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                       SECURITIES AND EXCHANGE COMMISSION
 
                              WASHINGTON, DC 20549
 
                               ----------------
 
                                   FORM 10-K
 
            [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
 
                  For the fiscal year ended December 31, 1994
 
                                       OR
 
          [_]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)
 
                               ----------------
 
                DELAWARE                               91-1353386
    (STATE OR OTHER JURISDICTION OF                 (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)               IDENTIFICATION NO.)
 
     22100 BOTHELL-EVERETT HIGHWAY
             P.O. BOX 3003
          BOTHELL, WASHINGTON                          98041-3003
    (ADDRESS OF PRINCIPAL EXECUTIVE                    (ZIP CODE)
                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 24, 1995, the aggregate market value of the voting stock held by
non affiliates of the registrant was $166,399,957 based upon the closing sale
price of $14.75 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 24, 1994: 13,344,783.
 


             DOCUMENTS INCORPORATED BY REFERENCE                  PART
     ---------------------------------------------------  ---------------------
                                                       
     Annual Report to Shareholders for the fiscal year    Part II (Items 6-8)
     ended December 31, 1994                              Part IV (Item 14)
     Proxy Statement for the 1995 Annual General Meeting  Part III (Items 10-13)
     of Shareholders

 
                          EXHIBIT INDEX IS ON PAGE 22
 
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                     ADVANCED TECHNOLOGY LABORATORIES, INC.
 
                               TABLE OF CONTENTS
 


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

 
                                       2

 
                                     PART I
 
ITEM 1. BUSINESS
 
STRUCTURE OF THE COMPANY
 
  Advanced Technology Laboratories, Inc. ("ATL" or the "Company") is engaged in
the high-technology electronic medical systems business. ATL develops,
manufactures, markets and services diagnostic medical ultrasound equipment
worldwide. ATL conducts its business through two major wholly owned U.S.
subsidiaries, Advanced Technology Laboratories, Inc., a Washington corporation,
and Interspec, Inc., a Pennsylvania corporation. ATL operates through fourteen
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 its 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 major operating subsidiary.
 
  ATL has acquired three companies with specific ultrasound expertise, products
and markets. In 1988 the Company acquired Nova MicroSonics which manufactures
and markets real time and off-line acquisition and measurement products for use
in ultrasound data and image management by hospitals, labs, clinics and
physician offices. In 1990 the Company acquired Precision Acoustic Devices,
Inc. ("PAD") which develops, manufactures and supplies high-performance
ultrasound transducers to industrial and medical imaging markets. In 1993 the
Company relocated PAD's Fremont, California operations to Bothell, Washington
and sold the OEM transducer business of PAD to Blatek, Inc., a transducer
company in State College, Pennsylvania.
 
  In May 1994 the Company completed the acquisition of Interspec, Inc.
("Interspec"), a 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. On February 15, 1995 the Company announced that it would
consolidate the Company's Interspec operations in Ambler Pennsylvania with
ATL's headquarters in Bothell, Washington and anticipates completing this
consolidation during the second half of 1995.
 
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 (TM)),
 
                                       3

 
Apogee, and Ultramark (R) product lines serve all major diagnostic ultrasound
clinical markets--radiology, cardiology, obstetrics/gynecology ("OB/GYN") and
vascular medicine. These product lines span a range of system prices from mid
to premium priced ultrasound products.
 
  Diagnostic ultrasound systems, which are sold for use in hospitals, clinics
and physicians' offices, represented an estimated $2 billion worldwide market
in 1994. The total medical imaging industry is estimated to be over $8 billion
worldwide in 1994.
 
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 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 premium system processing units are characterized by their
ability to fully process broadband signals characteristic of the body's tissues
digitally. ATL has been a pioneer in ultrasound digital technology and
introduced the industry's first digital beamforming processor in 1988.
 
 Ultrasound Characteristics
 
  Ultrasound offers several important advantages compared with other medical
imaging modalities.
 
  Safety. Physicians can often diagnose disease without using invasive
procedures or materials, ionizing radiation or exploratory surgery.
 
  Cost effectiveness. Ultrasound is generally less expensive to purchase, costs
less per patient examination, and requires little or no patient preparation
compared to other imaging modalities such as angiography, computed tomography
("CT"), magnetic resonance imaging and positron emission tomography ("P.E.T.").
 
  Real-time. Ultrasound examinations provide the physician with live, real-time
images of anatomy and physiology, which yield more diagnostic information and
can facilitate a faster diagnosis than static images of other imaging
modalities.
 
  Compared with high-energy modalities such as x-ray and gamma-ray systems,
ultrasound has difficulty imaging through air or bone and generally does not
image the lungs or bones. Due to acoustic properties such as scattering or
attenuation, ultrasound may not provide the clarity of more expensive
modalities such at CT and magnetic resonance imaging in certain applications.
However, by reason of its clinical efficacy, safety, versatility, ease of use
and economy, ultrasound is often the first imaging examination ordered by a
diagnosing physician and is typically the preferred imaging method for soft
tissues examination.
 
