging equipment is estimated by the Company to be over $8
billion worldwide in 1996.

ULTRASOUND TECHNOLOGY

ATL's Technology

The Company believes that it has become a worldwide leader in ultrasound
technology through its proprietary position in digital, broad bandwidth
beamforming, advanced software, and broad bandwidth scanhead technologies.
Ultrasound systems include three major components: a scanhead which transmits
sound waves into the body of a patient, receives returning echoes from the
patient and converts the echoes into electrical signals; a processing unit
which processes the electrical echo signals into images and measurements of
physiological conditions within the patient's body; and a monitor which
displays the resulting images or measurement information. ATL's scanheads are
characterized by the breadth of the bandwidth of ultrasonic signals which are
transmitted and received. ATL's HDI systems are characterized by their ability
to fully process broadband signals characteristic of the body's tissues
digitally. ATL has been a pioneer in digital ultrasound technology and
introduced the industry's first digital beamforming processor in 1988. In
February 1997 ATL introduced the HDI 1000 system, which combines ATL's core
technologies in broadband scanheads, digital beamforming, and advanced
proprietary software to form a software-based color system for the world's
rapidly growing mid-range markets.

ATL'S PRODUCTS

HDI 3000 ULTRASOUND SYSTEM. In October 1994 ATL introduced its fourth
generation digital ultrasound system, the HDI 3000(TM) system. The HDI 3000
system is designed to address the economic imperatives of an evolving health
care environment in the United States and international markets. It is lighter
in weight than competitive premium systems, providing greater mobility and
enabling it to be easily moved to the bedside of critical care patients. The
HDI 3000 system also features an intuitive, ergonomically designed set of user
controls, which enable an ultrasonographer or physician to quickly gain
confidence in operating the system and performing highly diagnostic
examinations. The HDI 3000 system provides interactive menu screens with
diagnostic procedures selectable at the touch of a button. This feature,
called Tissue Specific(TM) Imaging, automatically optimizes over one thousand
system operating parameters for the selected diagnostic procedure and
scanhead. The HDI 3000 system offers full Doppler capability including Color
Power Angio(TM) imaging features, Power Motion Imaging(TM) for cardiac
applications, Contrast Specific Imaging(TM) for harmonic imaging and imaging
with ultrasonic contrast agents, and three dimensional imaging of the human
vasculature. The HDI 3000 system operates with a full array of broad bandwidth
scanheads, including a family of Entos intraoperative scanheads designed for
surgical use, the diagnosis of breast disease and musculoskeletal injuries.

The HDI 3000 system can be purchased in a variety of configurations for
specific clinical applications, including a fully configured model for the
cardiovascular market, the HDI 3000cv system.

In April, 1996 the U.S. Food and Drug Administration (FDA) approved ATL's
breast premarket approval application (PMA) for the HDI system. This approval
allows a new clinical application of ultrasound that, in conjunction with
mammography, will provide physicians with a high level of confidence in
differentiating benign from malignant or suspicious breast lesions. Studies
have shown that approximately 80% of breast lump biopsies performed in the
United States have resulted in a finding that the lump is benign. The PMA
application was

based on the results of an international multi-center study involving the
examination of women with indeterminate lesions with the Ultramark 9 HDI
system. In December, 1996 the FDA approved a PMA supplement which allows the
HDI 3000 system to be marketed for this new application. ATL has equipped the
HDI 3000 to perform examinations in accordance with the new protocol through
the introduction of a new breast analysis package for the system, which was
introduced in the fall of 1996.

In October, 1996 ATL expanded the price and performance ranges of the HDI
3000 system by making the system available in both standard and advanced
configurations. The standard configuration provides all of the standard
grayscale, Doppler, colorflow and reporting capabilities of a premium
ultrasound system. The advanced configuration adds an expanded image memory,
Color Power Angio imaging features, Power Motion Imaging capability, three
dimensional Color Power Angio imaging, DiskLink and NetLink communication
functions, and Contrast Specific Imaging(TM) for imaging with ultrasonic
contrast agents. The standard configuration can be upgraded to any of these
advanced capabilities at a later date.

New scanheads which became available during 1996 for the HDI 3000 system
included a pediatric biplane transesophageal echocardiography probe and a C8-5
pediatric neonatal probe. The new probes were complemented by a new pediatric
calculation software package for the system.

HDI 1000 ULTRASOUND SYSTEM. In February 1997 ATL introduced the HDI 1000
system, a mid-range grayscale, color and Doppler product for the general
imaging and OB/GYN markets. This system makes many features of high
performance ultrasound systems affordable to a broad range of potential
customers through advanced software implementation: the system replaces over
50% of the hardware of a conventional ultrasound machine with software which
performs over 70% of the functions of the ultrasound system. At the heart of
this software-intensive system is ATL's proprietary Multitasking Software
Management technology (MSM(TM)), which utilizes an "object-oriented" software
architecture to perform self-contained software tasks which replace
conventional ultrasound hardware.

The HDI 1000 system is also unique among mid-range ultrasound products for
its broad range of communication capabilities. The HDI 1000 system's MSM
technology comes equipped for remote Internet/Intranet access to images and
reports stored in the system's memory. ATL's proprietary WebLink(TM) feature
enables physicians to simultaneously view images on the system and consult
with colleagues around the globe directly from the HDI 1000 system. The system
can even be remotely controlled through secure Web pages transmitted over the
Internet. The fully integrated communication capabilities enable patient
reports and ultrasound images to be printed directly on standard desktop
printers.

The HDI 1000 system utilizes scanheads of the other ATL HDI systems and the
ease of control of HDI Tissue Specific(TM) Imaging, enabling existing ATL
customers to apply their existing HDI scanheads and previously acquired
operating skills directly to the HDI 1000 system.

APOGEE 800PLUS SYSTEM. In 1994 the Company introduced the mid-range Apogee
800 system for the mid-range radiology and internal medicine markets. The
Apogee 800 system offers features normally found on high performance systems
and can be configured to address the broad array of clinical needs of the
radiologist, internal medicine specialist, and OB/GYN physician. In March,
1996 ATL introduced an upgraded model of this product, the Apogee 800PLUS,
offering improved image quality, Doppler performance, processing capability,
improved analysis packages and user controls. In the fall of 1996 the Apogee
800PLUS system became available in a full cardiology configuration with the
introduction of three new convex phased array scanheads, the 4-2C15 adult
cardiology probe, the 6-3C13 small adult cardiology probe, and the 8-5C11
pediatric cardiology probe. Concurrently, the Company added integrated stress
echo capability to this cardiology product.

In September, 1996 the Company announced that it had entered into a
technology transfer agreement with the Shantou Institute of Ultrasonic
Instruments (SIUI), whereby SIUI will manufacture Apogee 800PLUS

systems in the People's Republic of China. SIUI also acquired the exclusive
right to distribute the Apogee 800PLUS system in that country. ATL continues
to manufacture the Apogee 800PLUS system in Bothell, Washington for worldwide
distribution outside of China.

IMAGE MANAGEMENT PRODUCTS. The Company's Nova MicroSonics division develops,
manufactures and markets a complete line of ultrasound image management
products for use in the digital acquisition, storage, display and management
of ultrasound information. These products provide efficient printing,
automated image archival and retrieval and reduced patient examination times
through an ultrasound open network architecture. The Access(TM) Image
Management System connects to many types of ultrasound systems, printers or
other image management products, facilitating improved diagnostic
consultations within and between hospitals.

