SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended April 30, 1996
Commission file number 0-18724
------------------------------
MARQUETTE ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1046671
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8200 West Tower Avenue, Milwaukee, Wisconsin 53223
(Address of Principal Executive Offices) (Zip Code)
(414) 355-5000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $0.10 Par Value
(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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Approximate aggregate market value of the registrant's Class A Common Stock
held by non-affiliates (based on the closing sales price of such stock as
reported in the NASDAQ National Market System) on July 1, 1996 was
$152,860,053.*
As of July 1, 1996, the number of shares of Class A Common Stock, $0.10 par
value, outstanding was 16,064,928 and the number of shares of Class C Common
Stock, $0.01 par value, outstanding was 26,250,000.
DOCUMENTS INCORPORATED BY REFERENCE
Document Form 10-K Part
-------- --------------
1. Annual Report to Shareholders for fiscal year ended
April 30, 1996 II
2. Proxy Statement for Annual Meeting of Shareholders
scheduled to be held on August 15, 1996 III
_______________
* Excludes, among other shares, 5,227,849 shares of Common stock held by
officers and directors at July 1, 1996. Exclusion of such shares should not
be construed to indicate that any such person possesses the power, direct
or indirect, to direct or cause the direction of the management or policies
of the registrant or that such person is controlled by or under common
control with the registrant.
ITEM 1. BUSINESS
INTRODUCTION
Marquette Electronics, Inc. (including its subsidiaries, the "Company"
or "Marquette"(R)) is a leading manufacturer of medical electronic equipment,
systems and supplies and a leading developer of software for the diagnosis and
monitoring of patients requiring critical care, fetal and neonatal monitoring.
Marquette also develops and sells clinical information systems consisting of
hardware and software used by hospitals to electronically acquire, record,
store, analyze and distribute patient medical data. The Company is one of the
world market leaders in sales of computerized electrocardiographic, adult,
neonatal and fetal monitoring equipment, as well as physiologic/hemodynamic
monitoring systems utilized in cardiac catheterization laboratories ("Cath Lab")
and electrophysiology laboratories ("EP Lab"). The Company is also a major
distributor for a wide range of cineangiography films used to document and
archive images produced through diagnostic cardiac catheterization and related
procedures and also produces digital imaging systems for use with Cath Lab and
ECG equipment to digitally record images. The Company has four manufacturing
facilities in the U.S. and one in Germany as well as world-wide sales and
service operations.
Marquette pursues a strategy of using its market position and technological
capabilities to continue to enter other critical care areas including
defibrillators used in emergency cardiac care, instruments used to analyze
respiratory and anesthetic gases, cardiac catheterization monitoring equipment
and imaging products. In addition, as a result of Marquette's large installed
base of medical electronic equipment, much of which requires the use and
consumption of disposable items such as chart paper and patient electrodes, the
Company has established a substantial disposable supplies business.
The Company believes its products are widely recognized for quality and
technological innovation. In electrocardiography, Marquette introduced the first
commercially successful system for computerized acquisition and analysis of
electrocardiograms, and a proprietary computer program, developed using millions
of ECGs, which is the world's most widely used program for analysis of clinical
electrocardiographs ("ECG"). In addition, Marquette's patented continuous
patient monitoring system (TRAM(R)) eliminates the loss of information and staff
time associated with switching monitoring equipment connected to a patient being
moved within the hospital. Marquette has historically made a substantial
commitment to product research and development and has introduced major new
products in each of its product lines during the past three years. Product
engineering and research and development spending represented 9.0% of net sales
in fiscal 1996.
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Marquette was formed in 1965 by Michael J. Cudahy and Warren B. Cozzens.
Since its formation, the Company has grown by continuous investment in research
and development to create an ever-expanding proprietary line of medical products
and through carefully planned acquisitions which have broadened its product line
and the geographic scope of its operations. In 1982, the Company acquired from
General Electric Company its patient monitoring business. In 1994, the Company
purchased from American Home Products all of the outstanding shares of stock of
Corometrics Medical Systems, Inc. ("Corometrics") giving the Company a strong
position in the fetal and perinatal monitoring market and entree to the market
for clinical information systems. In January, 1996, the Company acquired all of
the stock of E For M Corporation ("E For M") which, with E For M's wholly-owned
German subsidiary, Hellige GmbH ("Hellige"), resulted in a significant
broadening of Marquette's lines of Cath Lab, defibrillator, ECG and monitoring
products and added EP Lab and digital imaging to its product lines and a
significant distributorship for specialized 35 millimeter cineangiography film .
The Company's principal markets are the critical care units, operating and
recovery rooms, step-down units and related areas of acute care hospitals,
particularly those institutions specializing in the diagnosis and treatment of
heart disease, together with labor and delivery units. Marquette also markets
its products to smaller hospitals, medical clinics, physician offices,
government hospitals, research institutions, and providers of emergency care.
Marquette believes that its current product lines address a United States
market totalling in excess of $1 billion annually and a non-United States market
of approximately equal size. The Company expects that the demand for
electrocardiographs will grow due to (i) the increasing incidence of
cardiovascular disease, (ii) the aging population, (iii) the growing emphasis on
early detection and management of cardiovascular disease, and (iv) the relative
ease and low cost of ECG testing relative to other methods of cardiac diagnosis.
The Company also expects that the demand for patient monitoring, gas analysis,
EP Lab and Cath Lab equipment will continue to grow due to (i) the need for more
comprehensive and useful information on a patient's physiological condition and
(ii) an increasing number of patients requiring cardiovascular surgical
procedures. Finally, the Company expects that the demand for emergency care
products will continue to grow due to (i) a growing recognition that early
defibrillation is the single most effective intervention for sudden cardiac
arrest and (ii) regulatory changes which greatly expand the number of emergency
care personnel permitted to use defibrillators.
The foregoing expectations are subject to unforeseeable, but conceptually
expected, changes that may be legislatively imposed to
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contain national health care costs and expand health care coverage and to the
growing pressure being placed upon medical care providers to contain or reduce
the cost of medical care.
During fiscal 1996, following the E For M acquisition, the Company was
restructured into eight separate semi-autonomous operating divisions known as:
Patient Monitoring, Cardiology, E For M Cath Lab, E For M Imaging Systems,
Corometrics Medical Systems, QMI Clinical Information Systems, Supplies and
Service. Each division is responsible for the design, development, production,
marketing and sale of a related group of products and/or services.
PRODUCT OVERVIEW
The medical electronic equipment industry is characterized by rapid
technological innovation, heavy reliance on computer products and increasing
digital communication capability. Marquette has designed products that replace
older analog technology with newer digital technology and which is capable of
improving the acquisition and processing of patient physiological information
available to the physician. In addition, Marquette's products take advantage of
the increased miniaturization of computer technology, allowing more processing
power to be included in a device without increasing its size. Miniaturization
has allowed Marquette to design products bringing processing power closer to the
patient and increasing the amount, quality and timeliness of patient
physiological information.
Marquette designs its products with the goals of minimizing product
obsolescence, maintaining compatibility with older products in the same product
line, integrating products from different product lines, providing for standard
computer software platforms and hardware, reducing products costs and prices and
permitting the customer to reduce its per patient costs. Given the rate of
change in electronics and computer technology, considerable development effort
must be expended to meet these goals. In an effort to minimize product
obsolescence and, thereby, customer costs, the Company designs hardware
components and modules to be removable and available for replacement with new
versions and includes processing technology in software which can generally be
upgraded more easily and inexpensively than hardware. No assurance can be given
that these goals will be met.
Marquette has developed and promotes an integrated system called
UNITY/tm/ which enables a wide range of Marquette's patient monitoring,
clinical information, diagnostic and Cath Lab products to be interconnected
and to interface with general and clinical information systems maintained by
its hospital customers. UNITY is designed to (i) communicate patient information
from bedside and telemetry monitors to central nurses' stations, (ii) allow
4
attending medical personnel to view patient information in various areas of the
hospital, (iii) allow attending medical personnel to receive patient information
from remote locations via telephone lines and modems, and (iv) electronically
transfer patient information to care units, outpatient facilities or physician's
offices.
The following table displays certain information relating to the Company's
products (dollars in thousands):
Year Ended April 30,
------------------------------------------------------------------------------------------------
1996 1995 1994
--------------------------- ---------------------------- ---------------------------
Percentage Percentage Percentage
of Net of Net of Net
Net Sales Sales Net Sales Sales Net Sales Sales
--------- ---------- --------- ---------- --------- ----------
Diagnostics $ 94,051 22.6% $ 94,749 27.7% 89,883 35.4%
Monitoring 121,696 29.2% 113,121 33.1% 107,928 42.6%
Perinatal 70,600 17.0% 66,857/1/ 19.5% -0- -0-
E For M Products 54,524/2/ 13.1% -0- -0- -0- -0-
Clinical 13,931 3.3% 10,283 3.0% 1,853 .7%
Information
Systems
Supplies 28,318 6.8% 27,022 7.9% 25,345 10.0%
Service 33,173 8.0% 30,144 8.8% 28,799 11.3%
-------- ----- -------- ----- -------- -----
Total $416,293 100.0% $342,176 100.0% $253,808 100.0%
======== ===== ======== ===== ======== =====
- ----------------
/1/ 11 months ending April 30, 1995.
/2/ 4 months ending April 30, 1996.
For additional financial information by geographic area, see Note 13 to
Notes to Consolidated Financial Statements.
The products handled by each of the divisions are summarized below.
CARDIOLOGY DIVISION PRODUCTS
Headquartered in Milwaukee, Wisconsin, the Cardiology Division's products
are used non-invasively in or related to electrocardiology, which is the
diagnosis of heart disorders through the detection, recording and analysis of
electrical signals emitted by the heart. An electrocardiograph is a device which
detects these signals through lead wires that are connected from the device to
electrodes (strips of an electrically conductive material) that are, in turn,
applied to the patient's skin at a number of points on the patient's chest and
limbs. These signals
5
are transmitted to the electrocardiograph where they can be recorded graphically
on paper or displayed on a video monitor and subsequently transmitted to a
control facility by telephone or stored on computer disk. The record of such
data is called an ECG.
Normal heartbeats make a specific pattern of electrical signals that are
displayed as wave forms on the ECG. Specific types of heart damage and disease
usually change the pattern of signals in ways recognizable to a cardiologist or
electrocardiographer. Such patterns can also be analyzed by a computer. Obser-
vation and analysis of ECGs are used to diagnose and prescribe treatment for
heart damage from such conditions as coronary artery disease (a condition in
which the arteries that supply the heart muscle have become dangerously
narrowed), arrhythmia (a disorder of the heart's rhythm characterized by an
irregular heart beat), cardiac ischemia (the reduced flow of oxygenated blood to
the heart muscle), pericarditis (inflammation of the heart due to virus or other
infection) and birth defects. An ECG is also used to help determine the location
and the amount of injury caused by a heart attack or myocardial infarction (the
damage to the heart muscle due to severe blockage of a coronary artery) or other
forms of cardiac disease. A series of ECGs collected over time and analyzed can
show whether and to what extent the heart is recovering and can be used to
predict the effects of certain drugs on the heart.