ATL'S PRODUCTS
 
  HDI (TM) 3000 ULTRASOUND SYSTEM. In October 1994 ATL introduced its fourth
generation digital ultrasound system, the HDI (TM) 3000 system. The premium HDI
3000 system was designed to address the economic imperatives of the evolving
health care environment in the United States and international markets. The HDI
3000 system operates with a full array of broad bandwidth scanheads, including
the new Entos CL 10-5 Intraoperative scanhead designed for surgical use and now
reported in use for the diagnosis of musculoskeletal injuries in sports
medicine. The HDI 3000 system is lighter in weight than competitive systems,
providing greater mobility and enabling it to be easily moved to the bedside of
critical care patients.
 
                                       4

 
The HDI 3000 system also features a new, more intuitive, ergonomically designed
set of operator controls, which enable an ultrasonographer or physician to
quickly gain confidence in operating the system and performing diagnoses. The
HDI 3000 system provides interactive control screens with diagnostic procedures
selectable at the touch of a button. This feature, called Tissue Specific (TM)
Imaging, optimizes system performance for the selected diagnostic procedure.
The HDI 3000 system offers full Doppler capability, including improved Color
Power Angio imaging features.
 
  In addition to the introduction of the HDI 3000 system and the CL10-5
scanhead in October 1994, ATL introduced two other new broadband scanheads
which expand the HDI system's clinical capabilities: the P7-4 broadband phased
array scanhead for pediatric cardiology and neonatal imaging, and the
multiplane transesophageal MPT7-4 scanhead for cardiac imaging. Shipments of
the MPT7-4 will begin in 1995. These product introductions followed the 1993
introduction of Extended Signal Processing (ESP (TM)) technology and four new
broadband scanheads for the Ultramark 9 HDI system. ESP is a standard feature
of the HDI 3000 system.
 
  ULTRAMARK 9 HIGH DEFINITION IMAGING (HDI) SYSTEM. The Ultramark 9 system with
High Definition Imaging ("HDI") is ATL's high performance product. Introduced
in April 1991, the system contains a digital beamformer which allows high
resolution images and captures a broad bandwidth of tissue signatures. The
Ultramark 9 HDI system also offers a series of high performance scanheads,
including a line of broad bandwidth scanheads which provide a broad range of
clinical applications for the system and substantially enhance the system's
competitive performance. In 1993 the performance of the Ultramark 9 HDI system
was enhanced with the addition of the ESP performance option, providing
improved, speckle reduced image clarity and a wider variety of scanheads for
the system. That year also marked the introduction of the Ultramark 9 HDIcv
system, a high performance system specially configured for the cardiology,
shared services and internal medicine markets. The Ultramark 9 HDI system
operates with a variety of broad bandwidth scanheads including the P7-4 and P5-
3 scanheads, which extend broad bandwidth capability to pediatric cardiology
and small adult applications; the C7-4 scanhead, which is a broad bandwidth
scanhead for abdominal and obstetrical applications; the C4-2 scanhead, which
provides the penetration required for deep abdominal and obstetrical
applications; and the L7-4 scanhead, which provides broad bandwidth scanning in
vascular applications. These scanhead offerings complement the other four
members of ATL's family of broadband scanheads, including the L10-5 linear
array scanhead, the A6-3 annular array scanhead, the P3-2 cardiovascular phased
array scanhead, and the C9-5 intracavitary scanhead.
 
  APOGEE (R) 800 SYSTEM. In 1994 the Company introduced the mid-range Apogee
800 high value imaging system for the radiology and internal medicine markets.
Manufactured by Interspec, the Apogee 800 system offers features normally found
on high performance systems. These include ease of use, and a system affording
high mobility at a moderate price. The Apogee 800 system can be configured to
address a broad array of clinical needs of the radiologist, internal medicine
specialist, and vascular physician.
 
  APOGEE CX 200 AND CX SYSTEMS. The Apogee CX 200 and CX systems are moderately
priced echocardiography systems designed for the hospital and high-end office
markets. The systems offer full imaging, color flow mapping, spectral Doppler
scanning, and digital image archival and can be equipped to perform stress echo
examinations. The Apogee CX 200 and CX systems are also designed to support
multiplane transesophageal echo examinations.
 
  ULTRAMARK 9 DP ULTRASOUND SYSTEM. The Ultramark 9 system was introduced in
1988 as a full featured, color Doppler, multipurpose ultrasound system
incorporating ATL's proprietary digital beamforming technology. In November
1990 the product was enhanced with a number of features known as the Digital
Plus ("DP") package. With the success of the Ultramark 9 HDI system, the
Company has discontinued the manufacture of new Ultramark 9 DP systems. ATL's
entire installed base of Ultramark 9 DP systems can be upgraded with the HDI
option, continuing ATL's commitment of upgradeability to its customers.
 
                                       5

 
  ULTRAMARK 4 ULTRASOUND SYSTEM. This highly portable gray scale and Doppler
system is the Company's principal product for private OB/GYN offices and is
also used in medical institutions worldwide. This product has various
configurations that cover a range of prices from $25,000 to $60,000. Recent
major introductions include Cineloop image review, curved-array scanhead
technology and a multifrequency intravaginal scanhead.
 
  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 acquisition, storage, display and management of
ultrasound information. In 1994 the Company introduced the Access (TM) Image
Management System which provides efficient printing, automated image archival
and retrieval and reduced patient examination times through an ultrasound open
network architecture. The Access system connects to many types of ultrasound
systems, printers or other image management products, facilitating improved
diagnostic consultations within and between hospitals. Through an agreement
with Eastman Kodak Company, the Access system participates in the market for
image management systems addressing all diagnostic imaging modalities. For
cardiac applications, the Nova MicroSonics technology facilitates 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.
 