For cardiac applications, Nova MicroSonics offers products that facilitate
the review and comparison of images produced at different times during a
cardiac study, expanding the diagnostic applications of echocardiography to
the detection of coronary artery disease. The ImageVue/DCR Workstation is a
state-of-the-art digital ultrasound image management system. This workstation
performs analysis and review of ultrasound exams conducted from a variety of
ultrasound systems.

The Image LAN Network provides network connection between ultrasound
systems, workstations, printers and other medical imaging devices and operates
with both the radiology and cardiology image management products.

In February, 1997 the Company entered into a memorandum of understanding to
sell the Nova MicroSonics division to Kodak. After transfer of the division to
Kodak, ATL will continue to work closely with the Nova MicroSonics unit in the
development and distribution of image management products.

SCANHEADS. ATL believes that its internal resources devoted to development
and manufacture of ultrasonic scanheads make it one of the largest ultrasound
scanhead manufacturers in the world. ATL's capabilities in scanhead design and
manufacture were enhanced in 1994 with the addition of the Echo Ultrasound
division of Interspec. The Echo Ultrasound division, located in Reedsville,
Pennsylvania, produces scanheads for ATL products and also offers scanheads to
other ultrasound companies.

ACCESSORIES AND SUPPLIES. The Company sells a variety of ultrasound
accessories and supplies, most of which are not manufactured by the Company.
These include disposable supplies, such as ultrasound gel and thermal paper,
and accessories, such as biopsy guides, printers, cameras and videocassette
recorders ("VCRs"). The Company markets these products through direct sales
and mail and its customer support organization.

PRINCIPAL MARKETS

The worldwide ultrasound market is typically categorized by clinical
application, price range and geographic area.

CLINICAL APPLICATIONS. Ultrasound products are used in four primary medical
applications: radiology, cardiology, OB/GYN, and vascular applications. ATL
also sells its products in several emerging clinical application markets,
including breast and musculoskeletal applications and the surgical ultrasound
market.

Radiology. The radiology, or general imaging, application, at approximately
48% of the worldwide ultrasound market, is the largest market for ultrasound
equipment. The major radiology markets are in the United States, Japan and
Europe. Most radiology examinations are conducted in hospitals or large
imaging centers.

In radiology, ultrasound is used to obtain diagnostic information on organs
and soft tissue, particularly in the abdominal area. It is also used to
ascertain fetal development, to guide tissue biopsies and to visualize blood
flow.

A substantial portion of the radiology market also requires systems which
include cardiac imaging capabilities. In the United States and Canada this
market segment is often referred to as the shared service market. Most
community or small hospitals without a dedicated cardiology department fall
into this category. In Europe, the internal medicine or shared services
segment requires systems which include cardiac imaging capability.

ATL's radiology product offerings include the HDI 3000 system in both
standard and advanced configurations, the new HDI 1000 system, and the Apogee
800PLUS system.

Cardiology. The cardiology ultrasound, or echocardiography, application, at
approximately 25%, is the second largest market for ultrasound systems. Most
dedicated echocardiography system sales occur in the United States, Western
Europe, and the more developed Asian and Latin American markets. While most
cardiology system sales are to hospitals, the cardiology office practice
represents a significant and growing share of the market for echocardiography
equipment.

Cardiologists use ultrasound as a noninvasive means of capturing real-time
images of the heart and its valves. These images, together with various
Doppler techniques, help the physician assess heart function as well as
congenital and valvular disease. With new advances in scanheads plus
acquisition and image display technology, echocardiography is a useful tool
for the detection and assessment of coronary artery disease. Ultrasound has
also been shown to be valuable in assessing the effectiveness of drug therapy
and intervention for the heart attack patient.

In 1996 ATL became the first ultrasound company to introduce the integrated
capability to image harmonic and other ultrasonic contrast agents in the HDI
3000cv system. It is anticipated that this emerging application will gain
increasing prominence as contrast agents become more widely available around
the world and cardiologists become more familiar with their application and
use.

ATL's cardiology product offerings include the HDI 3000cv system and the
Apogee 800PLUS system.

OB/GYN. The third largest market for ultrasound systems is the OB/GYN
application, at approximately 15%. The majority of OB/GYN ultrasound system
sales are to office-based practitioners in the United States, Western Europe,
and the more developed Asian markets. Perinatology is a clinical specialty in
OB/GYN dedicated to high risk obstetrics. Most perinatology ultrasound sales
are to hospitals and institutions in the United States. Ultrasound is the
preferred imaging technology for the assessment of fetal development since it
is noninvasive and involves no ionizing radiation. Ultrasound is also used for
general gynecological and infertility examinations. The introduction of the
intravaginal scanhead in the 1980s expanded the usefulness of ultrasound for
first-trimester obstetrical studies and the diagnosis of ectopic pregnancies.

ATL's OB/GYN product offerings include the HDI 3000 system for perinatology,
and the new HDI 1000 system and the Apogee 800PLUS system for all OB/GYN
applications and markets.

Vascular. The smallest of the primary clinical markets for ultrasound
systems, at approximately 4%, is the vascular ultrasound application,
primarily practiced in the United States and Western Europe. Most vascular
ultrasound examinations are performed in hospitals.

Vascular ultrasound studies utilize real-time imaging, Doppler and color
Doppler information to identify plaque deposits and their characteristics,
clots, and valve competence in blood vessels. Most vascular examinations are
performed on the body's extremities, cerebrovascular and deep abdominal
regions.

ATL's vascular product offerings include the HDI 3000 and the Apogee 800PLUS
systems. The Entos CL10-5 intraoperative scanhead was specially designed for
vascular surgery, and addresses the increasing use of ultrasound in the
surgical suite to immediately assess the results of surgical procedures.

Emerging applications. Other specialized applications for ultrasound
products, such as breast disease, musculoskeletal, and surgery, account for
approximately 8% of the worldwide ultrasound market. ATL provides the HDI 3000
system with the L10-5 and Entos CL10-5 scanheads for breast clinics and
orthopedic and sports medicine clinics, and the HDI 3000 system with the Entos
CL10-5, CT8-4 and LI9-5 intraoperative scanheads for surgical suites. The HDI
3000 is available with a laparoscopic probe for minimally invasive surgery,
and with harmonic and contrast agent imaging capability for emerging
applications of contrast agents in both radiology and cardiology.

PRICE RANGES. The world ultrasound market can be divided into five segments
based on broad price ranges. Each market segment is characterized by the level
of system performance and the number of scanheads and system features.

Premium Performance. The premium market segment, comprising about 18% of the
world market for ultrasound products, is characterized by ultrasound systems
that typically sell for over $160,000 per unit. These systems provide the
physician with superior definition of subtle tissue characteristics and
incorporate high resolution gray scale imaging, advanced color velocity,
power, and spectral Doppler capability, image acquisition storage, display and
review capability, advanced automation capabilities, and other features
providing additional clinical utility. Typically, systems sold in the premium
market are equipped with a wide variety of specialty scanheads. Advanced HDI
3000 and the HDI 3000cv systems are ATL's premium performance products.