Diagnosis of cardiac disease based on ECGs has historically required a
cardiologist or electrocardiographer to interpret ECGs. In the early 1970's,
organizations including the National Institutes of Health, the Veterans
Administration and the Mayo Clinic began computer analysis of ECGs. This
analysis, however, could only be performed on large computers and thus was not
practical for general use. In 1976, Marquette further developed computer ECG
analysis so that computer analysis of ECGs could be performed not only in
research hospitals but also in primary care hospitals, which represented a major
breakthrough in electrocardiography. In 1980, to improve the accuracy, quality
and comprehensiveness of ECG analysis, Marquette developed software capable of
analyzing all twelve standard ECG leads simultaneously, establishing a standard
which is to this day widely accepted. This capability is found in equipment
using the Marquette 12SL/tm/ Computer Analysis Program, and is based on millions
of ECGs collected throughout the world and made available to cardiac research
physicians. The Company sponsors and conducts an annual seminar for thirty of
the world's leading cardiologists, who assemble to exchange and compare data and
the results of their research in computerized electrocardiography. This work
has, over many years, resulted in an improvement in the accuracy and reliability
of computerized ECG analysis. Marquette believes this improved accuracy and
reliability allows a broader range of physicians to use ECGs effectively. The
12SL/tm/ technology is included in many of Marquette's current products,
6
including most diagnostic devices, many patient monitoring products and some
emergency care products, to provide a complete analysis of ECGs. The Company
believes this program is used to analyze more than 40% of all computerized ECGs
taken in the United States.
Industry sources indicate that there are approximately 75 million resting
ECGs and 6 million exercise test ECGs performed each year in the United States
and an equal number performed in the rest of the world. The Company expects the
number of these procedures to grow due to (i) the increasing incidence of
cardiovascular disease, (ii) the aging population, (iii) relative ease of
application, safety and low cost in comparison to other cardiac diagnostic
techniques and (iv) greater recognition of the benefits of early detection and
management of cardiovascular disease.
Based on independent market research, the 1995 worldwide market for
diagnostic equipment of the type sold by Marquette was estimated to be
approximately $855 million in sales. Marquette has historically manufactured
high-end electrocardiographs providing the greater precision and additional
features required by large hospitals. The Company recently introduced models to
appeal to a broader market of community hospitals, clinics, physicians' offices
and emergency care providers.
Cardiology products include:
(a) ELECTROCARDIOGRAPHS are designed to record an ECG of a patient who
is at rest, and are generally mounted on a wheeled cart for movement to the
patient's bedside or elsewhere as needed. The Company's electrocardiographs
permit as many as 14 lead wires to be attached to patients, maximizing the
amount of data that can be acquired. Data is acquired through a module that
contains a microprocessor for digital signal acquisition, which enhances
signal quality. Marquette's electrocardiographs perform immediate analysis
of ECGs, store ECGs for further analysis and can communicate ECGs
electronically to other Marquette electrocardiographs or other equipment
for storage and comparison.
The MAC(R) VU resting ECG analysis system is Marquette's most
sophisticated electrocardiograph and is designed primarily for hospitals.
In addition to its standard functions, the MAC VU system also has a CRT
screen and a proprietary optional feature for signal averaged ECG testing,
which is used to assist in diagnosing certain patients who are at high risk
of sudden death from a heart attack.
Marquette also manufactures other electrocardiographs, including the
recently introduced CardioSmart resting ECG system, a viable physician's
office product. The MAC(R) 6 and MAC(R) 8 systems offer a choice for
additional hospital custom-
7
ers with high volume requirement. The MAC PC system rounds out the product
line by offering light weight and portability. All resting ECG products
come with the 12SL ECG analysis program.
(b) EXERCISE TESTING SYSTEMS are used to diagnose cardiac disease and
assess its severity by stressing the heart through physical exercise to
elevate its need for blood flow. While this elevated need exists, any
significant obstruction in the coronary arteries would limit the flow of
blood and result in cardiac dysfunction, which can be detected by a
physician using electrocardiography. Marquette's stress test
electrocardiographs are used to record an ECG of a patient undergoing
physical stress by walking or running on a treadmill or peddling a
stationary bicycle.
Marquette has six principal exercise testing products. The CASE(R) 16
exercise testing system, targeted at academic research and teaching
institutions, provides sophisticated analysis and review tools. It also
offers options for the 12SL program and the HI-RES/tm/ signal averaging
program. Introduced in 1996, the CardioSys exercise testing system is
designed on industry-standard platforms to meet burgeoning hospital needs
for networking and data integration. The MAX(R) -1 exercise testing system
is sold to higher volume, hospital exercise testing facilities.
On the market since February 1995, the MAX personal exercise testing
system broadens the product line to cover smaller hospitals, outpatient
clinics and physician offices. Equipping the MACVU system with an exercise
testing option makes it an ideal choice for dedicated cardiology practices.
The CENTRA multifunction cardiology workstation (detailed below) rounds out
what the Company believes to be the most extensive exercise testing product
line in the U.S. market.
(c) HOLTER RECORDING AND ANALYSIS EQUIPMENT is designed to provide ECG
information from an ambulatory patient who experiences intermittent
symptoms such as palpitations, angina or loss or consciousness, who wears a
small recording device over the course of an extended period (usually 24
hours), in or out of the hospital.
Marquette's newest generation of Holter recording equipment, the
SEER(R), replaced older technology based on tape recordings and is designed
for use in hospital and in physician offices. The SEER uses solid-state
digital technology to acquire data, resulting in higher signal quality, and
has computerized memory for easier playback and analysis. The SEER can also
perform immediate data analysis on hospitalized patients. The SEER is
designed to interface with other
8
Marquette diagnostic products, such as the Laser Holter system which
provides computerized analysis and comparison of Holter ECG data and prints
reports on a self-contained, high-speed laser printer. These reports and
analyses can significantly reduce the time physicians must spend to analyze
24 to 48 hours of data.
Marquette recently introduced its new MARS/tm/ 8000 ambulatory ECG and
analysis system which provide many advances in Holter analysis and editing.
The MARS 8000 system is the result of a unique technological alliance
between Marquette and Sun Microsystems, a leader in graphic workstations.
This cooperative development effort combines Marquette's software expertise
with the powerful hardware of the Sun SPARC workstation. As a result,
advanced signal processing and graphic display performance gives the MARS
8000 system exceptional waveform resolution and quick data redraw
capabilities essential for the demanding clinical setting, and due to the
multi-tasking capabilities of the system, data can also be acquired from
the SOLAR series bedside monitoring and telemetry systems.
(d) CENTRAL DATA MANAGEMENT SYSTEMS are designed to accept data from
outlying electrocardiographs via telephone line, diskette or direct
connection, store hundreds of thousands of ECGs and quickly retrieve them
for comparison with ECGs currently being reviewed. Marquette's system,
known as MUSE(R) (Marquette Universal System for Electrocardiography),
introduced in 1976 and continuously enhanced, is designed for hospitals.
Besides storing, analyzing and retrieving ECGs taken at rest, MUSE provides
similar capability for Holter ECGs, exercise test ECGs, and other testing
procedures and integrates all of Marquette's diagnostic products together
through networking and computer processing. MUSE also can generate billing
and activity reports which can assist a hospital or other user in cost
control and decrease the possibility of tests remaining unbilled. Many MUSE
systems serve additional hospitals which employ workstations connected to a
central MUSE by telephone lines, permitting cardiologists at the central
hospital to assist in treating large numbers of patients in wide
geographical areas.
(e) CARDIAC DIAGNOSTIC WORKSTATIONS are a cardiac diagnostic tool
which Marquette introduced in November 1989. Marquette's CENTRA(R)
Workstation is a computerized diagnostic workstation that performs all of
Marquette's cardiac diagnostic tests, including ECGs taken at rest, during
exercise, from Holter devices and other Marquette diagnostic tests such as
signal averaged ECGs. The CENTRA Workstation provides, in a single compact
package, a complete range of diagnostic capabilities traditionally found
only in the heart stations of
9
major medical centers using several pieces of equipment. The CENTRA
Workstation is designed to be attractive to a hospital or other medical
facility whose volume of tests or financial resources may not justify or
permit the investment in separate single purpose equipment.
(f) The MUSE-CV INFORMATION SYSTEM is an integrated system for
managing cardiology information and departmental processes. This system
provides a single-internally consistent database for all cardiological data
including ECG, stress testing, echocardiography, Holter, Cath Lab,
cardiological history and physical, nuclear cardiology, cardiovascular
surgery, etc. This system is based on the large installed base of Marquette
MUSE systems which analyze, store and process all ECGS for a vast majority
of the hospitals in the United States. Applying the same process management
used for ECGs the MUSE-CV Information System automates the process of
managing cardiology information from instrument interfaces which automate
data entry, to report generation and routing, to database backup and
archive. Further automation is provided by integration with other systems.
Specifically, the MUSE-CV Information System can interface with hospital
enterprise-wide networks, hospital information systems (for automated
billing and results reporting), and remote physician groups (via telephone
retrieval, fax, E-mail, paging, etc.) The system is based on open
architecture standards which are scaleable from a single PC (for a small
hospital) to a vast wide area network of file servers and workstations that
embrace the management of large, multi-hospital providers. The MUSE-CV
Information System also provides statistical reports for outcomes
assessment of clinical, financial and work flow data for a cardiology
department. The system is used to measure and continuously improve the
efficiency of a cardiology department.
(g) CARDIAC DEFIBRILLATORS are designed to restart the hearts of
victims of sudden cardiac arrest, a severe form of heart attack. Cardiac
arrest is among the leading causes of death in the United States. The
highest incidence of cardiac arrest occurs outside the hospital. The
Cardiology Division markets a number of defibrillator models for hospital
and pre-hospital use.
RESPONDER 2500 DEFIBRILLATOR AND CARDIAC CARE SYSTEM is designed for use in
the critical care areas of a hospital. It features data collection and
management software that enables the user to document a clinical code situation.
The 2500 stores and communicates patient ECG, event, heart rate, and other
significant data through a seamless data transfer with the hospital-wide network
systems, assuring convenient access and insuring against loss of important data.
The 2500 will be available for sale in
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Europe upon completion of CE marking. It will not be available in the United
States until 510K approval is obtained.