  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 produces scanheads for the
ATL and Interspec products, and also offers scanheads on an OEM basis 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 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.
 
  Radiology. The radiology application, at approximately 45%, 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 abdomen. 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 Germany, the internal medicine segment requires systems
which include cardiac imaging capability.
 
                                       6

 
  ATL's radiology product offerings include the HDI 3000 system, the Apogee 800
system, and the Ultramark 9 HDI system. Ultramark 9 HDI systems are sold as new
and as refurbished (used) systems. Ultramark 9 DP systems are sold on a
refurbished basis.
 
  Cardiology. The cardiology ultrasound, or echocardiography, application, at
approximately 35%, 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.
 
  ATL's cardiology product offerings include the Ultramark 9 HDIcv system and
the Apogee CX products.
 
  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. The advent of ATL's broadband digital imaging
technology with the ESP option (see "ATL's Products") has enabled physicians to
visualize details of fetal development at earlier stages of pregnancy than had
previously been possible.
 
  ATL's OB/GYN product offerings include the HDI 3000, the Ultramark 9 HDI
system, refurbished Ultramark 9 DP systems, and the Ultramark 4 system for the
office market.
 
  Vascular. The smallest of the primary clinical markets for ultrasound
systems, at approximately 6%, 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, the Ultramark 9 HDI
system, the Apogee 800 system, and refurbished Ultramark 9 DP systems. The new
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.
 
  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.
 
                                       7

 
  Premium Performance. The premium market segment is characterized by
ultrasound systems that typically sell for over $150,000 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.
The HDI 3000 system is ATL's premium performance system.
 
  High Performance. The high performance 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 to $150,000 per unit and generally include advanced measurement and
analysis software, image review capabilities, and a variety of scanhead
offerings. The Ultramark 9 HDI and Ultramark 9 HDIcv systems are ATL's entries
in this market segment.
 
  Mid-Range. The mid-range market segment is characterized by ultrasound
systems that sell between $40,000 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 Apogee 800
system, the Apogee CX 200 and CX systems, and refurbished Ultramark 9 DP and
Ultramark 9 HDI systems.
 
  Low-End. The low-end market segment is characterized by basic black and white
imaging systems that sell below $40,000 per unit. These systems provide limited
diagnostic information and are used primarily for monitoring fetal development
and in other 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's
entry in the low-end market is the Ultramark 4 system.
 
  GEOGRAPHIC AREAS. The ultrasound market is divided into four major geographic
markets.
 
  United States. The United States, at 38% of the market, is the largest single
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. In
1993 and 1994, with the emphasis in the United States turning to more efficient
healthcare delivery and managed care and the consolidation of healthcare
organizations, the U.S. market has become increasingly value conscious.
 
  Europe. The European market, at 30% of the market, is the second largest
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 1994 the European markets proceeded through one of
the more pronounced recessionary cycles for healthcare in many years. This
effect has been moderated somewhat by the more regulated character of
healthcare in Europe, providing more stability to the European markets. Value
consciousness and organized healthcare has been characteristic of European
markets for a number of years, unlike the United States where these effects are
of relatively recent origin. The addition of the Interspec products to ATL's
product lines have significantly increased the presence of ATL in the European
markets.
 
  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.
 
  Asia Pacific, Latin America and Canada. The remaining geographic areas of the
world account for approximately 15% of the market. The Australian and Canadian
markets are similar in structure to those of the European countries. Parts of
Asia and Latin America represent some of the fastest growing areas for high
performance and mid-range ultrasound products. The remainder of this group are
mostly developing countries with limited resources to devote to health care.
Many ultrasound systems sold in these regions are mid-range systems,
refurbished systems or new low-priced Japanese systems. The Asia Pacific and
Latin America markets are among the Company's fastest growing markets.
 
                                       8

 
RESEARCH AND DEVELOPMENT
 
  In 1991 the Company instituted a multi-center study at a number of
institutions in Europe and North America to evaluate the ability of the
Ultramark 9 HDI system to distinguish benign and malignant breast disease.
These studies were concluded in 1993. Based upon the findings of these studies,
in February 1994 the Company submitted a Premarket Approval ("PMA") application
to the U.S. Food and Drug Administration ("FDA") for the use of HDI technology
in the differentiation of solid breast masses. The Company believes this to be
the first PMA application submitted to the FDA for diagnostic ultrasound. The
Company has received expedited handling of the PMA application by the FDA, and
is presently awaiting the FDA's commentary on its PMA application, which is
expected to lead to a review of the application by an FDA panel. The time
required for the application to be processed by the FDA is unknown, although
such applications typically require twelve to twenty-seven months. There can be
no assurances that product clearance under the PMA will ultimately be realized.
 
  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. 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.
 
MANUFACTURING
 
  The Company manufactures its ultrasound system products at facilities in
Bothell, Washington and Ambler, Pennsylvania. On February 15, 1995 the Company
announced that it would consolidate the Company's Interspec operations in
Ambler, Pennsylvania with ATL's headquarters in Bothell, Washington and that it
anticipates completing this consolidation during the second half of 1995. The
image management systems of Nova MicroSonics are manufactured in Nova's New
Jersey facilities. The Echo Ultrasound division of Interspec is located in
Reedsville, Pennsylvania.
 