High Performance. The high performance market, comprising about 36% of the
world ultrasound market, is characterized by systems with high resolution gray
scale imaging and advanced color velocity, power and spectral Doppler
capabilities. Systems in this market segment sell between $100,000 and
$160,000 per unit and generally include advanced measurement and analysis
software, image review capabilities, and a variety of scanhead offerings. ATL
sells the HDI 3000 standard system, the Apogee 800PLUS, and fully configured
HDI 1000 systems in this market segment.

Mid-Range. The mid-range market segment, comprising about 28% of the world
ultrasound market, is characterized by ultrasound systems that sell between
$50,000 and $100,000 per unit. These units are basic gray scale imaging, color
and spectral Doppler systems used for routine examinations and reporting and
utilize a minimum number of scanheads. Many of these systems are sold to small
hospitals and clinics and are used in radiology, cardiology and OB/GYN
applications. Refurbished premium and high performance systems with fewer
purchased optional features are also sold in this price range. ATL's products
in this market segment include the HDI 1000 system and the the Apogee 800PLUS
system.

Low-End. The low-end market segment makes up the remaining 18% of the market
and is characterized by basic black and white imaging systems that sell below
$50,000 per unit. These systems provide limited diagnostic information and are
used primarily for monitoring fetal development and in other basic radiology
and OB/GYN applications. Most of these systems are sold to private office
practitioners and small hospitals. Due to the growing acceptance and
affordability of color Doppler systems, units with only greyscale capability
represent the slowest growing portion of the market. ATL does not presently
compete in this market segment.

GEOGRAPHIC AREAS. The ultrasound market is divided into four major
geographic markets.

North America. The United States and Canada together comprise about 31% of
the world ultrasound market. This market traditionally has been characterized
by its emphasis on high performance systems driven by competition for patient
referrals. These factors encourage the rapid adoption of new technology. Over
the past four years, the emphasis in the United States has turned to more
efficient health care delivery and managed care, and been marked by
considerable consolidation of health care organizations. The predominately
western trend toward managed care has now begun to manifest itself strongly in
the eastern U.S., creating new uncertainties among healthcare buyers. With
consolidation and economic pressures, the U.S. market has become increasingly
value conscious while the installed base of ultrasound technology has
continued to age as a whole.

Europe. The European market, at 35% of the market, is the largest regional
market for ultrasound systems. European health care systems are more
centralized than the United States market and are often subject to more rigid
governmental regulation. In 1996 the European markets and economies began to
markedly improve in relation to previous recessionary characteristics. The
more regulated character of health care in Europe provides more stability to
the European markets than is evident in the U.S. during economic cycles of
growth and contraction. Value consciousness and state regulated health care
has been characteristic of European markets for a number of years, unlike the
United States where these effects are of relatively recent origin.

Japan. This market accounts for approximately 16% of worldwide ultrasound
sales. Its complex distribution system is highly competitive and Japanese
manufacturers account for almost all sales. In 1996 ATL began to experience an
emerging market presence in Japan through the efforts of Hitachi Medical
Corporation (HMC), ATL's exclusive distributor in the Japanese market. Sales
of the HDI 3000 product began in the spring following the receipt of Japanese
regulatory approval of the product by HMC.

Asia Pacific and Latin America. The remaining geographic areas of the world
account for approximately 18% of the market, and are among the world's fastest
growing markets for ultrasound. The Australian market is similar in structure
to many European countries. Parts of Asia and Latin America represent some of
the fastest growing areas for high performance and mid-range ultrasound
products. Many of the newly developing countries in these regions are devoting
substantial resources to building a health care infrastructure. Many
ultrasound systems sold in these regions are mid-range systems, refurbished
systems or new low-priced Japanese systems.

RESEARCH AND DEVELOPMENT

The high technology ultrasound business is characterized by rapidly evolving
technology, resulting in relatively short product life cycles and continuing
competitive pressure to develop and market new products and new features for
existing products. Although the Company intends to continue extensive research
and development activities, there can be no assurance that it 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 the Company's existing technology will not be superseded by new
discoveries by competitors.

In February, 1996 the University of Washington and ATL announced that they
and partners VLSI Technology, Inc. and Harris Semiconductor had been awarded
funding under the Technology Reinvestment Project by the Advanced Research
Project Agency of the U.S. Department of Defense to develop an ultrasound
diagnostic instrument small enough to hold in one's hand for use in
battlefield and trauma situations. Work under this program commenced in June,
1996 and will continue for several years, during which time government funding
is being provided as program milestones are achieved. The partners in the
program will retain the rights to commercial applications of the program's
developments. In February, 1997 the Company announced that it has formed a
business unit within the Company which has as its objective the
commercialization of the technology resulting from this program.

In August, 1996 the Company jointly announced with Vital Images, Inc. that
the two companies had entered into agreements for the exclusive development
and marketing of 3D ultrasound imaging products utilizing Vital Images' volume
rendering technology. Under the agreements Vital Images will receive royalties
on ATL sales of the jointly developed products.

MANUFACTURING

The Company manufactures its ultrasound system products at its facility in
Bothell, Washington. The Echo Ultrasound division of ATL is located in
Reedsville, Pennsylvania. Scanheads for ATL products are manufactured in both
Reedsville and Bothell.

The Company purchases certain unique scanheads from original equipment
manufacturers. The Company also purchases the hard-copy output devices sold
with its ultrasound systems, such as VCRs and cameras, and

other materials and component parts. The OEM scanheads and many of the
materials and components used by ATL in the manufacture of ultrasound
equipment are available from more than one source of supply. Certain
components, however, are single sourced, such as crystals and integrated
circuits which are critical to the quality and manufacture of ultrasound
equipment. Vendors can also experience difficulty in meeting quality standards
the Company requires of its vendors. While any of these single-source items
could be replaced over time, abrupt disruption in the supply of a single-
source part could have a material adverse effect on ATL's manufacture of the
products relying on such items. In addition, these items generally have long
order lead times, restricting the Company's ability to respond quickly to
changing market conditions.

Manufacturing efforts can also be impeded by third party assertions of
patent infringement by the Company's products. There can be no assurance the
Company will not be subject to claims of patent infringement by other parties
or that such claims will not require the Company to pay substantial damages or
delete certain features from its products or both. See ITEM 3, Legal
Proceedings, below.

SALES AND MARKETING

The Company's sales and marketing strategy has been to compete in all of the
major clinical, price and geographic segments of the ultrasound market with
the exception of the very low priced market segment. In the United States, the
Company markets its products through its direct sales organization. The United
States general imaging sales organization is organized into two geographic
zones, each staffed with regional management, sales representatives and
clinical application specialists knowledgeable in radiology, OB/GYN, and
peripheral vascular applications. A specialized sales force with its own
clinical application specialists offers the Company's cardiology products to
customers in the United States. The role of the application specialists is to
demonstrate the products and train customers in their clinical use.

The Company markets its products internationally through its direct sales
and service operations in Argentina, Australia, Austria, Belgium, Canada,
France, Germany, Hong Kong, Italy, the Netherlands, the United Kingdom and
Singapore. In addition, the Company markets its products in India through a
joint venture with Indchem Electronics. Other principal markets are covered
through a distributor network. European, Middle Eastern and African dealers
are managed through ATL's offices in Germany. Distributors serving the Pacific
Rim countries, Latin America and South America are managed from Bothell,
Washington. Customers outside of the United States accounted for 49% of
revenues in 1996.

The Company's marketing efforts emphasize the development of strong
relationships with key medical professionals, participation in national and
regional meetings and conventions for physicians and hospitals, direct mail
advertising, journal advertising and sponsorship of educational programs.