RESPONDER 1250 is a semi-automatic defibrillator used by paramedics in pre-
hospital settings. It uses a computer algorithm which analyzes the ECG to
determine whether a life-threatening rhythm is present and advises the user if
defibrillation is necessary.
RESPONDER 1500 is a manual defibrillator used by paramedics in pre-hospital
settings who do not require the assistance of a semi-automatic device. An
important innovation of the Responder 1500 is its ability to record and analyze
a 12-lead ECG in the field and transmit the data into the hospital emergency
department where it can assist the cardiologist in the early treatment for acute
myocardial infarction. The Responder 1500 was introduced in 1991.
CARDIOSERV. Introduced in July, 1996, the CardioServ defibrillator features
a lightweight, portable design suitable for pre-hospital and hospital use. It
combines defibrillator, monitoring, code summary, AC/DC and battery power in a
device that weights less than 18 pounds. In hospital applications, its light
weight makes it ideal for transport monitoring and with the flip display the
unit can be placed in various positions without impeding the view of the screen.
The multiple defibrillation capabilities allow the unit to be used in exercise
testing as a standard crash cart unit, in the operating room and it is ideal for
the emergency department.
In the pre-hospital setting, it has the first system of its kind "ambulance
mount" which allows the user to operate the device via vehicle power and charge
the battery. Its rugged, watertight design and handsfree defibrillation makes it
ideal for the paramedic on the street.
CARDIOSERV 360+. Weighing under 10 pounds, it is a small portable
defibrillator designed for use in exercise testing or other similar environments
where basic defibrillation is required. Also introduced in 1996, it provides the
functionality of the more advanced CardioServ, without a display. Its simple
operation makes it ideal for use in a private medical practice setting.
EMS WORKSTATION was developed as a computer based ECG Management System for
managing, analyzing and archiving patient recorded data via its pre-hospital
defibrillators. This is an important component of the patient record and,
accordingly, is tied into the MUSE System for future retrievals important for
the patient's continued care.
PATIENT MONITORING DIVISION PRODUCTS
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The Patient Monitoring Division's headquarters are located in Milwaukee,
Wisconsin.
Patient monitors continuously acquire, analyze, store, display on video
screens, and print patient physiological information such as ECGs, pulse rate,
blood pressure, temperature, gas measurements such as end-tidal CO\\2\\,
respiration rate and oxygen saturation in the blood. This information provides
attending medical personnel a means for continuous evaluation of the patient's
condition and determination of the medication or other treatment to be used to
promote the patient's recovery. Marquette's monitors are equipped with audio and
visual alarm systems that can be triggered by certain ranges of monitored data
in order to alert attending medical personnel.
Each of the Division's patient monitors is designed for adult applications
to meet the needs of specific areas of general clinical use, including areas
requiring a high level of sophistication such as intensive care units ("ICUs"),
coronary care units ("CCUs"), and operating rooms ("ORs"), as well as ambulatory
or step-down units, emergency rooms and admission and evaluation areas. Certain
monitors have been specifically designed for use in other specialized areas such
as surgical ICUs and neurosurgical ICUs. Because of Marquette's experience in
the field of electrocardiology, the Division has been able to develop
specialized monitoring systems for use where extremely complex and difficult
heart surgery is performed.
The E For M/Hellige acquisition added the important new technologies of EEG
and transcutaneous oximetry to the Division's product line offerings as well as
a new lower cost configured monitor, the Eagle(R) 1000.
The Company estimates that the annual sales of patient monitoring equipment
(including telemetry equipment) are approxi-mately $1.3 billion worldwide, 60%
of which is believed to occur in the United States. The Division believes its
current product line enables the Division to compete in approximately 70% of
that market.
PATIENT MONITORING PRODUCTS include:
(a) BEDSIDE MONITORS are used to continuously acquire critical
physiologic information from patients in most critical care areas and
operating rooms. This information is acquired through patient cables from
electrodes, catheters and other invasive and non-invasive sensors attached
to the patient. The information is processed and stored by a family of
Marquette Tram (Transport Remote Acquisition Module) and single parameter
modules. The Tram Module itself is a patient monitor that can be connected
to the patient upon admission
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and accompany the patient throughout the hospital displaying information on
either the portable Tram Transport Display or the Solar(R) 7000 and 8000
monitors. Upon arrival at the patient's bedside, the Tram Module is
inserted into the bedside monitoring system. Previously, the need to
disconnect the patient from the monitor in one area of the hospital and
then reconnect the patient into another monitor in another area resulted in
potentially dangerous loss of monitoring information during transport and
vital time as patient cables and monitors were reconnected. Marquette's
patented concept for the continuous patient monitoring is intended to make
patient transportation safer while saving valuable staff time.
The Tram Module expanded the use of the Division's monitoring products
into several new areas of the hospital, including trauma centers,
evaluation and the emergency room. In addition, the incorporation of the
Marquette 12SL/tm/ (resting 12 lead ECG program) into the Tram Module has
introduced to the market an entirely new concept, integrating what was
formerly the function of an electrocardiograph with that of a bedside
monitor. This, coupled with the Division's powerful Unity Network(R),
provides for a hospital-wide solution for the management of ECG's. This
concept has been successfully implemented in emergency room chest pain
centers, resulting in early differential diagnosis and appropriate
management and intervention in the chest pain patient population.
The newest addition to the Tram Module family is the arterial blood
gas module, introduced in May, 1996. This module permits near real time
analysis of arterial blood gas values, facilitating rapid diagnosis and
early intervention in the critically ill adult and neonate patient
population.
The Solar 7000 bedside display couples with the Tram-rac and Tram
Module to provide a complete bedside monitoring system. The Solar 7000
consists of a high resolution video display along with the necessary
communications technology to make it part of the Marquette Unity Network.
The Tram-rac is a housing, capable of holding up to four modules, including
the Tram Multi-parameter Module. The Solar 7000 display can be operated
using the Trim-Knob control located on the face of the unit or a convenient
hand held control. The Solar 7000, with its built-in Tram-net Communication
System, offers support for peripheral devices such as ventilators and gas
analysis devices manufactured by other companies. This interfacing of
equipment at the patient's bedside provides for a complete vital sign
patient record.
The Solar 8000 bedside was introduced in October, 1995. This new
product innovation allows separation of the main processing unit from the
display, enabling the customer
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to change an off-the-shelf medical grade display in a size appropriate
to the requirements of patient acuity and space constraints of the cure
area.
The Marquette Unity Network capabilities allow the bedside to be
connected to a central station, as well as numerous other bedsides on the
network for intercommunication and viewing of other patients. The Unity
Network can also be viewed remotely, facilitating telemedicine
applications.
In April, 1995, Marquette introduced the EAGLE(R) 4000 monitor, a
next-generation, lower cost addition to its bedside monitor product line.
The EAGLE monitor utilizes an electroluminescent flat screen display
available in both monochrome and color and acquires up to eight different
parameters. This highly-featured, compact, configured monitor has been
globally successful in lower acuity intensive care and operating rooms
facilitating Marquette's competitiveness in a larger segment of the patient
monitoring market.
The Eagle 3000 Monitor, a lower-featured, less expensive configured
monitor with full Unity Network compatibility was also introduced in 1995.
The SMU Monitoring System developed by Hellige also competes in
the modular monitoring market segment and is targeted specifically at
settings which require integrated EEG or transcutaneous oxygen/CO2
monitoring capabilities.
The Division introduced its Eagle 1000 Monitor in Europe in June,
1996. This is a very low cost mobile, compact monitor with a 2+ hour
battery life, allowing Marquette to effectively compete, for the first
time, in the portable monitoring market segment. The Eagle 1000 utilizes a
monochrome liquid crystalline display and is designed to accommodate
multiple options whenever ECG, SPO/2/, non-invasive blood pressure,
invasive pressure or a two-channel recorder are required.
The Hellige-developed Vicom-SMU universal monitors, featuring high-
resolution graphics, transparent information presentation, an extensive
range of vital signs modules, optional application software and easy
operation and the VICOM-SMT 810 and 820 central station are sold outside of
the U.S.
(b) TELEMETRY MONITORS are designed for patients who are not confined
to their beds. Usually, this includes post-operative patients and others
for whom the recovery process is well underway. Marquette's CD
Telemetry(R)-LAN System consists
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of a small, battery-powered radio frequency transmitter and a central
receiving station with antenna system. The Marquette system has been
complimented by the addition of a new Apex transmitter which is
significantly smaller and lighter and incorporates the unique Multi-Link
cable design, which utilizes the patient's existing ECG lead wires. The
patient's ECG signal is continuously transmitted to the central receiving
station for rhythm analysis, arrhythmia analysis and trending. Telemetry
provides a lower cost method of monitoring recovering patients than bedside
monitors and represents an increasing share of the market for monitoring
equipment.
(c) ANESTHETIC AND RESPIRATORY GAS MONITORS are used in tandem with
Marquette's other vital signs monitors and diagnostic products for
cardiopulmonary monitoring in anesthesia, post-operative recovery, critical
care and pulmonary function laboratories. Anesthesiology is the branch of
medicine that deals with the administration of oxygen and anesthetic gases
in order to induce unconsciousness, control metabolic processes, relieve
pain and reduce anxiety during surgery. Gas monitoring products are used to
verify the accuracy of anesthetic gas vaporizers and delivery systems
before, during and after surgery and measure pulmonary functions such as
oxygenation, ventilation and circulation. Gas monitors also detect
potentially life-threatening conditions such as hyperventilation (excessive
pulmonary gas exchange), hypoventilation (inadequate pulmonary gas
exchange), pulmonary air embolus (air bubbles in the pulmonary blood
stream), and equipment malfunction during surgery.
The Patient Monitoring Division employs two basic analysis
methodologies for multiple gas detection and analysis: mass spectrometry
and infra-red spectroscopy. With mass spectrometry, anesthetic and
respiratory gases are passed through an electromagnetic field in order to
detect, identify and measure gas concentrations by molecular weight. Mass
spectrometry provides the most comprehensive analysis of all the gases
administered/monitored during surgery. Infra-red spectroscopy is a
technique whereby anesthetic and respiratory gases are passed through an
infra-red detector and the gas molecules are identified and measured. This
technique, in some respects, duplicates the capabilities of the mass
spectrometer, but is limited with regard to the quantity and types of gases
which can be automatically identified and measured. Infra-red has proven to
be a very cost effective and practical technique for measuring carbon
dioxide in the artificially ventilated post-operative and critical care
patient. This information allows the caregiver to promptly assess if the
patient is properly ventilated or breathing.