  The Company purchases certain specialty 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 specialty 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 hybrid and integrated circuits which are critical
to the quality and manufacture of ultrasound equipment. 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
manufacturing production 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.
 
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, with the
exception of the third-party business of Nova MicroSonics, the Company markets
its products through its direct sales organization. The United States 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.
 
                                       9

 
  The Company markets its products internationally through its direct sales and
service operations in Argentina, Australia, Austria, Belgium, Canada, France,
Germany, Italy, the Netherlands, Hong Kong, Singapore, and the United Kingdom.
In addition, the Company markets its products in India through a joint venture
with Indchem Electronics. In January 1995 the Company announced that it had
reached an agreement to increase its position in its India joint venture to a
majority share. 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 approximately 46% of revenues in
1994.
 
  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 that
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 competitive. The Company competes worldwide in the
major clinical applications of the ultrasound market, in each price range and
in each major geographic market. Four companies, ATL, Toshiba Corporation's
Medical Systems Group, 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 approximately equal
market shares. Each of the Company's primary competitors initially participated
in only one or two of the clinical ultrasound markets (such as radiology or
cardiology), but all are increasingly seeking to sell their ultrasound products
in additional markets.
 
  In addition to the Company's primary competitors, the large, multi-modality
companies of the medical imaging industry--the Medical Systems Group of General
Electric Company, Siemens Medical Systems, Inc. and Philips Medical Systems,
Inc.--have signaled their intention to become more competitive in the
ultrasound market. General Electric stepped up its participation in ultrasound
in November 1993 with the announcement of a new digital ultrasound system, and
has recently announced that it has contracted with
one of the nation's large hospital networks to assist with the acquisition and
servicing of the network's diagnostic equipment. Philips has announced its
plans to collaborate in ultrasound with Hewlett-Packard.
 
                                       10

 
Siemens has located its central world ultrasound facility to Issaquah,
Washington, approximately twelve miles from ATL's headquarters. Elbit, Inc., an
Israeli supplier of a broad range of diagnostic imaging equipment, increased
its presence in ultrasound in 1994 with the acquisition of Diasonics, Inc.
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.
 
  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, and reliability
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.
 
  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
could adversely affect the ultrasound industry. Nevertheless, the Company
believes that ultrasound's inherent advantages of safety, cost-effectiveness
and real-time imaging will continue to make ultrasound a primary imaging
modality.
 
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 technology,
is protected by copyright laws and confidentiality and licensing agreements.
The Company's proprietary digital beamformer is protected by confidentiality
agreements, copyright and trade secret law.
 
  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 that the Company 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 Company's 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 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 1994 the FDA concluded inspections of the
Company's Allendale, New Jersey facilities of Nova MicroSonics and its Bothell,
Washington facilities. The FDA also has broad regulatory powers with respect to
preclinical and clinical testing of new medical products and the manufacturing,
marketing and advertising of medical products.
 
                                       11

 
  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 premarket approval 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 premarket approval 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 required only 510(k) clearance. In October 1994 the
Company received 510(k) clearance to market its new HDI 3000 system.
 
  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.
 
  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. In 1994, four of the Company's five manufacturing facilities
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.
 
  Federal, state and foreign regulations are constantly undergoing change. In
1994 the U.S. government continued its consideration of healthcare system
reform. The national focus on possible healthcare legislation has caused U.S.
ultrasound customers to become more cautious in making expenditures and
investing in capital equipment. In addition, the U.S. healthcare 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 healthcare providers for
diagnostic testing services and other services for which the providers may seek
reimbursement from third-party payors, 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 payors. 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 payors 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 payors worldwide, including governmental agencies, are under
increasing pressure to contain medical costs. Limits on reimbursement or other
cost containment measures imposed by third-party payors 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
 
                                       12

 
regulation would have on the Company. Many of ATL's ultrasound systems are used
in an outpatient setting, replace higher-cost imaging modalities or enable a
hospital or clinic to receive higher payments for services commensurate with
the higher level of diagnostic information provided.
 
  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, 1994, the Company had 2,630 employees. 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 20 on page 26 of the 1994
Annual Report to Shareholders is incorporated by reference herein.
 
EXECUTIVE OFFICERS OF THE REGISTRANT
 
  Information set forth in Part III, Items 10-13 found on page 15 of this Form
10-K are incorporated herein by reference in response to the information
required by this item.
 
ITEM 2. PROPERTIES
 
  The Company owns premises at 22100 Bothell Everett Highway, Bothell,
Washington 98041, consisting of 285,000 square feet. These premises include the
Company's corporate headquarters and a major manufacturing facility, as well as
the Company's research and development, sales, service, marketing and
administrative functions. A number of these functions are being moved to the
building on an adjoining property which the Company purchased in December 1994
for approximately $11.5 million, consisting of 80,000 square feet. The
additional space provided by the new building makes possible the consolidation
of Interspec's Ambler, Pennsylvania operations into those of the Company's
headquarters facilities, as well as the consolidation of operations occupying
another 41,000 square feet in an adjoining business park. See "Subsequent
Event" of the Notes to the Consolidated Financial Statements contained in Note
22, included in Item 8 of this Form 10-K. The Company expects to sell the
Ambler, Pennsylvania building after the consolidation of operations there has
been fully completed in late 1995.
 