CUSTOMER SUPPORT AND WARRANTY

The Company warrants its new and used products for all parts and labor
generally for one year from the date of original delivery. The Company offers
a variety of post-warranty service agreements permitting customers to contract
for the level of equipment maintenance they require. Alternatively, customers
can contact ATL as needed and receive service at rates based on labor and cost
of parts. The Company's warranty costs are included in cost of product sales
in ITEM 8, Financial Statements and Supplementary Data.

The Company maintains its own customer support organization in the United
States and other countries where the Company has direct operations. Local
dealers and distributors provide service and support in other countries. The
Company provides manuals and expedites delivery of repair parts to all
geographic locations from its facility in Bothell, Washington, with the
assistance of its direct operations in Europe.

The Company's customer service organizations are an integral part of its
sales effort because a customer's decision to purchase a particular product is
based in part on the availability and reputation of the service for that
product. In addition, the customer support group sells and installs upgrades
for existing customers and provides

training for biomedical technicians so customers can service their own
systems. The customer support group also provides customer education programs
on clinical applications and the use of the Company's products.

COMPETITION

The ultrasound market is highly competitive. The Company competes worldwide
in the major clinical applications of the ultrasound market, in the mid and
upper price ranges and in each major geographic market. Four companies--
Toshiba Corporation's Medical Systems Group, ATL, Hewlett-Packard Company's
Medical Products Group and Acuson Corporation--account for approximately 60%
of the worldwide ultrasound market. The Company believes that these four
companies have similar market shares. Toshiba, ATL, and Acuson participate in
all of the major clinical ultrasound markets. Hewlett-Packard holds the
largest individual market share in the cardiology and vascular markets, and in
the fall of 1996 introduced a mid-range general imaging product.

The year 1996 was marked by a significant influx of new product offerings by
the Company's competitors, continuing a trend which began in 1995. The many
new product offerings have made the ultrasound market even more competitive
than in the past, as customers have an even broader range of products from
which to choose. The breadth of new products from many companies appears to
have lengthened the time required for customers to make decisions to purchase,
since customers have many more products to consider before making a purchase
decision. Most of the recent competitive products are based upon digital
technology to varying degrees, as competitors attempt to position their new
products as comparable to those of ATL, which pioneered digital ultrasound
systems over a decade ago.

Many of the Company's major competitors, such as Hewlett-Packard Company's
Medical Products Group, Toshiba' Medical Systems Group, General Electric
Medical Systems, Inc., the Diasonics subsidiary of Elbit, Inc., and Siemens
Medical Systems, Inc., are divisions or subsidiaries of companies much larger
than ATL. General Electric and Siemens, as well as Toshiba and others, have
multi-modality medical imaging product offerings, including MRI, CT, nuclear
medicine and x-ray products in addition to ultrasound. These companies and
several of the Company's other competitors have far greater financial,
marketing, servicing, technical and research and development resources than
those of the Company, and are able to support and sustain their efforts in the
ultrasound market with resources derived from other imaging modalities and
businesses.

The Company believes that significant competitive factors in the diagnostic
ultrasound market include the clinical performance of systems, depth of
product line, reputation for technology leadership, upgradeability to advanced
features, availability of Company-provided purchase financing, reliability,
ease of use and price of products and service. See "Research and Development."
The Company believes that it presently competes favorably with respect to each
of these competitive factors, however, there can be no assurances that the
Company will be able to fully respond to competitive inroads by companies with
far greater resources than ATL.

Ultrasound is only one of a number of diagnostic imaging technologies
currently available, including conventional x-ray, angiography, CT, magnetic
resonance imaging and P.E.T. A development in another diagnostic technology,
and declining prices for these other products which bring them into the range
of price competition with ultrasound, could adversely affect ATL and the
ultrasound industry.

PATENTS, TRADEMARKS AND LICENSES

The Company has obtained patents on certain of its products and has applied
for patents which are presently pending. The Company has also sought trademark
protection for the brand names of the products it currently markets. There can
be no assurance that any additional patents will be issued or that trademark
protection will be granted and maintained.

Certain critical technology incorporated in the Company's products,
including software algorithms, broad bandwidth scanhead technology and ASIC
(application-specific integrated circuit) technology, is protected by

copyright laws and confidentiality and licensing agreements. The Company's
proprietary digital beamformer is protected by confidentiality agreements,
patents, copyright and trade secret law. There can be no assurances that these
modes of intellectual property protection will continue to maintain the
proprietary aspects of ATL's technology.

Companies in high technology businesses routinely review the products of
others for possible conflict with their own patent rights. The Company has
from time to time received notices of claims from others alleging patent
infringement. While the Company believes that it does not infringe any valid
patent of any third party, there can be no assurance that the Company will not
be subject to future claims of patent infringement or that any claim will not
require the Company to pay substantial damages or delete certain features from
its products or both. While such claims could temporarily interrupt the
Company's ability to ship affected products, the Company believes that any
such interruption can be overcome by technical changes to product features.
See ITEM 3, Legal Proceedings, below.

GOVERNMENTAL REGULATION

Product Regulation. The Company's products are subject to extensive
regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign agencies, and to various domestic and foreign
electrical safety and emission standards. The FDA has broad regulatory powers
with respect to preclinical and clinical testing of new medical products and
the manufacturing, marketing and advertising of medical products. The
Company's product development processes, manufacturing facilities, and the
manufacture of its products are subject to FDA regulations respecting
registration of manufacturing facilities and compliance with the FDA's Good
Manufacturing Practices ("GMP") regulations. The Company is also subject to
periodic on-site inspection for compliance with such regulations. The
Company's ability to obtain timely FDA export and new product approvals is
dependent upon the results of such inspections. In February, 1996 the FDA
concluded a comprehensive inspection of the Company's Bothell, Washington
facilities as a part of the approval process for ATL's breast PMA for its
Ultramark 9 HDI system. In January, 1997 the FDA concluded a similar
inspection attendant to its approval of ATL's breast PMA supplement for the
HDI 3000 system. The FDA has notified ATL that the Company has satisfied the
requirements of both inspections. The Company's Nova MicroSonics division also
was inspected and passed an FDA GMP audit in 1996.

The FDA requires that all medical devices introduced to the market be
preceded either by a premarket notification clearance order under Section
510(k) of the Federal Food, Drug and Cosmetic Act, as amended (the "FDC Act"),
or an approved PMA application. A 510(k) premarket notification clearance
order indicates FDA agreement with an applicant's determination that the
product for which clearance has been sought is substantially equivalent to
medical devices that were on the market prior to 1976 or have subsequently
received clearance. An approved PMA application indicates that the FDA has
determined that the device has been proven, through the submission of clinical
trial data and manufacturing quality assurance information, to be safe and
effective for its labeled indications. The process of obtaining 510(k)
clearance typically takes approximately six to nine months, while the
premarket approval application process typically lasts more than a year. All
of ATL's current products have 510(k) clearance and additionally, the
Ultramark 9 HDI and HDI 3000 systems are cleared to be marketed under ATL's
breast PMA application.

The Company believes that its products comply generally with applicable
electrical safety standards, such as those of Underwriters Laboratories and
non-U.S. safety standards authorities. Several countries have, in recent
years, changed the electronic emission requirement which must be met by
ultrasound equipment. There can be no assurances that the Company will be able
to continue to respond to these continually changing regulatory requirements
in a timely manner.