The market for respiratory and anesthetic gas analysis monitors is
estimated to be $60 to $75 million worldwide. The
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relatively stable market is currently being positively influenced by emerging
standards such as that of the American Society of Anesthesiologists encouraging
the routine monitoring of respiratory and anesthetic agent concentrations during
anesthesia and guidelines by the Society of Critical Care Medicine recommending
end-tidal CO/2/ monitoring on all artificially ventilated patients, the
introduction of new inhalation anesthetic agents such as desflurane and
sevoflurane, and the replacement of older, non-integrated previous generations
of gas monitoring technologies.
The Division's gas monitoring product portfolio includes the RAMS(R) mass
spectrometer, recently developed and introduced by the Company, which offers a
dramatic reduction in size (10.5" x 10.5" x 17.75" and 65 lbs) and the
heightened analytical capacity of monitoring up to ten gases or compounds,
ranging from 0 to 250 amu. Unlike previous generations of mass spectrometers,
RAMS is easily software configured to change or add any new gas of interest.
This provides a high level of diagnostic and monitoring capabilities for today's
healthcare and research markets. RAMS is available fully integrated into the
Company's vital signs products.
The Division provides a range of fully integrated infra-red modules for
CO/2/ monitoring in adult, pediatric and neonate patients.
A new multi-gas, infra-red based module was recently introduced for routine
anesthesia monitoring. The SAM(TM) (Smart Anesthetic Multi-gas Module) has the
capability of monitoring 0/2/, C0/2/ and anesthetic agent concentrations. A
unique and proprietary approach provides instant warm-up and virtually
instantaneous identification of any of the five commonly used anesthetic agents.
This miniaturized module is integrated into the Company's vital signs monitoring
system.
In July, 1993, Marquette was awarded a contract by NASA to develop a mass
spectrometer-based metabolic exercise stress system for the MIR Space mission.
This new system, called GASMAP, will utilize the version of the RAMS mentioned
above. This product concluded with the launching of the MIR in May, 1996. In
June, 1996, Marquette was awarded an extension of the NASA GASMAP Contract for
further RAMS development.
E FOR M CATH LAB DIVISION PRODUCTS
The E For M Cath Lab Division, which designs and develops Cath Lab and EP
Lab equipment, now manufactures and sells both the Marquette and E For M Cath
Lab and EP Lab products. Its headquarters are located in Jupiter, Florida.
Cardiac catheterization refers to a cardiovascular procedure
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in which a long, thin tube referred to as a "catheter" is inserted into a
patient's blood vessel and then manipulated by a cardiologist along that blood
vessel to the heart. In hemodynamic or vascular studies, the catheter, with
attached physiological sensors, is used to measure temperature and blood
pressure in various parts of the heart and the surrounding circulatory system.
The sensor, in conjunction with a saline injection, can be used to determine the
volume of blood being pumped by the heart. Cardiac catheters are used in
conjunction with coronary balloon angioplasty and angiography procedures. In
coronary artery balloon angioplasty, a balloon is inserted into an artery by
means of a wire and then inflated to widen blocked arteries. In angiography, the
catheter is used to inject a radio-opaque dye into the bloodstream to illuminate
with x-rays a blockage of the coronary arteries, or the structures of the heart
tissue. During the catheterization procedure, the patient's ECG, pulse and blood
pressure are usually continuously monitored.
Electrophysiology studies are performed in the EP Lab to evaluate the
process of the conduction of electricity through the heart as the heart
contracts and to diagnose the mechanisms of abnormal heart rhythm. In this case,
the catheter tip contains a number of electrodes which are connected to wires
which pass out of the body through the tube and are connected to external
amplifiers and a chart recorder. The cardiologist manipulates the catheter so
that the electrodes at the tip are in close proximity to the electrical
conduction system within the heart. A stimulator may be used to deliver small
electric currents directly to the heart to better investigate the mechanism of
conduction. Recently, electrode catheters have been used to deliver larger
amounts of RF energy to destroy small areas of the heart muscle which are
causing abnormal rhythms.
In November, 1989, Marquette introduced a physiological system for cardiac
catheterization laboratories, the MAC LAB(R). When introduced, the MAC LAB was
configured only for hemodynamic studies as a monitoring and measuring system
that receives and stores the data from multi-lead ECGs and from catheter
sensors, including blood pressure, blood flow and temperature. The system
computes additional parameters from this data which are used by the physician to
assist in the determination of the patient's cardiac status, particularly the
condition of the heart valves and the heart muscle. The MAC LAB receives the
data, amplifies it, subjects it to computer analysis and displays it on
monitoring screens as well as generating a hard copy on a self-contained
proprietary chart writer. These monitoring screens have a very high resolution
for ease of interpretation and utilization by medical personnel. The MAC LAB
includes analytic monitoring screens, software and related data output and
storage devices. The Company does not sell x-ray equipment or catheters, which
are used in connection with the procedure.
17
In late 1993, an electrophysiology option was developed for MAC LAB. With
the addition of an amplifier module and appropriate software, the same MAC LAB
used for hemodynamic studies can also be used for many electrophysiology
studies. The system records the electrical waveforms from up to eight catheter
electrodes, displays the information on the monitoring screens, and generates a
hard copy record. Electronic calipers permit measurement and tabulation of the
relative timing of the cardiac electrical signals. The Company does not sell
electrophysiology catheters or any device which delivers energy to the heart
through a catheter.
The MAC LAB is completely compatible with the Marquette TRAM patient
monitor, which can be easily inserted into the MAC LAB to maintain continuous
patient monitoring. Marquette believes this compatibility, plus MAC LAB's
ability to integrate real time and computer generated data, and its relatively
simple calibration feature, give it a strong competitive position, particularly
in view of its price relative to competitive products.
Marquette's acquisition of E For M in 1996 permitted the Company to add to
its Cath Lab and EP Lab products, the well-recognized Midas Series of Cath Lab
and EP Lab products developed by Hellige. Of those products, the Midas System
8000 is the only system that combines complete electrophysiology and
hemodynamics into one workstation, maximizing the users investments in time and
money. The system is specially configured to assist cardiologists and
electrophysiologists with fast, accurate collection and analysis of
physiological data. The Midas System 8000 is fast and easy to learn using the
TouchScreen controls for managing up to 24 channels of patient data.
The MUSE/Cardio Window workstation, a component of the Marquette MUSE Unity
Network, has been designed to meet the unique clinical and management demands of
the cardiac catheterization laboratory. The system can be upgraded and networked
to any of Marquette's family of cardiology management systems to support the
customers' database needs today and into the future. The MUSE/Cardio Window
workstation provides centralized storage, comprehensive statistical reports,
scheduled database query, individualized patient report generation, simple
windows graphical user interface, multilevel user security and custom system
interfaces.
The MAC-Lab, Midas System and MUSE/Cardio Window workstation are all part
of the Marquette Unity Network(R).
COROMETRICS MEDICAL SYSTEMS PRODUCTS
The Corometrics Medical Systems Division, headquartered in Wallingford,
Connecticut, develops, manufactures and sells a broad
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line of perinatal products used in hospitals, physicians' offices and other
clinical settings for care of mother and child. The range of products are for
monitoring of the mother, fetus and newborn, covering the continuing of early
pregnancy through labor and delivery, to recovery and post-partum, and infancy.
These products are normally sold under the "Corometrics" mark.
The Division's fetal monitoring equipment provides continuous electronic
monitoring of the fetal heart rate and uterine contractions and may be utilized
both prior to and during labor, thus providing a means of ongoing observation of
the fetal response to changes in the intrauterine environment in relation to the
effects of uterine contractions and other antepartum and intrapartum events.
The instrumentation for continuous monitoring of fetal heart rate and
uterine contractions may be placed externally or internally. With the external
or indirect method, an ultrasound transducer is positioned on the mother's
abdomen directly over the fetal heart for recording of the fetal heart rate and
a tocotransducer is placed at the fundus for measuring changes in abdominal wall
pressure. A spiral electrode can be attached to the presenting part of the fetus
to provide more precise date for the fetal heart rate, and an intrauterine
catheter can be inserted to measure actual intrauterine pressure. Both methods
permit the fetal monitor to process the incoming signals and produce a
continuous recording of the fetal heart rate and uterine activity. After the
maternal membranes are ruptured, internal or direct monitoring may be used.
While the internal method, which can be used only after maternal membranes are
ruptured, provides more precise data, both methods permit the fetal monitor to
process the incoming signals and produce a continuous recording of the fetal
heart rate and uterine activity.
The Company believes that its Model 118 Maternal/Fetal Monitor, which
created a unique combination of fetal monitoring with maternal vital signs, has
become the defacto standard for in-hospital obstetrical monitoring. A major
software upgrade to the Model 118 in early 1996 significantly enhanced the
product's capabilities, especially in recovery and post-partum care. The Company
also introduced new products and product enhancements for pre-natal and ante-
partum use. The Model 155 External Fetal Monitor is a compact, economical unit
especially for use in non-stress tests during ante-partum surveillance.
Electronic fetal movement detection was introduced as an option in both the
Model 155 and the advanced Model 150 External Twin Monitor.
The Division has a full line of neonatal monitors that provide continuous
monitoring of neonates and allow for admissions to record, analyze and react to
a neonate's changing condition. In addition to the Corometrics' 556 Monitor, the
Division sells the
19
Marquette Solar and Eagle monitor lines under the Corometrics' name for the
neonatal ICU. The highly advanced modular Solar 7000N and 8000N Neonatal
Critical Care Monitors are capable of displaying multiple measurements such as
ECG, respiration, invasive pressures, temperatures, pulse oximetry and non-
invasive blood pressure. Through an arrangement with Optical Sensors
Incorporated, the Division also sells an on-line ABG module for the Solar
monitor line which measures pO2, pCO2 and pH and displays the values at the
bedside, thereby reducing the wait time for this vital physiological data.
The Division also sells a line of monitors designed primarily for the
monitoring of infants at risk for apnea in the home. Its Model 500 EXL is
designed to monitor the infant's heart rate and respiration rate and will alarm
when these rates violate predetermined alarm levels in the monitor, as ordered
by the physician. The new models 510 and 511 Monitors were recently cleared by
the FDA and are the only monitors now available which meet the FDA's proposed
Guidelines For Infant Apnea Monitors. These monitors convert to use in the home
and the Model 511 can also be used in the hospital. The Division also sells an
apnea monitor (Model 502) designed for hospital use. The Division's new Model
511 monitor was recently cleared by the FDA and incorporates all of the features
of the Model 502, plus the ability to monitor pulse oximetry.
The Models 500 EXL, 510 and 511 are compatible for the Event Link R. Data
Retrieval and Display Software Program. The Event Link System provides graphical
and tabular documentation of alarms and events. This information is used to
evaluate the patient prior to discharge from the hospital and can provide
continuity for home monitoring programs.