  The Company's Nova MicroSonics facility occupies approximately 33,000 square
feet in leased buildings in Allendale, New Jersey and Indianapolis, Indiana,
and the Echo Ultrasound division of Interspec occupies 63,000 square feet in a
building owned by the Company in Reedsville, Pennsylvania.
 
  In 1994, the Company sold property formerly used as the Company's
manufacturing facility in Germany for $3.2 million. 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 which
have not yet been disposed of, other than those 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 product liability 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 subsequent to 1986 are covered by
the Company's insurance policies. The Company
 
                                       13

 
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 November 1992, a U.S. District Court in California granted a motion by SRI
International, Inc. ("SRI") requesting partial summary judgment on a patent
infringement claim relating to an electrical circuit alleged to be used in the
Company's Ultramark 4 system and two discontinued products. The patent expired
in 1994. In December 1994 the U.S. Federal Circuit Court of Appeals affirmed
the summary judgment obtained by SRI. A jury trial to determine a damage award
commenced in the District Court in California in March, 1995 but was suspended
after two days of trial for assignment of the case to a new judge. SRI is
claiming royalties for past sales of these product and an enhancement of
royalties for willful infringement. 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. Information set forth in Notes to
the Consolidated Financial Statements contained in Note 19 on page 26 of the
1994 Annual Report to Shareholders is incorporated by reference herein.
 
  The Company is involved in various other legal actions and claims arising in
the ordinary course of business. The Company believes the resolution of these
matters individually and in the aggregate will not have a material adverse
effect on the Company's financial condition.
 
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 Common Stock, $0.01 par
value, is traded over the counter under the symbol ATLI and is an authorized
security for quotation in National Association of Securities Dealers, Inc.
Automated Quotation National Market System ("Nasdaq National Market").
 
  The market prices of the Company's Common Stock during the two-year period
ended December 31, 1994 are set forth below. The prices reflect the high and
low trading prices for each quarter as reported by Nasdaq National Market for
ATL.
 


     ATL COMMON STOCK                                               HIGH   LOW
     ----------------                                              ------ ------
                                                                    
     Quarter ended December 31, 1994.............................. 19 1/2 14 3/4
     Quarter ended September 30, 1994............................. 17 1/4 13
     Quarter ended July 1, 1994................................... 15 3/4 12 1/2
     Quarter ended March 31, 1994................................. 17 1/4 15

     Quarter ended December 31, 1993.............................. 17 1/2 15 3/4
     Quarter ended October 1, 1993................................ 17 3/4 15 1/4
     Quarter ended July 2, 1993................................... 18 3/4 15 1/2
     Quarter ended April 2, 1993.................................. 19     15 3/4

 
  Shareholders. The approximate 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 February 28, 1995 was 9,269.
 
  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 dividend policy of ATL is reviewed from time to time by the
Company's Board of Directors. 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.
 
                                       14

 
ITEM 6. SELECTED FINANCIAL DATA
 
  Reference is made to page 10 of the 1994 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 11 through 14 of the 1994 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 1994 Annual Report to Shareholders in
response to the information required by this item:
 


                                                                          PAGE
                                                                          -----
                                                                       
Independent Auditors' Report.............................................    15
Consolidated Financial Statements:
  Consolidated Balance Sheets at December 31, 1994 and 1993..............    16
  Consolidated Statements of Operations for each of the years in the
   three-year period ended December 31, 1994.............................    17
  Consolidated Statements of Cash Flows for each of the years in the
   three-year period ended December 31, 1994.............................    18
  Consolidated Statements of Shareholders' Equity for each of the years
   in the three-year period ended December 31, 1994......................    19
  Notes to Consolidated Financial Statements............................. 20-27
See Part IV of 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
 
ITEMS 10-13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
  The information required by Part III (Items 10-13) is partially set forth in
ATL's definitive proxy statement which will be filed pursuant to Regulation 14A
within 120 days of December 31, 1994. Such information is incorporated herein
by reference and made a part hereof.
 
  Debby Jo Blank M.D. Dr. Blank joined ATL as Senior Vice President, Marketing
in August 1994. She held the position of Vice President, Marketing for Syntex
Laboratories, Inc. from 1993 to July 1994. Prior to that time, Dr. Blank held
various positions as Vice President of Worldwide Marketing (1992-1993), New
Product Planning & Licensing (1992), and Strategy and Business Development
(1991-1992) at DuPont Merck Pharmaceutical Company, and other management
positions in planning and development marketing (1989-1991) at E.I. DuPont &
Company, Medical Products Department.
 
  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, ATL Europe
since October 1993 and as Vice President, ATL Europe since October 1988. 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, Chief Financial Officer and Treasurer 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.
 
                                       15

 
  Victor H. Reddick. Mr. Reddick has served as Senior Vice President, U.S.
Sales since April 1994 and as Vice President, U.S. Sales since July 1991. He
also held other general management positions in sales and marketing at ATL from
December 1984 to July 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.
 
                                    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 1994 Annual Report to
  Shareholders:
 
    Independent Auditors' Report
 
    Consolidated Financial Statements:
 
      Consolidated Balance Sheets at December 31, 1994 and 1993
      Consolidated Statements of Operations for each of the years in the
      three-year period ended December 31, 1994.
      Consolidated Statements of Cash Flows for each of the years in the
      three-year period ended December 31, 1994.
      Consolidated Statements of Shareholders' Equity for each of the
      years in the three-year period ended December 31, 1994.
 