The Company's regulatory compliance programs have been expanded to encompass
verification of the Company's compliance with international standards for
medical device design, manufacture, installation, and servicing known as ISO
9001 standards. All of the Company's manufacturing facilities have qualified
for ISO 9001 registration. In addition, several of the Company's international
sales and service subsidiaries received

certification under the ISO 9002 standards for sales and service entities. ISO
9001 standards will become mandatory in Europe in 1999. The FDA is in the
process of adopting the ISO 9001 standards as regulatory standards for the
United States, and it is anticipated these standards will be phased in for
U.S. manufacturers of medical devices over a period of time. In 1996 the
Company passed a full biennial review of its ISO certifications by a European
inspecting authority.

ATL's HDI 3000 system has received the European Community (CE) mark in
Europe. The CE mark means that the HDI 3000 satisfies the regulatory
requirements of all of the countries of the European community, enabling the
product to be freely marketed throughout Europe. The CE mark will be required
to market products in Europe beginning in 1998. The Company expects to have
the CE mark for the HDI 1000 system by the time customer shipments commence in
the second quarter of 1997.

Federal, state and foreign regulations are constantly undergoing change. The
increasing attention given to the national health care legislation has caused
U.S. ultrasound customers to become more cautious in making expenditures and
investing in capital equipment. In addition, the U.S. health care system has
undergone significant consolidations and restructuring in recent years. The
Company cannot predict what effect, if any, such change may have on its
business, or when the deleterious effect of these conditions on its business
will change.

Reimbursement. The Company's products are used by health care providers for
diagnostic testing services and other services for which the providers may
seek reimbursement from third-party payers, principally, in the United States,
Medicare, Medicaid and private health insurance plans. Such reimbursement is
subject to the regulations and policies of governmental agencies and other
third-party payers. For example, the Medicare program, which reimburses
hospitals and physicians for services provided to a significant percentage of
hospital patients, places certain limitations on the methods and levels of
reimbursement of hospitals for procedure costs and for capital expenditures
made to purchase equipment, such as that sold by the Company. The Medicare
program also limits the level of reimbursement to physicians for diagnostic
tests. The state-administered Medicaid programs and private payers also place
limitations on the reimbursement of both facilities and physicians for
services provided in connection with diagnostic and clinical procedures.
Reduced governmental expenditures in the United States and many other
countries continue to put pressure on diagnostic procedure reimbursement. The
Company cannot predict what changes may be forthcoming in these policies and
procedures, nor the effect of such changes on its business.

Third-party payers worldwide, including governmental agencies, are under
increasing pressure to contain medical costs. Limits on reimbursement or other
cost containment measures imposed by third-party payers may adversely affect
the financial condition and ability of hospitals and other users to purchase
products, such as those of the Company, by reducing funds available for
capital expenditures or otherwise. The Company is unable to forecast what
additional legislation or regulation, if any, relating to the health care
industry or third-party reimbursement may be enacted in the future or what
effect such legislation or regulation would have on the Company.

Environmental. The Company is subject to Federal, state and local provisions
regulating the discharge of materials into the environment or otherwise for
the protection of the environment. Although the Company's current operations
have not been significantly affected by compliance with environmental laws or
regulations, Federal, state and local governments are becoming increasingly
sensitive to environmental issues, and the Company cannot predict what impact
future environmental regulations may have on its operations.

Employees. As of December 31, 1996, the Company had 2,703 employees
worldwide. None of the Company's United States employees is covered by
collective bargaining agreements, and the Company considers its employee
relations to be satisfactory.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

Information set forth in "Geographic Segment Information" of the Notes to
the Consolidated Financial Statements contained in Note 19 on page 30 of the
1996 Annual Report to Shareholders is incorporated by reference herein.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is information concerning certain officers of the Company
who are not Directors.

Donald D. Blem. Mr. Blem has served as Senior Vice President, Operations
since October 1993. He served as Vice President, Operations from February 1988
to October 1993.

Castor F. Diaz. Mr. Diaz has served as Senior Vice President, Worldwide
Sales and Marketing, since February 1995 and as Vice President, ATL Europe
from October 1988 to February 1995. He also held various international sales
and marketing positions with ATL from May 1987 to October 1988.

Harvey N. Gillis. Mr. Gillis has served as Senior Vice President, Finance
and Administration, and Chief Financial Officer since September 1992. He
served as Senior Vice President, Finance and Administration and Chief
Financial Officer for NeoPath, Inc. from 1991 to 1992. He served as Chief
Operating Manager of Samuel Stroum Enterprises from 1985 to 1991.

Jacques Souquet, Ph.D. Dr. Souquet has served as Senior Vice President,
Product Generation since October 1993. He served as Vice President, Product
Generation from October 1992 to October 1993, as Vice President, Strategic
Marketing and Product Planning from July 1990 to October 1992 and as Director
of Strategic Marketing and Product Planning from March 1989 to June 1990.

ITEM 2. PROPERTIES

The Company owns two buildings on the corporate campus at 22100 Bothell
Everett Highway, Bothell, Washington 98041, consisting of 365,000 square feet.
These buildings include the Company's corporate headquarters and its major
manufacturing facility, as well as the Company's research and development,
sales, service, marketing and administrative functions. In February, 1997 the
Company's Board directed management to begin planning construction of a third,
smaller building on the corporate campus. The Company also leases space in
several buildings in nearby business parks.

The Company's Nova MicroSonics division occupies approximately 33,000 square
feet in leased buildings in Allendale, New Jersey and Indianapolis, Indiana,
and the Echo Ultrasound division occupies 63,000 square feet in a building
owned by the Company in Reedsville, Pennsylvania. ATL continues to own a
building of 70,000 square feet in Ambler, Pennsylvania, which is occupied by
the Company's cardiology sales organization. The Company plans to lease unused
space in the Ambler building.

The Company's direct business operations in the United States and other
countries lease office and warehouse space in their respective countries.

There are no significant unutilized facilities for ongoing operations, other
than discussed above, and the Company believes its existing facilities are
sufficient to meet its near-term operating requirements.

ITEM 3. LEGAL PROCEEDINGS

The Company is subject to various claims and other proceedings which arise
in the ordinary course of its businesses and believes that such proceedings,
individually or in the aggregate, will not have a material adverse effect on
the business or financial condition of the Company. Insured claims arising
from ATL's businesses are covered by the Company's insurance policies. The
Company intends to maintain insurance coverage against business risks at
levels that take into account the nature and magnitude of the respective
businesses to be conducted by ATL. There can be no assurance that the
Company's current insurance coverage will prove adequate or that the amount or
type of coverage available to the Company will remain available on a cost-
effective basis.

In May 1996, a U.S. District Court in California ordered the Company to pay
damages in the amount of $27.9 million together with interest, costs and
attorney fees on a patent infringement claim by SRI International, Inc.
("SRI") relating to an electrical circuit alleged to be used in several of the
Company's discontinued products. The patent expired in 1994. The Company has
filed an appeal of the amount awarded with the Federal Circuit Court of
Appeals in Washington, D.C. and is presently awaiting the decision of the
appellate court on the appeal. The Company stayed payment of the damages award
during the pendency of the appeal by posting a supersedeas bond with the
California court. The Company has accrued a provision for the full amount of
the damages awarded and will continue to accrue interest during the appeal
process. See Note 10 of the Notes to the Consolidated Financial Statements on
page 25 of the 1996 Annual Report to Shareholders incorporated by reference
herein. There can be no assurance the Company will not be subject to claims of
patent infringement by other parties or that such claims will not require the
Company to pay substantial damages or delete certain features from its
products or both.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market and Market Price for Common Stock. The Company's Common Stock, $0.01
par value, trades on the Nasdaq Stock Market under the symbol ATLI and is an
authorized security for quotation in Nasdaq National Market System ("Nasdaq
National Market").