E FOR M IMAGING SYSTEMS DIVISION PRODUCTS
The E for M Imaging Systems Division's headquarter offices are located in
Torrance, California.
Applied medicine relies heavily on the ability to view the performance and
function of different parts of the human anatomy to assist in the detection,
diagnosis, treatment and prevention of diseases and injuries. Before every
cardiac bypass procedure and during most angioplasty procedures, a high
resolution x-ray motion picture of the patient's coronary vasculature is
recorded, typically on specialized cardiac catheterization film known as cine
film. Technologies such as x-ray and ultrasound now provide medical personnel
with a detailed view of human organs and the systems that support them. The
increased use of these imaging technologies creates a need for image management
systems that allow the capture, storage and utilization of these images.
Film distribution
- -----------------
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The Company, through its E For M Imaging Systems Division, is a leading
supplier of specialized 35mm cineangiography films and related imaging services
and products to Cath Labs. The Company does not manufacture any of the film
products that it sells, but purchases them from independent third parties, and
then markets them. These products are key components in the process of
detecting, diagnosing and treating cardiovascular disease in Cath Labs.
With four types of cine film and a range of processing equipment support,
the Company has the flexibility to meet the varied needs of most invasive
cardiologists. Largely because of its broad product line and technical support
offered to customers, the Division's film products have in the past enjoyed
attractive annual growth rates. However, hospitals appear to be slowly utilizing
digital imaging systems for diagnostic purposes which has softened the demand
for cine film and related products.
The Division's cine films are high grade films designed exclusively for
recording images during coronary angiography procedures. The Division's cine
film has a fine grain structure that provides superior detail and smooth, high
resolution images. The Division offers five types of cine film: Cine 35,
VariCath I, VariCath II, VariCath III and VariCath Blue. Cine 35, the Division's
newest cine film product, and VarCath I, VariCath II and VariCath III are clear-
base films. Clear-base cine film produces a crisp, sharp image. Blue-base cine
film produces a soft, balanced image. VariCath Blue is a blue-base film made to
the same standards as the other films. All films are packaged in a variety of
industry standard lengths and are also available in custom lengths.
The Division currently purchases Cine 35 from Sterling Diagnostics, Inc.
under an exclusive arrangement, VariCath Blue from Ilford Photo Corporation
("Ilford") and all of its VariCath I, VariCath II and VariCath III film from
Agfa, which also distributes a blue-base film in the United States. The Company
and Agfa are parties to a purchase agreement of indefinite duration, subject to
periodic adjustments with respect to price and certain termination provisions.
The Company also has a marketing agreement with Ilford to market VariCath
Blue in the United States. The Division believes that marketing VariCath Blue
will provide an opportunity to sell cine film to those hospitals that prefer
blue-base film.
The Division also offers a number of different processing chemistries for
its films. Each combination of film and chemistry produces images that vary
slightly in contrast and resolution. The Division's technical sales
representatives advise Cath Lab technologists in creating image variations by
adjusting the
21
aperture of the cine camera and altering the film immersion time, processing
temperature and the rate of replenishment of the chemistries. By offering a
range of films, processing chemistries and technical support, the Division can
satisfy the image preferences of most cardiologists.
Digital Imaging Systems
- -----------------------
Digital imaging products capture analog images from x-ray, ultrasound and
other common medical imaging sources and convert them to digital images. These
products then manage these digitized images so that they can be enhanced,
quantified, reviewed in real-time, archived, transmitted over networks and/or
further converted into high-quality film images.
AccuVision(TM). AccuVision is a real-time, high-resolution acquisition,
storage and replay device designed for the Cath Lab. Unlike its predecessors and
competitors, the AccuVision unit has a RAID disk array capable of storing up to
10 gigabytes of digitized information (a capacity of approximately 40,000
standard resolution images). The unit captures and stores relatively short
segments of an invasive cardiac procedure that is also being recorded on film.
These digitized segments can be reviewed as loops on a high resolution monitor
while the procedure is in progress. The digitized images can also be enhanced
and manipulated for more detailed analysis. Cardiologists are relying
increasingly on these real-time digitized images for making emergency and
routine diagnostic decisions, while using cine film as the primary medium for
archiving the images and for making diagnostic decisions in complicated cases.
The AccuVision product was formally released at the American College of
Cardiology Conference in March, 1994.
AccuWorks(TM). The Division believes that Cath Labs of the near future
will be centered around a single system that combines digital image acquisition,
display, enhancement, analysis, archiving and report writing. All of these
features could be networked over fiber-optic cables around a workstation. The
Company has developed a workstation called "AccuVision RS" to perform these
functions. The Division intends to couple its imaging technology with the
physiological monitoring expertise contained in the Cath Lab Division products
to provide a comprehensive workstation to the market.
In addition to the digital imaging systems designed and manufactured by the
Division and sold to Cath Labs, the Division designs and manufactures imaging
systems for OEMs for incorporation into proprietary OEM imaging systems. These
products consist of:
22
R & F Related Products. Radiology and fluoroscopy ("R & F") generally
describes an x-ray room that is dedicated to gastrointestinal and related
examination procedures. As in the Cath Lab, R & F procedures are diagnostic
examinations of dynamic processes. In conventional R & F, fluoroscopy is used
for patient positioning, then the examination is recorded by taking a series of
direct x-ray pictures at rates of 2 to 12 frames per second. In R & F, as in
cardiac imaging, there is a move towards replacing these direct film images with
digital images. This is called "digital photospot". Digital photospot systems
acquire and enhance the video images in various ways, allowing hard copy films
to be made from the processed video image. These products can be used to replace
the direct film camera in OEMs' x-ray systems. The Division developed the first
digital photospot device and continues to be an industry leader in developing
digital photospot systems for OEMs.
Video Enhancement Products. Many of the image acquisition and output
devices currently in use for medical applications are outdated, scanning only at
so-called low-line rates. Higher line scan rates produce incrementally less
flicker and better images. Newer devices are virtually all high-line scan rate.
As cardiologists begin to shift their reliance from film images to electronic
images for diagnostic purposes, the older systems must be replaced or upgraded.
The Division has developed a "Scan Converter" which can increase or decrease
scan rates on these devices, thereby increasing the quality of images. For
example, a image generated from a high-line device such as an AccuVision system,
can be reviewed on a high resolution monitor such as the H3. The same image can
then be "down-scanned" by the Scan Converter and sent to a low-line output
device.
Ultrasound Related Products. Ultrasound related products convert
ultrasound images into high-resolution film images. Currently, ultrasound images
are reviewed in a video format, and selected images may be printed out on
thermal paper. In order to generate a film image, the image must be digitized
and transferred to a laser camera, which will generate an x-ray type film image.
This can be done by a laser camera attached to each ultrasound unit by a network
or by some means of transporting the digitized image data from the ultrasound
unit to the laser camera. RDS (removable disk system), manufactured by the
Division for one OEM customer captures and digitizes the ultrasound image
directly from the ultrasound scanner. The operator can then remove the digitized
data stored on a removable hard disk. This hard disk can then be inserted into a
reader unit, which then automatically transfers image data to a laser camera for
film imaging and processing.
23
QMI CLINICAL INFORMATION SYSTEMS DIVISION
The Division, located in Annapolis, Maryland, develops and markets clinical
information systems for the ICU, CCU, OR, Recovery Room, Med/Surge and the
labor-and delivery areas.
The Division is the clinical information hub of the Company and provides
the connectivity for Marquette's UNITY network. The QMI-QS(R) System integrates
data coming from multiple patient care areas and serves as the central
collecting system. The data is then charted, reviewed and presented in hospital
selected formats that provide the clinician with a more comprehensive overview
of their patient's status. Reports can then be generated that provide the data
in both clinical and administrative form to aid in improving the quality of care
in the most cost effective method.
The QMI Division provides systems designed for the whole hospital as well
as departmental systems for Labor and Delivery, NICU, General Floor, ICU/CCU, ER
and Perioperative. Interfaces exist for most ADT, lab, and pharmacy systems as
well as for all Marquette monitoring and diagnostic products. The
configurability of the QS makes use in most hospital departments possible. The
whole hospital applications have been expanded to include remote site access
that enables satellite hospitals, clinics and physicians to be linked to the
centrally-located system.
Systems can be customized to meet the most basic entry level requirements
to the most complex whole hospital solutions involving wide area networks.
SUPPLIES DIVISION
Marquette, through its Supplies Division which is headquartered in Jupiter,
Florida, manufactures, purchases and sells a broad spectrum of disposable
supplies used primarily in conjunction with the Company's diagnostic,
monitoring, perinatal and emergency care equipment. These supply items include
ECG and other recording paper, monitoring and diagnostic electrodes, patient
belts and straps, disposable and reusable blood pressure cuffs, disposable water
traps, temperature probes, pulse oximetry probes and holter/telemetry hookup
kits.
Marquette markets and distributes its supplies in the United States through
an in-house telemarketing group, a national direct sales force, two non-
exclusive distributors located in Missouri and Florida and a number of dealers.
The Company distributes its supplies outside of the United States through its
direct sales force in Europe, its Australian subsidiary and through independent
24
dealers.
The Company manufactures, warehouses and ships supplies from the Company's
facilities located in Jupiter, Florida and Wallingford, Connecticut. The Jupiter
facility also operates a rotogravure printing press, a rotary offset printing
press and a production paper coater for the production of chart paper used in
the Company's electrocardiographs and other products. Other automatic machinery
in this facility is used to produce disposable electrodes and lead wires.
Heat sensitive recording paper has long suffered from the possibility that,
over time, the tracings made will fade and ultimately become unreadable. The
Company has obtained a source of supply for heat sensitive paper, called
Archivist(R), which Marquette has guaranteed to retain long term legibility when
the paper is used within certain general limitations. The Company also provides
a less expensive line of papers to enable it to more effectively compete in the
lower tier of the chart paper market while maintaining a margin percentage equal
or higher than that enjoyed on its higher grades of paper.
Marquette manufactures and sells a patented, disposable "tab electrode"
with self-contained skin gel, marketed under the name MACTRODE, which is used to
take resting ECGs. The MACTRODE(R) can be used with electrocardiographs
manufactured by the Company or others, and the Company believes that since 1988,
approximately 70% of the domestic electrode market has converted from the use of
traditional reusable electrodes to disposable tab electrodes.
Although third party suppliers compete with Marquette for supplies business
with respect to the Company's equipment in use throughout the world,
historically the sale of the Company's supplies has grown in proportion to the
growth in the quantity of the Company's equipment in use throughout the world.