      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.
 
(C)EXHIBITS:
 
  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.
 
                                       16

 
                     INDEX TO FINANCIAL STATEMENT SCHEDULES
 


                                                                      PAGE
                                                                      ----
                                                                   
Financial Statement Schedule for each of the years in the three-year
 period ended December 31, 1994:
  VIII Valuation and qualifying accounts                               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.
 
                                       17

 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Shareholders
 Advanced Technology Laboratories, Inc.:
 
  Under date of February 10, 1995 we reported the consolidated balance sheets
of Advanced Technology Laboratories, Inc. and subsidiaries as of December 31,
1994 and 1993, 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, 1994, as contained in the 1994 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
1994. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedules as listed in the index referred to in Part IV, Item 14(2)
of the Form 10-K report. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statement schedules based on our audits.
 
  In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
 
  The Company changed its method of accounting for investments to adopt the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities, at January 1,
1994.
 
                                          KPMG Peat Marwick LLP
 
Seattle, Washington
February 10, 1995

 
                                       18

 
                             CONSENT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS
 
The Board of Directors
 Advanced Technology Laboratories, Inc.:
 
  We consent to incorporation by reference in the registration statements 33-
38218, 33-38217, 33-28830, 33-28092, 33-22434, 33-10618, 33-47967, 33-54757 and
33-66298 on Form S-8, of Advanced Technology Laboratories, Inc., of our report
dated February 10, 1995, relating to the consolidated balance sheets of
Advanced Technology Laboratories, Inc. and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of operations, shareholders'
equity and cash flows and related financial statement schedules for each of the
years in the three-year period ended December 31, 1994, which reports appear in
the December 31, 1994 annual report on Form 10-K, or are incorporated by
reference therein from the 1994 annual report to shareholders, of Advanced
Technology Laboratories, Inc.
 
  Our reports refer to a change in the method of accounting for certain
investments in debt and equity securities, effective January 1, 1994.
 
                                          KPMG Peat Marwick LLP
 
 
Seattle, Washington
March 29, 1995
 
                                       19

 
                                   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)
 
                                                    /s/ Dennis C. Fill
                                          By __________________________________
                                                       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            3/29/95
-------------------------------------    Board, Chief
           DENNIS C. FILL                Executive Officer
                                         and Director
 
        /s/ Harvey N. Gillis            Senior Vice                3/29/95
-------------------------------------    President, Chief
          HARVEY N. GILLIS               Financial Officer
                                         and Treasurer
 
        /s/ David M. Perozek            President and Chief        3/29/95
-------------------------------------    Operating Officer,
          DAVID M. PEROZEK               ATL, and Director
 
           /s/ Edward Ray               President and Chief        3/29/95
-------------------------------------    Operating Officer,
             EDWARD RAY                  Interpec, and
                                         Director
 
                                       20

 
              SIGNATURE                         TITLE                DATE
              ---------                         -----                ----
 
         /s/ Kirby L. Cramer            Director                   3/29/95
-------------------------------------
           KIRBY L. CRAMER
 
        /s/ Harvey Feigenbaum           Director                   3/29/95
-------------------------------------
       HARVEY FEIGENBAUM, M.D.
 
        /s/ Eugene A. Larson            Director                   3/29/95
-------------------------------------
          EUGENE A. LARSON
 
       /s/ Phillip N. Nudelman          Director                   3/29/95
-------------------------------------
         PHILLIP N. NUDELMAN
 
         /s/ John R. Miller             Director                   3/29/95
-------------------------------------
           JOHN R. MILLER
 
           /s/ Harry Woolf              Director                   3/29/95
-------------------------------------
         HARRY WOOLF, PH.D.
 
       /s/ Richard S. Totorica          Corporate Controller       3/29/95
-------------------------------------    (Chief Accounting
         RICHARD S. TOTORICA             Officer)
 
                                       21

 
                               INDEX TO EXHIBITS
 


 EXHIBIT NO.                             DESCRIPTION
 ----------- ------------------------------------------------------------------
          
  (A) 3.1    Restated Certificate of Incorporation of Westmark International
             Incorporated.
  (B) 3.2    Certificate of Amendment to the Restated Certificate of
             Incorporation of Advanced Technology Laboratories, Inc.
  (B) 3.3    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.
      3.4    Amended and Restated Bylaws of Advanced Technology Laboratories,
             Inc.
  (C) 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.
  (B) 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.
  (B) 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.
  (D) 4.4    Note Purchase Agreement dated as of May 31, 1989 between Interspec
             and Noteholders (incorporated by reference from Interspec, Inc.
             1993 Annual Report on Form 10-K, filed as Exhibit 4.1, filed on
             February 25, 1994).
  (E) 4.5    Form of Amended to Note Purchase Agreement and Notes, and Guaranty
             between Interspec, Noteholders and ATL.
 (B) 10.1    Distribution Agreement between Westmark International Incorporated
             and SpaceLabs Medical, Inc. dated as of May 18, 1992.
 (B) 10.2    Intercompany Agreement between Westmark International Incorporated
             and SpaceLabs Medical, Inc. dated as of May 18, 1992.
 (B) 10.3    Tax Allocation Agreement between Westmark International
             Incorporated and SpaceLabs Medical, Inc. dated as of May 18, 1992.
 (F) 10.4    Lease between Le Bien and Nova MicroSonics dated November 9, 1988
             (Indianapolis facility).
     10.5    Lease between Advent Realty Partnership II and Nova MicroSonics
             dated December 14, 1993 (Allendale, New Jersey facility).
 (G) 10.6    Lease between WRC Properties, Inc. and Advanced Technology
             Laboratories, Inc. dated January 10, 1992.
 (D) 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 on Form 10-K,
             filed as Exhibit 10.27, filed on February 25, 1994)
 (D) 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 on Form 10-K, filed as Exhibit 10.26,
             filed on February 25, 1994)