The market prices of the Company's Common Stock during the two-year period
ended December 31, 1996 are set forth below. The prices reflect the high and
low trading prices during each quarter as reported by the Nasdaq National
Market to ATL.

ATL COMMON STOCK HIGH LOW
---------------- ------ ------

Quarter ended December 31, 1996.............................. 33 1/4 25
Quarter ended September 27, 1996............................. 38 1/2 25 1/4
Quarter ended June 28, 1996.................................. 40 3/4 26 1/2
Quarter ended March 29, 1996................................. 31 1/2 20 1/2

Quarter ended December 31, 1995.............................. 28 1/2 17 3/4
Quarter ended September 29, 1995............................. 19 1/4 15 1/4
Quarter ended June 30, 1995.................................. 17 1/2 14 1/2
Quarter ended March 31, 1995................................. 18 1/2 13

Shareholders. The number of shareholders of record of the Company's Common
Stock as recorded on the books of ATL's Registrar and Transfer Agent as of
March 1, 1997 was 7,862.

Dividends. The Company has not paid cash dividends on its capital stock and
does not currently have any plans to pay such dividends in the foreseeable
future. The Company's dividend policy is dependent upon its earnings, the
overall financial condition of ATL, and other factors to be considered by the
Board of Directors from time to time.

ITEM 6. SELECTED FINANCIAL DATA

Reference is made to page 12 of the 1996 Annual Report to Shareholders,
which is incorporated herein by reference and made a part hereof in response
to the information required by this item.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Reference is made to pages 13 through 17 of the 1996 Annual Report to
Shareholders, which is incorporated herein by reference and made a part hereof
in response to the information required by this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following Consolidated Financial Statements are incorporated herein by
reference and made a part hereof from the 1996 Annual Report to Shareholders
in response to the information required by this item:

PAGE
-----

Independent Auditors' Report........................................ 17
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1996 and 1995......... 18
Consolidated Statements of Operations for each of the years in the
three-year period ended December 31, 1996........................ 19
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1996........................ 20
Consolidated Statements of Shareholders' Equity for each of the
years in the three-year period ended December 31, 1996........... 21
Notes to Consolidated Financial Statements........................ 22-31

See Part IV, Item 14, for the Financial Statement Schedules filed with Form
10-K Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Part III (Items 10) is partially set forth in
ATL's definitive proxy statement which will be filed pursuant to Regulation
14A within 120 days of December 31, 1996. Such information is incorporated
herein by reference and made a part hereof.

The information set forth in ITEM 1 "Executive Officers of the Registrant",
found on page 14 of this Form 10-K is incorporated herein by reference in
response to the information required by this item.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Part III (Item 11) is set forth in ATL's
definitive proxy statement which will be filed pursuant to Regulation 14A
within 120 days of December 31, 1996. Such information is incorporated herein
by reference and made a part hereof.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Part III (Item 12) is set forth in ATL's
definitive proxy statement which will be filed pursuant to Regulation 14A
within 120 days of December 31, 1996. Such information is incorporated herein
by reference and made a part hereof.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Part III (Item 13) is set forth in ATL's
definitive proxy statement which will be filed pursuant to Regulation 14A
within 120 days of December 31, 1996. Such information is incorporated herein
by reference and made a part hereof.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:

1. Financial Statements.

As noted in Part II, Item 8, the following financial statements have been
incorporated by reference from the Company's 1996 Annual Report to
Shareholders:

Independent Auditors' Report
Consolidated Financial Statements:

Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Operations for each of the years
in the three-year period ended December 31, 1996.
Consolidated Statements of Cash Flows for each of the years
in the three-year period ended December 31, 1996.
Consolidated Statements of Shareholders' Equity for each of the
years in the three-year period ended December 31, 1996.
Notes to Consolidated Financial Statements.

2. Financial Statement Schedules.

An index to the financial statement schedules required to be filed by Part
II, Item 8 of this Form 10-K is set forth immediately before the attached
financial statement schedule on page 17 of this filing.

3. Management Contracts and Compensatory Arrangements.

Exhibits constituting management contracts and compensatory arrangements are
indicated by footnote (M).

(B) REPORTS ON FORM 8-K:

None

The required exhibits are included at the back of this Form 10-K and are
described in the Exhibit Index immediately preceding the first exhibit.

INDEX TO FINANCIAL STATEMENT SCHEDULES

PAGE
----

Independent Auditors' Report.............................................. 18
II--Valuation and Qualifying Accounts for the Years ended December 31,
1996, 1995 and 1994...................................................... 26

All other schedules are omitted because they are not applicable, 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 and notes thereto.

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Advanced Technology Laboratories, Inc.:

Under date of February 14, 1997 we reported on the consolidated balance
sheets of Advanced Technology Laboratories, Inc. and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996, as contained in the 1996 annual
report to shareholders. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for
the year 1996. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule of valuation and qualifying accounts. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

KPMG Peat Marwick LLP

Seattle, Washington
February 14, 1997

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Advanced Technology Laboratories, Inc.:

We consent to incorporation by reference in the registration statements,
333-00163 on Form S-3 and 333-08881, 33-61807, 33-38218, 33-38217, 33-28830,
33-28092, 33-22434, 33-10618, 33-47967, 33-54757 and 33-59914 and 33-66298 on
Form S-8, of Advanced Technology Laboratories, Inc., of our reports dated
February 14, 1997, relating to the consolidated balance sheets of Advanced
Technology Laboratories, Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996, and related financial statement schedule, which reports
appear in the December 31, 1996 annual report on Form 10-K, or are
incorporated by reference therein from the 1996 annual report to shareholders,
of Advanced Technology Laboratories, Inc.

KPMG Peat Marwick LLP

Seattle, Washington
March 27, 1997

SIGNATURES

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints DENNIS C. FILL, HARVEY N. GILLIS, and W.
BRINTON YORKS, Jr. and each of them, 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 to this Annual Report on 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 or necessary to be done in and about the
premises, 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/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

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.

Advanced Technology Laboratories,
Inc.
(Registrant)

By /s/ Dennis C. Fill
___________________________________
Dennis C. Fill
Chairman of the Board

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 DATES INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Dennis C. Fill Chairman of the Board, Chief March 26, 1997
____________________________________ Executive Officer,
Dennis C. Fill President and Director

/s/ Harvey N. Gillis Senior Vice President and March 26, 1997
____________________________________ Chief Financial Officer
Harvey N. Gillis

/s/ Kirby L. Cramer Director March 26, 1997
____________________________________
Kirby L. Cramer

/s/ Harvey Feigenbaum Director March 26, 1997
____________________________________
Harvey Feigenbaum, M.D.

/s/ Eugene A. Larson Director March 26, 1997
____________________________________
Eugene A. Larson

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Ernest Mario Director March 26, 1997
____________________________________
Ernest Mario, Ph.D.