SERVICE DIVISION
The Service Division is headquartered in Jupiter, Florida and is
responsible for equipment installation at customers' sites and for the
fulfillment of the Company's warranty and maintenance commitments. Most
equipment sold by the Company is fully warranted for all parts and labor for one
year. Under the terms of the Company's standard warranty, the customer is
assured of on-site service to remedy any problem with respect to the equipment's
operation. The Company offers a variety of post-warranty service agreements
permitting customers to contract for the level of equipment maintenance and
repair they require. All parts, labor, travel and mileage are covered under
fixed-price, full service and emergency maintenance agreements. Alternatively,
the customers can
25
contact the Company as needed and receive service at rates competitive with
those offered by third party service centers.
In addition to warranty and post-warranty maintenance service, the Service
Division installs software up-grades, performs circuit board repairs on a 24-
hour return basis, and manufactures and markets replacement parts to the
Company's dealers and equipment users. The Division offers repair and
maintenance training classes throughout the year for biomedical engineers
employed by hospitals and other companies, which are taught by a full time staff
of Company-employed instructors. In addition, Marquette provides support for
customers' biomedical engineering technicians and the Company's field personnel
by providing telephone assistance on service problems.
Except for offices maintained in Jupiter, Florida, Wallingford,
Connecticut and Milwaukee, Wisconsin, the Company's domestic field engineers and
technicians work out of their homes and are located in all major United States
cities. At its Hellige operation in Germany, the Division operates a parts and
support center for European service. In some foreign countries, if direct
Company field engineers and technicians are not conveniently located, employees
of local dealers provide warranty and field maintenance service. The Division
maintains a 24-hour a day, seven day a week dispatch service integrated with a
computerized field service system, permitting each dispatcher to review all
pertinent customer data and history incident to a request for field service.
PRINCIPAL MARKETS/SALES
Traditionally, the Company's principal markets have been the critical care
units of larger acute care hospitals. During the past several years, however,
the Company has broadened its product lines to appeal to smaller hospitals and
also address intermediate care, stepdown units, out-patient surgery centers,
labor and delivery rooms, physician groups, doctor offices, emergency rooms and
pre-hospital emergency care.
Although the United States is the principal geographic market for the
Company's products, the Company has over the past ten years sought to develop
its international market standing. International sales were 26.8%, 26.5% and
34.4%, respectively, of total Company sales during fiscal years 1994, 1995 and
1996. The Company anticipates that the addition of the Hellige product line and
sales force will augment sales internationally, particularly in Europe.
Products are sold directly by the Company in the United States, Europe and
Australia. The remainder of the international market, primarily Japan, China,
Southeast Asia, India, and Canada, is served by distributorship arrangements
under which the local
26
dealer buys products from the Company at a discount for resale within its
own territory.
Because most Company products are highly technical requiring extensive
training in their application and operation, the Company's sales organization is
organized along divisional product lines, including technical support groups
consisting primarily of nurses, biomedical engineers and clinicians. The Company
maintains a large investment in demonstration equipment so that sales personnel
can make on-site clinical demonstrations for equipment sales. The Company offers
technical seminars and training sessions on a worldwide basis, and furnishes
instruction manuals, maintenance manuals, operator guides, application
information and software in foreign languages, as required.
In recent years, many hospitals have joined buying groups or have been
acquired by large hospital chains permitting them to negotiate with suppliers of
hospital equipment to obtain more favorable pricing on large quantity purchases.
In addition, some large hospitals, chains and buying groups prefer to negotiate
with single limited number of vendors who can provide a broader range of
products used by the hospital or group. While the Company believes that the
existence of these groups will present a marketing opportunity for the Company,
there can be no assurance that the Company will be able to negotiate purchasing
arrangements with all of those groups or on terms that are favorable to the
Company.
To facilitate sales, the Company has an arrangement with a third party
leasing company which provides customer financing. Under this arrangement, the
Company is paid in full for its products, and the leasing company assumes credit
risks. The Company also directly provides lease financing and equipment rentals
for smaller transactions.
The Company has recently begun to lease its equipment to hospitals under a
Managed Use Program permitting the hospitals to make lease payments to the
Company based upon the intensity of use of the equipment by the hospital. Under
the Managed Use Program, the Company has the right to increase or reduce the
number of equipment units deployed at the hospital to correlate with the degree
of use of the units at the hospital. The Company believes that the program is
being well received by the market and will further facilitate distribution of
the Company's products by permitting the hospital to better correlate its
equipment to its needs.
Order Activity
As of April 30, 1996, the backlog of unfilled equipment and supplies orders
was $78,908,600, compared with $47,782,700 as of
27
April 30, 1995. E For M, having been acquired by the Company in January, 1996,
$16,258,000 of the Company backlog at April 30, 1996 was attributable to E For M
product lines. The Company's order activity is not seasonal in nature. The
Company usually manufactures and ships equipment ordered within 30 to 60 days
following receipt of an order.
COMPETITION
The markets for the Company's products have historically been highly
competitive. The consolidation of healthcare providers in the U.S. and the
national effort to curtail increases in medical care costs have increased the
level of competition. Although the Company competes directly with other
providers of medical equipment, no one company or group of companies competes
with the Company across its full line of products. The Company's competitors
include Hewlett-Packard Corporation, Siemens Medical Systems, Space Labs
Medical, Inc. and Datex Company. The principal competitive factors are the
manufacturer's reputation for producing accurate, reliable and technically
advanced products, product features, product line breadth, price, expected
medical cost savings and effectiveness of sales and marketing efforts.
The Company believes that it has a reputation for technological leadership
and product reliability, which, with its working relationship with physicians at
teaching and research hospitals as well as the breadth of its product line, have
provided it with a strong competitive position. However, purchase decisions
which have traditionally been based on clinical needs are being more
significantly affected by cost considerations to which the Company is responding
by introducing lower end products to augment its traditional high-end lines.
Some of the Company's competitors are much larger and have greater financial
resources than Marquette and, in that respect, may have a competitive advantage.
In addition, the Company, like other technology companies, is subject to the
risk that a competitor may introduce into the marketplace a new product or
technology that would adversely impact the Company's ability to compete in its
existing markets.
The Company's competitive position is strongest with respect to its
cardiology product line and fetal and neonatal monitoring products, where the
Company has been selling its products for the longest period of time, has the
greatest name recognition and competes primarily on the basis of product
features and technological advances. The Company's competitive position is less
strong with respect to its monitoring product and Cath Lab lines where there are
several competitors having greater financial resources than the Company, and
competition is based on price as well as product features. The Company's
position is weakest with respect to the emergency care and gas analysis product
lines.
28
RESEARCH AND DEVELOPMENT
Because of rapid technological change in the fields in which the Company
competes, the Company is constantly seeking ways to improve its product line
through innovative engineering and to create diagnostic and monitoring
technologies that address problems brought to its attention by contacts in the
medical community, particularly those which increase efficiency and reduce the
labor involved in medical care by nurses, physicians and emergency care
technicians.
The Company's product engineers work closely with the Company's sales force
and customers to modify and improve current products. Such engineering
interaction both within and outside the Company assists Marquette to design new
products to address customer needs or problems. These product engineers also
evaluate new technologies and components offered by suppliers to maintain price
and technological competitiveness. Each division of the Company has its own
engineering staff that specializes in that division's product and related
customer applications. In addition, these engineers assist with the integration
of components or technologies across several Company product lines to enhance
product competitiveness. Introduction of any product now under development will
require completion of development and engineering work, successful conclusion of
clinical trials, compliance with regulatory procedures and the transfer of the
product to production. There can be no assurance that the Company's product
development work will result in viable new products.
The Company maintains a 17,000 square foot Research and Development Center
approximately one mile from its corporate offices in Milwaukee, Wisconsin. This
center, which includes design and development laboratories, test and design
equipment, a complete standards laboratory and a technical library, is at the
disposal of Company scientists, engineers and technicians.
The Company expended $17,413,000, $22,501,000 and $23,756,000 on research
and development for the years ending April 30, 1994, 1995 and 1996,
respectively.
EMPLOYEES
At April 30, 1996, the Company had 2,269 U.S. employees and 763 employees
based abroad, or a total of 3,032 employees. None of the Company's employees is
covered by a collective bargaining agreement, except for 127 employees of
Corometrics who are represented by the IBT under a Collective Bargaining
Agreement expiring on November 30, 1997. Management considers employee
29
relations to be excellent.
The Company believes that high levels of employee support and participation
significantly contribute to Marquette's business success. Therefore, the Company
has implemented various employee benefit programs and work-related policies.
Employees are permitted to personalize their work areas and determine their own
flexible work schedules. The Company also provides many of its employees with
day care facilities, exercise facilities, and a tuition reimbursement program,
and encourages them to play a role in the Company's growth. It also encourages
direct and individual ownership by employees of Company stock through its 401K-
Profit Sharing Plan and grants of stock options.
OBTAINING RAW MATERIALS AND OTHER SUPPLIES
To manage the acquisition of necessary supplies and raw materials, the
Company employs a technique referred to as the "just in time" program. Under
this program, the Company aims to purchase materials when and as they are
needed, shorten manufacturing cycle times and emphasize quality of purchased
components to minimize required inventory. This reduces inventory carrying cost
and allows the Company to use its capital elsewhere while minimizing the
possibility of an accumulation of obsolete inventories. Under this program the
Company has significantly reduced the number of approved vendors, often
purchasing exclusively from one supplier for any given part. While there is a
back-up supplier identified in most cases, this commitment to a primary supplier
permits preferred pricing and service. Suppliers are selected on their
capability to manufacture in a high quality and reliable fashion with very short
lead times. Four electronic parts distributors operate in-house stores on
Company premises which maintain significant inventories to meet production
schedule fluctuations.
PATENTS AND TRADEMARKS
The Company possesses rights under a number of domestic and foreign patents
and trademarks relating to its products and business. While the Company
considers its trademarks important in the operation of its business and, in
particular, the names "Marquette", "E For M", "Hellige" and "Corometrics", the
business of the Company is not dependent on any trademark or on any single
patent or group of patents. The Company believes that because of the rapid pace
of technological change in its industry, patent protection is of less
significance than factors such as the knowledge and experience of the Company's
personnel and their ability to develop, enhance and market new products.
The Company relies substantially on its unpatented, propri-
30
etary know-how. No assurances can be given that others will not be able to
develop substantially equivalent proprietary know-how or otherwise obtain access
to the Company's know-how. In addition, others could obtain patents or other
proprietary rights with respect to technology which the Company may need to
license in order to carry on its business. No assurances can be given that such
licenses would be available on reasonable terms or at all.
As a condition of employment, most of the Company's new employees are
required to sign an agreement to maintain the confidentiality of Company secrets
and to assign to the Company their interest in any inventions conceived during
the course of their employment. The Company recognizes that such agreements are
sometimes difficult to enforce.