 
                                       22

 


 EXHIBIT NO.                             DESCRIPTION
 ----------- ------------------------------------------------------------------
          
 (D) 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 on Form 10-K, filed as Exhibit 10.28,
             filed on February 25, 1994)
 (D) 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
             on Form 10-K, filed as Exhibit 10.13, filed on February 25, 1994).
 (D) 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 on Form 10-K,
             filed as Exhibit 10.12, filed on February 25, 1994).
 (D) 10.12   Assignment of Installment Sale Agreement and Amendment dated
             November 30, 1989 by Montgomery County Industrial Development
             Corporation to The Pennsylvania Industiral Development Authority
             (incorporated by reference from Interspec, Inc. 1993 Annual Report
             on Form 10-K, filed as Exhibit10.14, filed on February 25, 1994).
 (D) 10.13   Consent, Subordination and Assumption 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
             on Form 10-K, filed as Exhibit 10.25, filed on February 25, 1994).
 (D) 10.14   Promissory Note dated May 29, 1990 in the principal amount of
             $1,500,000 from Mifflin County Industrial Development to The
             Pennsylvania Industrial Development Authority (incorporated by
             reference from Interspec, Inc. 1993 Annual Report on Form 10-K,
             filed as Exhibit 10.19, filed on February 25, 1994).
 (D) 10.15   Loan Agreement dated May 29, 1990 between Mifflin County
             Industrial Development and The Pennsylvania Industrial Development
             Authority (incorporated by reference from Interspec, Inc. 1993
             Annual Report on Form 10-K, filed as Exhibit 10.33, filed on
             February 25, 1994).
 (D) 10.16   Mortgage dated May 29, 1990 between Mifflin County Industrial
             Development and The Pennsylvania Industrial Development Authority
             (incorporated by reference from Interspec, Inc. 1993 Annual Report
             on Form 10-K, filed as Exhibit 10.20, filed on February 25, 1994).
 (D) 10.17   Installment Sale Agreement dated October 14, 1988 between Mifflin
             County 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
             on Form 10-K, filed as Exhibit 10.22, filed on February 25, 1994).
 (D) 10.18   Assignment of Installment Sale Agreement dated May 29, 1990 by
             Mifflin County Industrial Development to The Pennsylvania
             Industrial Development Authority (incorporated by reference from
             Interspec, Inc. 1993 Annual Report on Form 10-K, filed as Exhibit
             10.23, filed on February 25, 1994).
 (D) 10.19   Consent, Subordination and Assumption Agreement dated May 29, 1990
             by Mifflin County Industrial Development to The Pennsylvania
             Industrial Development Authority (incorporated by reference from
             Interspec, Inc. 1993 Annual Report on Form 10-K, filed as Exhibit
             10.32, filed on February 25, 1994).
     10.20   Purchase and Sale Agreement by and between ELDEC Corporation, N.C.
             ELDEC, Inc. and ATL for the sale of ELDEC Building and surrounding
             property.

 
                                       23

 


 EXHIBIT NO.                             DESCRIPTION
 -----------  -----------------------------------------------------------------
           
        10.21 Certificate and Indemnity Agreement by ATL for the benefit of
              Seattle First National Bank for $11,500,000 loan for ELDEC
              Building and surrounding property.
        10.22 Deed of Trust, Security Agreement as of December 28, 1994, by ATL
              to Rainier Trust Company for the Benefit of Seattle-First
              National Bank, for ELDEC Building and surrounding property.
        10.23 Promissory Note for $11,500,000 dated December 28, 1994 from ATL
              to Seattle-First National Bank, for ELDEC Building and
              surrounding property.
 (H)(M) 10.24 1986 Amended and Restated Option, Restricted Stock, Stock
              Appreciation Right and Performance Unit Plan.
    (M) 10.25 Amended and Restated July 1, 1994 Advanced Technology
              Laboratories, Inc. Incentive Savings and Stock Ownership Plan.
    (M) 10.26 Advanced Technology Laboratories, Inc. Supplemental Benefit Plan,
              Amended and Restated January 1, 1994.
        10.27 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) 10.28 Amended and Restated Retirement Plan, effective June 26, 1992.
    (M) 10.29 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.
 (A)(M) 10.30 Management Incentive Compensation Plan.
 (I)(M) 10.31 Amendment to Management Incentive Compensation Plan, effective
              May 5, 1993.
    (B) 10.32 Employee Benefit Allocation Agreement between Westmark
              International Incorporated and SpaceLabs Medical, Inc. dated as
              of May 18, 1992.
 (J)(M) 10.33 Amended 1992 Option, Stock Appreciation Right, Restricted Stock,
              Stock Grant and Performance Unit Plan. Adopted by Shareholders on
              May 5, 1993.
 (B)(M) 10.34 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.
 (I)(M) 10.35 Long Term Incentive Plan, effective January 1, 1993.
    (D) 10.36 Interspec Supplemental Executive Retirement Plan (incorporated by
              reference from Interspec, Inc. 1993 Annual Report, filed as
              Exhibit 10.8 on Form 10-K, filed on February 25, 1994)
 (H)(M) 10.37 Change of Control Employment Agreement with Dennis C. Fill dated
              January 1, 1991.
 (B)(M) 10.38 First Amendment to Employment Agreement with Dennis C. Fill dated
              May 18, 1992.
    (M) 10.39 Second Amendment to Employment Agreement with Dennis C. Fill
              dated July 4, 1994.
 (B)(M) 10.40 Change of Control Employment Agreement with David M. Perozek
              dated May 18, 1992.
 (B)(M) 10.41 Change of Control Employment Agreement with Harvey N. Gillis
              dated September 23, 1992.
    (M) 10.42 Employment Agreement with Edward Ray dated May 17, 1994.
    (K) 10.43 Amended and Restated Nonofficer Employee Option, Restricted Stock
              and Stock Grant Plan.