/s/ John R. Miller Director March 26, 1997
____________________________________
John R. Miller

/s/ Phillip M. Nudelman Director March 26, 1997
____________________________________
Phillip M. Nudelman

/s/ Harry Woolf Director March 26, 1997
____________________________________
Harry Woolf, Ph.D.

/s/ Richard S. Totorica Corporate Controller March 26, 1997
____________________________________ (Principal Accounting
Richard S. Totorica Officer)

INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION
----------- -----------

(A) 3.1 Articles of Incorporation of Advanced Technology
Laboratories, Inc.
(A) 3.2 Certificate of Designation of Series A, Participating
Cumulative Preferred Stock Setting Forth the Powers,
Preferences, Rights, Qualifications, Limitations and
Restrictions of Such Series of Preferred Stock of
Advanced Technology Laboratories, Inc.
3.3 Bylaws of Advanced Technology Laboratories, Inc.
(B) 4.1 Amended and Restated Rights Agreement between advanced
Technology Laboratories, Inc. and First Chicago Trust
Company of New York dated as of June 26, 1992.
(C) 4.2 Revolving Credit Loan Agreement by and among Advanced
Technology Laboratories, Inc. (Washington), Advanced
Technology Laboratories, Inc. (Delaware) and Seattle-
First National Bank dated as of June 26, 1992 and
supplemental letter dated February 4, 1993.
(C) 4.3 Uncommitted Line of Credit for $10 million by and among
Advanced Technology Laboratories, Inc. (Washington),
Advanced Technology Laboratories, Inc. (Delaware) and
Seattle-First National Bank dated as of June 18, 1992.
(C) 10.1 Distribution Agreement between Westmark International
Incorporated and SpaceLabs Medical, Inc. dated as of May
18, 1992.
(C) 10.2 Intercompany Agreement between Westmark International
Incorporated and SpaceLabs Medical, Inc. dated as of May
18, 1992.
(C) 10.3 Tax Allocation Agreement between Westmark International
Incorporated and SpaceLabs Medical, Inc. dated as of May
18, 1992.
(D) 10.4 Lease between Le Bien and Nova MicroSonics dated
November 9, 1988 (Indianapolis facility).
(E) 10.5 Lease between Advent Realty Partnership II and Nova
MicroSonics dated December 14, 1993 (Allendale, New
Jersey facility).
(F) 10.6 Lease between WRC Properties, Inc. and Advanced
Technology Laboratories, Inc. dated January 10, 1992.
(G) 10.7 Note dated November 30, 1989 in the principal amount of
$2,000,000 issued by Montgomery County Industrial
Development Corporation to The Pennsylvania Industrial
Development Authority (incorporated by reference from
Interspec, Inc. 1993 Annual Report, filed as Exhibit
10.27 on Form 10-K, filed on February 25, 1994).
(G) 10.8 Loan Agreement dated November 30, 1989 between
Montgomery County Industrial Development Corporation and
The Pennsylvania Industrial Development Authority
(incorporated by reference from Interspec, Inc. 1993
Annual Report, filed as Exhibit 10.26 on Form 10-K,
filed on February 25, 1994).
(G) 10.9 Mortgage dated November 30, 1989 between Montgomery
County Industrial Development Corporation and The
Pennsylvania Industrial Development Authority
(incorporated by reference from Interspec, Inc. 1993
Annual Report, filed as Exhibit 10.28 on Form 10-K,
filed on February 25, 1994).
(G) 10.10 Memorandum of Installment Sale Agreement and Amendment
dated November 30, 1989 between Montgomery County
Industrial Development Corporation and The Pennsylvania
Industrial Development Authority (incorporated by
reference from Interspec, Inc. 1993 Annual Report, filed
as Exhibit 10.13 on Form 10-K, filed on February 25,
1994).
(G) 10.11 Amendment to Installment Sale Agreement dated November
30, 1989 between Montgomery County Industrial
Development Corporation and The Pennsylvania Industrial
Development Authority (incorporated by reference from
Interspec, Inc. 1993 Annual Report, filed as Exhibit
10.12 on Form 10-K, filed on February 25, 1994).

EXHIBIT NO. DESCRIPTION
----------- -----------

(G) Assignment of Installment Sale Agreement and Amendment dated November 30,
10.12 1989 by Montgomery County Industrial Development Corporation to The
Pennsylvania Industrial Development Authority (incorporated by reference
from Interspec, Inc. 1993 Annual Report, filed as Exhibit 10.14 on Form 10-
K, filed on February 25, 1994).
(G) Consent, Subordination and Assumption Agreement dated November 30, 1989
10.13 between Montgomery County Industrial Development Corporation and The
Pennsylvania Industrial Development Authority (incorporated by reference
from Interspec, Inc. 1993 Annual Report, filed as Exhibit 10.25 on Form 10-
K, filed on February 25, 1994).
(G) Promissory Note dated May 29, 1990 in the principal amount of $1,500,000
10.14 from Mifflin County Industrial Development to The Pennsylvania Industrial
Development Authority (incorporated by reference from Interspec, Inc. 1993
Annual Report, filed as Exhibit 10.19 on Form 10-K, filed on February 25,
1994).
(G) Loan Agreement dated May 29, 1990 between Mifflin County Industrial
10.15 Development and The Pennsylvania Industrial Development Authority
(incorporated by reference from Interspec, Inc. 1993 Annual Report, filed
as Exhibit 10.33 on Form 10-K, filed on February 25, 1994).
(G) Mortgage dated May 29, 1990 between Mifflin County Industrial Development
10.16 and The Pennsylvania Industrial Development Authority (incorporated by
reference from Interspec, Inc. 1993 Annual Report, filed as Exhibit 10.20
on Form 10-K, filed on February 25, 1994).
(G) Installment Sale Agreement dated October 14, 1988 between Mifflin County
10.17 Industrial Development and Interspec, Inc.; Amendment of to Installment
Sale Agreement dated December 9, 1988; and Second Amendment to Installment
Sale Agreement dated May 29, 1990 (incorporated by reference from
Interspec, Inc. 1993 Annual Report, filed as Exhibit 10.22 on Form 10-K,
filed on February 25, 1994).
(G) Assignment of Installment Sale Agreement dated May 29, 1990 by Mifflin
10.18 County Industrial Development to The Pennsylvania Industrial Development
Authority (incorporated by reference from Interspec, Inc. 1993 Annual
Report, filed as Exhibit 10.23 on Form 10-K, filed on February 25, 1994).
(G) Consent, Subordination and Assumption Agreement dated May 29, 1990 by
10.19 Mifflin County Industrial Development to The Pennsylvania Industrial
Development Authority (incorporated by reference from Interspec, Inc. 1993
Annual Report, filed as Exhibit 10.32 on Form 10-K, filed on February 25,
1994).
(E) Purchase and Sale Agreement by and between ELDEC Corporation, N.C. ELDEC
10.20 Inc. and ATL for the sale of ELDEC Building and surrounding property.
(E) Certificate and Indemnity Agreement by ATL for the benefit of Seattle First
10.21 National Bank for $11,500,000 loan for ELDEC Building and surrounding
property.
(E) Deed of Trust, Security Agreement as of December 28, 1994, by ATL to
10.22 Rainier Trust Company for the Benefit of Seattle-First National Bank, for
ELDEC Building and surrounding property.
(E) Promissory Note for $11,500,000 dated December 28, 1994 from ATL to
10.23 Seattle-First National Bank, for ELDEC Building and surrounding property.
(H)(M)(O) 1986 Amended and Restated Option, Restricted Stock, Stock Appreciation
10.24 Right and Performance Unit Plan.
(M)(O) 10.25 Advanced Technology Laboratories, Inc. Incentive Savings and Stock
Ownership Plan, Amended and Restated effective January 1, 1997.