GOVERNMENT REGULATION
The medical devices manufactured and marketed by the Company, including
those of Corometrics, are subject to regulation by the federal Food and Drug
Administration ("FDA") and, in many instances, by foreign governments. Under the
Federal Food, Drug and Cosmetic Act, as amended (the "FDC Act"), manufacturers
of medical devices must comply with certain provisions of the FDC Act and
regulations promulgated by the FDA governing the testing, manufacturing,
packaging and marketing of medical devices. The FDA's powers include the
imposition of criminal and civil sanctions against companies, including seizures
of regulated products and criminal sanctions against individuals. To facilitate
compliance, the Company, from time to time, may institute voluntary compliance
actions such as product recalls when it believes it advisable to do so.
Under the FDC Act, medical devices are subject to different levels of
review, the most comprehensive of which requires that a device receive pre-
market approval by the FDA for commercial distribution in the United States. The
Company's products have not been subject to the comprehensive pre-market
approval requirements, but are generally subject to pre-market notification
requirements. If a new device is substantially equivalent to a device that did
not require pre-market approval, pre-market review is satisfied through a pre-
market notification submission (a "510(k) Submission"), under which the
applicant provides product information supporting its claim of substantial
equivalence. The FDC Act requires 90 days' prior notice, but the FDA can
continue to review a submission beyond the 90 day period.
As a manufacturer of medical devices, the Company is also subject to
certain other FDA regulations, such as general controls provisions which include
manufacturing process requirements, and the Company's manufacturing processes
and facilities are subject to
31
biannual inspection by the FDA. The FDA has power to order a limited detention
of products and other remedies where it finds the devices to be in violation of
the FDC Act. Federal, state and foreign regulations regarding the manufacture
and sale of medical devices are subject to change. The Company cannot predict
what impact, if any, such changes might have on its business. The Company also
seeks, where appropriate, to comply with safety standards of Underwriters
Laboratories, the Canadian Standards Association, the European Economic
Community and other countries in which it markets products.
The Company's products are used by health care providers for diagnostic
testing services and other services for which the providers may seek
reimbursement under the federal Medicare and Medicaid programs or from other
governmental and private payers. Such reimbursement is subject to federal
regulations and policies and regulations of other 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 and recently has instituted
changes that may further limit the amount of such reimbursement. The state-
administered Medicaid programs and private payers, most notably managed care
organizations, also place limitations on the reimbursement of both facilities
and physicians for services provided in connection with diagnostic and clinical
procedures. Federal and state regulations regarding the amount and manner of
reimbursement are subject to change. The new federal administration has placed
national health reform as a priority item on its legislative agenda and there
are a number of bills presently being considered in both Houses of Congress. The
Company is unable to predict the impact, if any, that such change or legislation
might have on its business.
In addition to laws and regulations enforced by the FDA, Marquette is also
subject to regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Resource Conservation and Recovery Act and
other present and potential future federal, state and local regulations.
PRODUCT LIABILITY AND INSURANCE
The Company is involved in various legal proceedings, including product
liability suits of a nature considered normal to its business. The Company's
products are relied upon by medical personnel in critical care hospitals and
elsewhere in their diagnosis and treatment of patients. As a result, the Company
is exposed to potential product liability claims. Patients with
32
respect to whom the Company's equipment is being used will, on occasion, sustain
injury or death as a result of their condition or medical treatment. If
litigation is initiated because of that occurrence, the Company, along with
physicians and nurses, hospitals and other medical suppliers may be sued, and
whether or not the Company is ultimately determined to be liable, it may incur
significant legal expenses. In addition, such litigation could damage the
Company's reputation and therefore impair its ability to market its products,
and impair its ability to obtain product liability insurance or cause the
premiums for such insurance to increase. The Company carries product liability
insurance coverage under several policies currently with an aggregate loss
coverage of $30,000,000, which the Company believes is sufficient. However, in
the future the Company may be unable to obtain adequate product liability
coverage under terms that it finds acceptable, if at all.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information regarding executive officers who are not
also directors.
NAME AGE POSITION WITH THE COMPANY
Mary M. Kabacinski 47 Vice President, Chief
Financial Officer and
Assistant Secretary
Gerald G. Woodard 49 Vice President-Sales
and Marketing
Karl F. Braun 63 Vice President-EMEA
Steven G. Books 45 Division President-Cardiology
Gerald J. Lentz 49 Division President-Service
Mark Stega, M.D. 42 Division President-QMI
Clinical Information Systems
Frederick A. Robertson, M.D. 40 Division President-
Patient Monitoring
P. Michael Breedlove 52 Division President-E for M
Imaging Systems
James R. Mertens 43 Division President-E for M
Cath Lab
33
Louis P. Scafuri 44 Division President-
Corometrics Medical Systems
Mary M. Kabacinski joined the Company in March 1989 and has served as the
Treasurer since July 1989 and Vice President since July 1991. Prior to her
employment with the Company, Mrs. Kabacinski was a tax manager since 1983 at
Arthur Andersen LLP.
Gerald G. Woodard joined QMI in 1986 and served as its Vice President until
January 1, 1992, when he became Director of Operations. He continued to serve as
such until October, 1995 when he became Vice President, Sales and Marketing for
the Company.
Karl F. Braun became employed by Hellige GmbH (since January, 1996 an
indirect wholly-owned subsidiary of the Company) in 1955. In 1977, Mr. Braun
became Vice President-Marketing and Sales of Hellige; in September, 1989, he
became Vice President-Cardiology; in June, 1993, he became Director of Marketing
and Development and in May, 1994 became Managing Director of Hellige GmbH and
continues to serve as such. In May, 1996, he was elected as Vice President-EMEA
of the Company.
Steven G. Books joined the Company in 1982. Mr. Books served as a manager
in the Manufacturing and Engineering Departments of the Company between 1982 and
June 30, 1994 when he was elected as Vice President in charge of the Company's
Cardiology Division, where he served until elected to his current office in May,
1996.
Gerald J. Lentz joined the Company on September 22, 1969 and served as its
National Service Manager until June, 1994, when he became a Product Manager for
the Company, serving as such until May, 1996, when he was elected to his current
office.
Mark Stega, M.D. is a co-founder of QMI and served as its President for 16
years. On January 1, 1992, Dr. Stega's title was changed to Vice President and
General Manager of QMI, where he has served, as such, until elected to his
current office in May, 1996.
Frederick A. Robertson, M.D. was employed by the Company in January, 1993
and has served as a Vice President of the Company since June 2, 1994,
supervising the monitoring product line of the Company until elected to his
present office in May, 1996. During the ten years preceding his employment by
the Company, Dr. Robertson was a practicing anesthesiologist and a shareholder,
Director and officer of Anesthesia Service Medical Group, based in San Diego,
California.
P. Michael Breedlove served as Vice President of Field Operations for E for
M Corporation from October, 1995 until May,
34
1996 when he was elected to his current office. Prior to becoming employed by E
For M Corporation, Mr. Breedlove worked for Cerner Company, a provider of
Clinical Information Systems, as Vice President-Sales and Marketing from 1984 to
1991, Managing Director of Cerner Corporation Prop Ltd. from 1991 until 1993 and
Vice President, Western Operations from 1993 until October, 1995.
James R. Mertens worked as a Software Engineer for the Company for the two
years ending November, 1983, when he became Software Manager for Mortara
Instruments Company. In June, 1994, Mr. Mertens became Vice President-Software
Technology of E For M Corporation, where he served as such until his election to
his current office in May, 1996.
Louis P. Scafuri joined the Company in July, 1989, serving as a Regional
Manager until November, 1989 and a District Manager until July, 1991 when he was
promoted to the position of Director of National Sales. He served as Director of
National Sales until August of 1992 when he left the Company to become Vice
President-Sales and Marketing and Acting Executive Vice President at Aspect
Medical Systems, Inc., a medical device manufacturer. In September, 1995, Mr.
Scafuri was hired by and elected to the presidency of Corometrics Medical
Systems, Inc. (a wholly-owned subsidiary of the Company), a position that he
presently occupies. In May, 1996, Mr. Scafuri was elected as Division President-
Corometrics Medical Systems.
ITEM 2. PROPERTIES
The following table sets forth certain information as of April 30, 1996,
relating to the Company's principal real estate facilities:
Location
(Owned or Approximate
Leased) Square Feet Principal Uses
- --------- ----------- --------------
Freiburg, Germany
(owned) 180,000 Engineering, research and development,
marketing and manufacturing of
cardiology and adult monitoring
products
Freiburg, Germany 35,100 Research and development,
(leased until marketing and sale and
January 31, 1997) purchasing for Hellige
manufactured products
35
Jupiter, 180,000 Manufacturing, engineering and
Florida (owned) marketing of supplies and car
diac catheterization products
and service center
Milwaukee, 295,000 Corporate offices, engineering,
Wisconsin research and development, and
(owned) marketing and manufacturing of
cardiology and adult monitoring
products
Overland Park, Kansas 7,200 Cath Lab engineering and film
(leased until distribution
February 28, 1997)
Lenexa, Kansas 14,533 Film distribution
(leased until
January, 1997)
Paris, France 8,000 Marketing and sales,
(leased until general administration
February, 1999)
Torrance, California 65,500 Engineering, research and
(leased until December, development and marketing
2004) and manufacturing of
imaging systems
Wallingford, CT 180,000 Engineering, research and
(owned) development and marketing and
manufacturing of fetal and neonatal
monitoring and diagnostic products
The Company believes that its manufacturing facilities are sufficient for
its current needs. Because approximately 75% of its manufacturing capacity is
presently being utilized, the Company believes that such facilities are
sufficient for the next three years based on the Company's expected rate of
growth.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceeding other than
ordinary routine litigation incident to its business.
36
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
The section labeled "General Information" appearing on page 36 of
the Company's 1996 Annual Report to Shareholders is incorporated herein by
reference.
The Registrant has two classes of stock, Class A Common Stock, $0.10
par value, and Class C Common Stock, $0.01 par value. There is no
established public trading market for the Class C Common Stock, all of
which is owned by the Michael J. Cudahy Revocable Trust.
ITEM 6. SELECTED FINANCIAL DATA
The section labeled "Five Year Summary of Selected Financial
Data" appearing on page 1 of the Company's 1996 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The section labeled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing on pages 29
through 34 of the Company's 1996 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Public Accountants appearing on page
28 and the Consolidated Financial Statements and Notes to Consolidated
Financial Statements appearing on pages 12 through 27 of the Company's 1996
Annual Report to Shareholders are incorporated herein by reference.
37
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
(a) The section labeled "Nominees" appearing on page 3 of the
Company's Proxy Statement dated July 22, 1996 is incorporated herein by
reference.