 
                                       24

 


 EXHIBIT NO.                             DESCRIPTION
 ----------- ------------------------------------------------------------------
          
 (J) 10.44   1992 Nonofficer Employee Stock Option Plan.
 (E) 10.45   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       1994 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, 1994.
    24       Consent of KPMG Peat Marwick. Reference is made to the Consent on
             page 19 of this filing in response to this item.
  (L) 28     Proxy Statement to Stockholders for ATL's 1994 Annual General
             Meeting of Shareholders.
    (A)      Previously filed with, and incorporated herein by reference to,
             Westmark's Registration Statement on Form 10, File No. 0-15160.
    (B)      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.
    (C)      Previously filed with, and incorporated herein by reference to,
             Westmark International Incorporated's Amendment to Application
             Form 8, filed on June 25, 1992.
    (D)      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.
    (E)      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.
    (F)      Previously filed with, and incorporated herein by reference to,
             Westmark's Annual Report on Form 10-K, File No. 015160, filed on
             March 21, 1989.
    (G)      Previously filed with, and incorporated herein by reference to,
             Westmark's Annual Report on Form 10-K, File No. 015160, filed on
             March 26, 1992.
    (H)      Previously filed with, and incorporated herein by reference to,
             Westmark's Annual Report on Form 10-K, File No. 015160, filed on
             March 22, 1991.
    (I)      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.
    (J)      Previously filed with, and incorporated herein by reference to,
             ATL's Registration Statement on Form S-8, Registration Nos. 33-
             66298 and 33-54757, filed July 22, 1993 and July 24, 1994,
             respectively.
    (K)      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.
    (L)      To be filed within 120 days of the 1994 fiscal year end pursuant
             to General Instruction G to Form 10-K.
    (M)      Management Contracts and Compensatory Arrangements.

 
                                       25

 
                                 SCHEDULE VIII
 
                     ADVANCED TECHNOLOGY LABORATORIES, INC.
 
                       VALUATION AND QUALIFYING ACCOUNTS
 


                                           ADDITIONS
                           -----------------------------------------
                           BALANCE AT CHARGED TO CHARGED                BALANCE
                           BEGINNING  COSTS AND  TO OTHER              AT END OF
       DESCRIPTION         OF PERIOD   EXPENSES  ACCOUNTS DEDUCTIONS    PERIOD
       -----------         ---------- ---------- -------- ----------   ---------
                                             (IN THOUSANDS)
                                                        
Year ended December 31,
 1994:
  Valuation accounts de-
   ducted from assets:
    Allowance for doubtful
     receivables and sales
     returns..............  $  7,460   $ 5,015   $   --    $ 2,047(1)  $ 10,428
                            ========   =======   =======   =======     ========
Valuation allowance for
 deferred tax assets......  $ 19,709   $ 7,540   $   --    $   --      $ 27,249
                            ========   =======   =======   =======     ========
Year ended December 31,
 1993:
  Valuation accounts de-
   ducted from assets:
    Allowance for doubtful
     receivables and sales
     returns..............  $  6,301   $ 1,801   $   --    $   642(1)  $  7,460
                            ========   =======   =======   =======     ========
Valuation allowance for
 deferred tax assets......  $ 18,565   $ 2,181   $   --    $ 1,037(2)  $ 19,709
                            ========   =======   =======   =======     ========
Year ended December 31,
 1992:
  Valuation accounts de-
   ducted from assets:
    Allowance for doubtful
     receivables and sales
     returns..............  $  6,396   $ 1,744   $   --    $ 1,839(1)  $  6,301
                            ========   =======   =======   =======     ========
Valuation allowance for
 deferred tax assets......  $ 16,449   $   --    $ 3,288   $ 1,172(2)  $ 18,565
                            ========   =======   =======   =======     ========

--------
Note:
(1) Accounts charged off, net of recoveries.
(2) Adjustments to the valuation allowance for deferred tax assets, based on
    the ability to realize net deferred tax assets in the future, according to
    the provisions of Statement of Financial Accounting Standards No. 109,
    "Accounting for Income Taxes."
 
                                       26