EXHIBIT NO. DESCRIPTION
----------- -----------

(M) 10.26 Advanced Technology Laboratories, Inc. Supplemental Benefit
Plan A, Amended and Restated January 1, 1996.
(M) 10.27 ATL Supplemental Benefit Plan B, Amended and Restated
January 1, 1996.
(E) 10.28 Trust Agreement for Incentive Savings and Stock Ownership Plan
by and between Advanced Technology Laboratories, Inc. and
First Interstate Bank of Washington, N.A. effective June 26,
1992.
(M)(Q) 10.29 Amended and Restated Retirement Plan, effective May 17, 1994.
(M)(Q) 10.30 First Amendment to ATL Retirement Plan dated December 29,
1995.
(M) 10.31 Second Amendment to ATL Retirement Plan dated July 25, 1996.
(E) 10.32 Amended and Restated Retirement Plan Trust Agreement by and
between Advanced Technology Laboratories, Inc. and First
Interstate Bank of Washington, N.A. effective December 29,
1993.
(I)(M)(O) 10.33 Management Incentive Compensation Plan.
(J)(M) 10.34 Amendment to Management Incentive Compensation Plan, effective
May 5, 1993.
(C) 10.35 Employee Benefit Allocation Agreement between Westmark
International Incorporated and SpaceLabs Medical, Inc. dated
as of May 18, 1992.
(K)(M)(O) 10.36 Amended 1992 Option, Stock Appreciation Right, Restricted
Stock, Stock Grant and Performance Unit Plan, dated May 8,
1996.
(C) 10.37 Forms of Option Grant, Restricted Stock Award Agreement and
Restricted Stock Award Letter under the 1992 Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and
Performance Unit Plan.
(J)(M) 10.38 Long Term Incentive Plan, effective January 1, 1993.
(K) 10.39 Amended Nonemployee Director Stock Option Plan, dated May 8,
1996.
(H)(M) 10.40 Change of Control Employment Agreement with Dennis C. Fill
dated January 1, 1991.
(C)(M) 10.41 First Amendment to Employment Agreement with Dennis C. Fill
dated May 18, 1992.
(M) 10.42 Third Amendment to Employment Agreement with Dennis C. Fill
dated July 25, 1996.
(C)(M) 10.43 Change of Control Employment Agreement with Harvey N. Gillis
dated September 23, 1992.
(L)(O) 10.44 Amended and Restated Nonofficer Employee Option, Restricted
Stock and Stock Grant Plan.
(K)(O) 10.45 1992 Nonofficer Employer Stock Option Plan.
(P) 10.46 ATL Employee Stock Purchase Plan, adopted October 25, 1996.
(N) 10.47 Amended and Restated Agreement and Plan of Merger as of
February 10, 1994 between ATL and Interspec, Inc. and Press
Releases dated February 10, and February 24, 1994.
13 1996 Annual Report to Shareholders (Such report, except to the
extent incorporated herein by reference, is being provided for
the information of the Securities and Exchange Commission,
only, and is not deemed to be filed as a part of this Annual
Report on Form 10-K).
21 Subsidiaries of ATL as of December 31, 1996.
23 Consent of KPMG Peat Marwick LLP. Reference is made to the
Consent on page 19 of this filing in response to this item.
(P) 28 Proxy Statement to Shareholders for ATL's 1997 Annual General
Meeting of Shareholders.

EXHIBIT NO. DESCRIPTION
- ----------- -----------

(A) Previously filed with, and incorporated herein by reference to, ATL's
Current Report on Form 8-K, File No. 0-15160, filed on January 11, 1996.
(B) Previously filed with, and incorporated herein by reference to, Westmark
International Incorporated's Amendment to Application Form 8, filed on
June 25, 1992.
(C) Previously filed with, and incorporated herein by reference to, ATL's
Annual Report on Form 10-K, File No. 0-15160, filed on March 25, 1993.
(D) Previously filed with, and incorporated herein by reference to, Westmark's
Annual Report on Form 10-K, File No. 0-15160, filed on March 21, 1989.
(E) Previously filed with, and incorporated herein by reference to, ATL's
Annual Report on Form 10-K, File No. 0-15160, filed on March 30, 1995.
(F) Previously filed with, and incorporated herein by reference to, Westmark's
Annual Report on Form 10-K, File No. 0-15160, filed on March 26, 1992.
(G) Previously filed and incorporated herein by reference from Interspec,
Inc.'s Annual Report on Form 10-K/A, File No. 0-15883, filed on February
25, 1994.
(H) Previously filed with, and incorporated herein by reference to, Westmark's
Annual Report on Form 10-K, File No. 0-15160, filed on March 22, 1991.
(I) Previously filed with, and incorporated herein by reference to, Westmark's
Registration Statement on Form 10, File No. 0-15160.
(J) Previously filed with, and incorporated herein by reference to, ATL's
Annual Report on Form 10-K, File No. 0-15160, filed on March 4, 1994.
(K) Previously filed with, and incorporated herein by reference to, ATL's
Registration Statement on Form S-8, Registration No. 333-08881, filed on
July 26, 1996.
(L) Previously filed with, and incorporated herein by reference to, Westmark
International Incorporated's Registration Statement on Form S-8,
Registration No. 33-38218, filed on December 14, 1990.
(M) Management Contracts and Compensatory Arrangements.
(N) Previously filed with, and incorporated herein by reference to, ATL's
Current Report on Form 8-K, File No. 0-15160, filed on February 17, 1994
and March 4, 1994.
(O) Previously filed and incorporated herein by reference to ATL's Post
Effective Amendment No. 1 on Form S-8, filed on August 14, 1995.
(P) To be filed within 120 days of the 1996 fiscal year end pursuant to
General Instruction G to Form 10-K.
(Q) Previously filed and incorporated herein by reference to, ATL's Annual
Report on Form 10-K, File No. 0-15160, filed on March 28, 1996.

SCHEDULE II

ADVANCED TECHNOLOGY LABORATORIES, INC.

VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994

ADDITIONS
-------------------
BALANCE
BALANCE AT CHARGED TO CHARGED AT END
BEGINNING COSTS AND TO OTHER OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- -------- ---------- -------
(IN THOUSANDS)

Year ended December 31,
1996:
Valuation accounts
deducted from assets:
Allowance for doubtful
receivables and sales
returns............... $10,140 $1,553 $-- $2,072(1) $ 9,621
======= ====== ==== ====== =======
Year ended December 31,
1995:
Valuation accounts
deducted from assets:
Allowance for doubtful
receivables and sales
returns............... $10,428 $1,521 $-- $1,809(1) $10,140
======= ====== ==== ====== =======
Year ended December 31,
1994:
Valuation accounts
deducted from assets:
Allowance for doubtful
receivables and sales
returns............... $ 7,460 $5,015 $-- $2,047(1) $10,428
======= ====== ==== ====== =======

NOTE:

(1) Accounts charged off, net of recoveries.