(b) Information concerning the Company's executive officers who are
not directors is set forth in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The sections labeled "Executive Officer Compensation" and "Report of
the Human Resources Committee" appearing on pages 11 through 15 of the
Company's Proxy Statement dated July 22, 1996 is incorporated herein by
reference to the extent necessary to be responsive to the requirements of
this Item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section labeled "Stock Ownership of Management and Others"
appearing on pages 10 and 11 of the Company's Proxy Statement dated July
22, 1996 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The subsection labeled "Certain Transactions" appearing on page 17 of
the Company's Proxy Statement dated July 22, 1996 is incorporated herein by
reference.
38
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. INDEX TO FINANCIAL STATEMENTS
The following Financial Statements
are included in the Company's
1996 Annual Report to Shareholders Page in 1996
and are incorporated herein by Annual Report
reference pursuant to Item 8: to Shareholders
---------------
Consolidated Balance Sheets at
April 30, 1996 and 1995 12-13
Consolidated Statements of Income
for the years ended April 30, 1996, 1995
and 1994 14
Consolidated Statements of Shareholders'
Equity for the years ended April 30,
1996, 1995 and 1994 16
Consolidated Statements of Cash Flows
for the years ended April 30, 1996,
1995 and 1994 14-15
Notes to Consolidated Financial
Statements 17-27
Report of Independent Public Accountants 28
Selected Quarterly Data (Unaudited) 27
2. INDEX TO FINANCIAL STATEMENT SCHEDULES
The following schedule is filed as part of this Report on Form 10-K
and is covered by the "Report of Independent Public Accountants on
Supplementary Schedule" included herein.
Schedule
Number Description
-------- -----------
II Valuation and Qualifying Accounts
All other financial statement schedules not listed have been omitted
since the required information is included in the consolidated statements
or the notes thereto, or is not applicable or required under the rules of
Regulation S-X.
39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTARY SCHEDULE
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Marquette Electronics,
Inc.'s annual report to shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated June 13, 1996. Our audit was
made for the purpose of forming an opinion on those statements taken as a
whole. The following schedule is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Milwaukee, Wisconsin
June 13, 1996
40
MARQUETTE ELECTRONICS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Balance Additions Additions Write-Offs Balance
Beginning Charged Due to Net of End
of Year to Income Acquisitions Recoveries of Year
--------------------------------------------------------
Year ended
April 30,
1994 $ 413 $ 120 $ - $ 75 $ 458
Year ended
April 30,
1995 $ 458 $ 196 $ 347 $ (65) $ 1,066
Year ended
April 30,
1996 $ 1,066 $ 817 $ 5,427 $ 880 $ 6,430
41
3. Exhibits
Sequential
Exhibit Page
No. Number*
2.1 Stock Purchase Agreement by and between the Company,
AHP Subsidiary Holding Corporation and American Home
Products Corporation dated April 7, 1994 (filed as
Exhibit 2 to Form 8-K dated May 31, 1994 and
incorporated herein by reference). All schedules to
the Agreement have been omitted, the Company hereby
agreeing to furnish supplementary a copy of any
omitted schedule to the Commission upon request.
2.2 Closing Date Agreement between Marquette Electronics,
Inc., AHP Subsidiary Holding Corporation and American
Home Products Corporation dated May 23, 1994 (filed
as Exhibit 2 to Form 8-K dated May 31, 1994 and
incorporated herein by reference)
2.3 Offer to Purchase for Cash dated November 10, 1995
made Marquette Subcorp (filed as Exhibit (a)(1) to
Schedule 14D-1 on November 13, 1995 and incorporated
herein by reference)
2.4 Agreement and Plan of Merger dated as of November 5,
1995 between Registrant, Marquette Subcorp and E For
M Corporation (filed as Exhibit (a)(10) to Schedule
14D-1 filed on November 13, 1995 and incorporated
herein by reference)
3.1 Form of Restated Articles of Incorporation (filed as
Exhibit 1.1to Form S-1 Registration Statement No. 33-
35642, filed June 29, 1990 and incorporated herein by
reference)
3.2 (a) Amended and Restated By-Laws of the Registrant
adopted as of January 8, 1996
(b) Amendment No. 1 to Amended and Restated By-Laws
of the Registrant adopted May 21, 1996
10.1 Post-Death Option Agreement, by and between Marquette
Electronics, Inc. and Michael J. Cudahy, dated April
6, 1992 (filed as Exhibit 10.67 to Form 10-K for the
fiscal year ended April 30, 1992 and incorporated
herein by reference)
42
Sequential
Exhibit Page
No. Number*
10.2 Post-Death Option Agreement, by and between Marquette
Electronics, Inc. and Warren B. Cozzens, dated April
6, 1992 (filed as Exhibit 10.68 to Form 10-K for the
fiscal year ended April 30, 1992 and incorporated
herein by reference)
10.3 Amended and Restated Stock Option Plan for Employees
of Marquette Electronics, Inc. (filed as Exhibit
10.70 to Form 10-K for the fiscal year ended April
30, 1992 and incorporated herein by reference)
10.4 Amendment No. 1 to Amended and Restated Stock Option
Plan for Employees of Marquette Electronics, Inc.
adopted September 10, 1993 (filed as Exhibit 10.15
to Form 10-K for the fiscal year ended April 30, 1994
and incorporated herein by reference)
10.5 Amendment No. 2 to Amended and Restated Stock Option
Plan for Employees of Marquette Electronics, Inc.
adopted June 2, 1994 (filed as Exhibit 10.16 to Form
10-K for the fiscal year ended April 30, 1994 and
incorporated herein by reference)
10.6 Amendment No. 3 to Amended and Restated Stock Option
Plan for Employees of Marquette Electronics, Inc.
adopted May 21, 1996
10.7 Letter Agreement between the Company and Warren B.
Cozzens dated July 11, 1994 (filed as Exhibit 10.21
to Form 10-K for the fiscal year ended April 30,
1994 and incorporated herein by reference)
10.8 Marquette Electronics, Inc. Profit Sharing and 401
(K) Plan and Trust (as restated and amend-
-------------
* This information appears only in the manually signed,
original, sequentially numbered copy of this report.
43
Sequential
Exhibit Page
No. Number*
ed) dated April 10, 1994 (filed as Exhibit 10.22 to Form
10-K for the fiscal year ended April 30, 1994 and
incorporated herein by reference)
10.9 Amendment No. 1 to Marquette Electronics, Inc. Profit-
Sharing and 401(k) Plan and Trust (as restated and
amended) adopted on August 1, 1994.
10.10 Amendment No. 2 to Marquette Electronics, Inc. Profit-
Sharing and 401(k) Plan and Trust (as amended and
restated) adopted on February 9, 1996.
10.11 Marquette Electronics, Inc. Directors (non-employee)
Stock Option Plan adopted August 19, 1993 (filed as
Exhibit 10.23 to Form 10-K for the fiscal year ended
April 30, 1994 and incorporated herein by reference)
10.12 Loan Agreement dated May 31, 1994 between Marquette
Electronics, Inc., M&I Marshall & Ilsley Bank and
NBD Bank, N.A. (filed as Exhibit 10.19 to Form 10-K
for the fiscal year ended April 30, 1995 and
incorporated herein by reference)
10.13 Marquette Electronics, Inc. Management Deferred
Compensation Plan, as adopted on February 9, 1996
10.14 Employment Agreement dated September 20, 1995 between
E For M Corporation, a wholly-owned subsidiary of
the Registrant, and P. Michael Breedlove
10.15 Employment Agreement dated May 14, 1996 between
Registrant and Peter P. Tong
-------------
* This information appears only in the manually signed,
original, sequentially numbered copy of this report.
44
Sequential
Exhibit Page
No. Number*
10.16 Stock Purchase Agreement, dated July 1, 1996, between
the Registrant, E For M Corporation and Polar Vision,
Inc.
10.17 Loan Agreement between Registrant and M & I Marshall
and Ilsley Bank, Wachovia Bank of Georgia N.A. and
NBD Bank, N.A. dated December 12, 1995
10.18 Commercial Lease Agreement dated July 28, 1994 between
Kansas Industrial No. 1 and Vari-X, Inc. (an indirect
wholly-owned subsidiary of Registrant) (filed by E For
M Corporation, a wholly-owned subsidiary of Registrant,
as an exhibit to its Form 10-Q for the quarterly
period ending June 30, 1994 and incorporated herein by
reference)
10.19 Commercial and Industrial Lease Agreement dated
March 29, 1995 between Bond Street Building Co. and
E For M Corporation (a wholly-owned subsidiary of
Registrant)
10.20 Standard Industrial/Commercial Single Tenant-Tenant
Lease-Net dated May 24, 1994 between Albor Properties
One LP and Enhanced Imaging Technologies, Inc. (now
known as E For M Corporation)
13 1996 Annual Report to Shareholders
21.1 List of subsidiaries
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
------------
* This information appears only in the manually signed,
original, sequentially numbered copy of this report.
45
(b) REPORTS ON FORM 8-K
The Registrant filed Form 8-K/A on February 22, 1996, for purposes of
amending Form 8-K filed by the Registrant on December 23, 1995. Form
8-K/A contained financial statements and exhibits reported under Item
7, consisting of audited financial statements of E For M Corporation
for the years ending December 31, 1992, 1993 and 1994, unaudited
interim financial statements of E For M Corporation as of and for the
nine months ended September 30, 1994 and 1995 and pro forma financial
information consisting of unaudited pro forma combined balance sheets
of the Registrant and E For M Corporation as of October 31, 1995, pro
forma combined condensed statements of income (unaudited) of
Registrant and E For M Corporation for the years ended April 30, 1995
and March 31, 1995 and pro forma combined condensed statements of
income (unaudited) of the Registrant and E For M Corporation for the
six months ended October 31, 1995 and September 30, 1995.
46
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 24, 1996
MARQUETTE ELECTRONICS, INC.
By: /s/ Timothy C. Mickelson
---------------------------------
Timothy C. Mickelson, President
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
- --------- ----- ----
Principal Executive Officer:
/s/ Michael J. Cudahy Chief Executive
- ------------------------------ Officer, Director July 24, 1996
Michael J. Cudahy
Principal Financial Officer:
/s/ Mary M. Kabacinski Vice President, Chief
- ------------------------------ Financial Officer,
Mary M. Kabacinski Assistant Secretary July 24, 1996
A Majority of Directors:
/s/ Timothy C. Mickelson President,
- ------------------------------ Director July 24, 1996
Timothy C. Mickelson
/s/ Michael J. Cudahy Chief Executive
- ------------------------------ Officer, Director July 24, 1996
Michael J. Cudahy
/s/ Frederick G. Luber Director July 24, 1996
- ------------------------------
Frederick G. Luber
/s/ Melvin S. Newman Director July 24, 1996
- ------------------------------
Melvin S. Newman
47