1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 0-6715
ANALOGIC CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2454372
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
8 Centennial Drive, Peabody, Massachusetts 01960
(Address of principal executive offices) (Zip Code)
(978) 977-3000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report.)
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
The number of shares of Common Stock outstanding as of October
31, 1999 was 12,800,368.
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ANALOGIC CORPORATION AND SUBSIDIARIES
INDEX
Page No
Part I Financial Information
Consolidated Condensed Balance Sheets
October 31, 1999 and July 31, 1999 3
Consolidated Condensed Statements of Income
Three Months Ended October 31, 1999 and 1998 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended October 31, 1999 and 1998 5
Notes to Consolidated Condensed
Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of operations 9-11
Part II Other Information 12-13
3
PART I FINANCIAL INFORMATION
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share data)
October 31 July 31,
1999 1999*
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 28,140 $ 30,017
Marketable securities, at market 93,847 94,185
Accounts and notes receivable,net 58,588 56,400
Inventories 55,393 52,423
Prepaid expenses and other current assets 8,231 7,445
Total current assets 244,199 240,470
Property, plant and equipment, net 63,203 63,514
Investments in and advances to
affiliated companies 6,085 5,572
Other assets, including unamortized software
costs (Fiscal 2000,$4,215; Fiscal 1999,$4,174) 5,551 5,457
TOTAL ASSETS $ 319,038 $ 315,013
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Mortgage and other notes payable $ 358 $ 356
Obligations under capital leases 652 633
Accounts payable, trade 17,290 14,526
Accrued employee compensation and benefits 8,764 10,349
Accrued expenses 9,110 8,666
Accrued income taxes 326 68
Accrued dividends payable 891 ---
Total current liabilities 37,391 34,598
Long-term debt:
Mortgage and other notes payable 5,424 5,626
Obligations under capital leases 918 1,088
Deferred income taxes 1,528 1,497
Excess of acquired net assets over cost, net 188 217
Minority interest in subsidiary 4,184 4,586
Stockholders' equity:
Common stock, $.05 par value 697 694
Capital in excess of par value 26,638 24,718
Retained earnings 259,043 257,417
Accumulated other comprehensive income (1,330) (1,023)
Treasury stock, at cost (12,733) (13,100)
Unearned compensation (2,910) (1,305)
Total stockholders' equity 269,405 267,401
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 319,038 $ 315,013
*See note 2 of notes to consolidated condensed financial
statements for further information
The accompanying notes are an integral part of these financial
statements.
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ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
Three Months Ended
October 31,
1999 1998
Revenues:
Product and service, net $ 54,365 $ 57,839
Engineering and licensing 5,395 3,588
Other operating revenue 3,953 3,620
Interest and dividend income 1,725 2,119
Total revenues 65,438 67,166
Costs of sales and expenses:
Cost of sales:
Product and service 34,246 33,900
Engineering and licensing 3,874 3,021
Other operating expenses 1,682 1,635
General and administrative 5,180 5,059
Selling 5,913 6,267
Research and product development 9,611 8,993
Interest expense 87 115
(Gain) Loss on foreign exchange 135 84
Amortization of excess of acquired
net assets over cost (28) (28)
Total cost of sales and expenses 60,700 59,046
Income from operations 4,738 8,120
Equity in net loss of unconsolidated
affiliates (1,049) (1,088)
Income before income taxes and minority
interest 3,689 7,032
Provision for income taxes 1,144 2,180
Minority interest in net income of
consolidated subsidiary 27 95
Net income $ 2,518 $ 4,757
Earnings per common share:
Basic $ 0.20 $ 0.38
Diluted 0.20 0.37
Dividends declared per common share $ 0.07 $ 0.06
The accompanying notes are an integral part of these financial statements.
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ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three Months Ended
October 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,518 $ 4,757
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,954 2,600
Amortization of capitalized software 463 509
Amortization of excess of acquired net
assets over cost (28) (28)
Minority interest in net income of 27 95
consolidated subsidiaries
Compensation from stock grants 74 146
Gain on sale of equipment (5) (19)
Excess of equity in losses of
unconsolidated affiliates 1,049 1,088
Changes in operating assets and liabilities
Decrease (increase) in assets:
Accounts and notes receivable (2,188) 217
Inventories (2,970) (88)
Prepaid expenses and other current assets (189) (108)
Other assets (115) (137)
Increase (decrease) in liabilities:
Accounts payable, trade 2,764 33
Accrued expenses and other current
liabilities (1,369) (4,006)
Accrued and deferred income taxes (205) 2,692
TOTAL ADJUSTMENTS 262 2,994
NET CASH PROVIDED BY OPERATING ACTIVITIES: 2,780 7,751
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in and advances to affiliated companies(1,500) (600)
Additions to property, plant and equipment (2,646) (4,195)
Capitalized software (504) (432)
Purchases of marketable securities (5,805) (2,988)
Maturities of marketable securities 5,210 935
Proceeds from sale of property, plant and equipment 8 35
NET CASH USED BY INVESTING ACTIVITIES (5,237) (7,245)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt and capital lease obligations (352) (2,932)
Issuance of common stock pursuant to stock
options and employee stock purchase plan 409 106
NET CASH USED BY FINANCING ACTIVITIES 57 (2,826)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 523 1,313
NET DECREASE IN CASH & CASH EQUIVALENTS (1,877) (1,007)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 30,017 27,644
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 28,140 $ 26,637
The accompanying notes are an integral part of these financial
statements.
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ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments (consisting solely of normal recurring adjustments)
necessary to fairly present Analogic Corporation's financial
position as of October 31, 1999 and July 31, 1999, the results of
its operations for the three months ended October 31, 1999 and
1998 and statements of cash flows for the three months then
ended. The results of the operations for the three months ended
October 31, 1999 are not necessarily indicative of the results to
be expected for the fiscal year ending July 31, 2000. The
accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements in its Annual Report on
Form 10-K for the fiscal year ended July 31, 1999.
2. The financial statements, with the exception of the July 31,
1999 balance sheet, are unaudited and have not been examined by
independent certified public accountants. The consolidated
balance sheet as of July 31, 1999 contains data derived from
audited financial statements.
3. The inventories as of October 31, 1999 were not based on a
physical or perpetual inventory but were calculated on the basis
of material used during the period. The components of inventory
are estimated as follows:
October 31,1999 July 31, 1999
Raw Materials $ 23,308,000 $ 20,918,000
Work-in-process 21,957,000 20,621,000
Finished goods 10,128,000 10,884,000
$ 55,393,000 52,423,000
4. Total interest expense, amounted to $120,000 of which $33,000
was capitalized during the three months ended October 31, 1999.
Interest paid amounted to $87,000 and $115,000 during the three
months ended October 31, 1999 and 1998, respectively.
5. Income taxes paid during the three months ended October 31,
1999 and 1998 amounted to $864,000 and $440,000, respectively.
6. The Company declared a dividend of $.07 per common share on
October 7, 1999, payable on November 4, 1999 to shareholders of
record on October 21, 1999.
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ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
7. Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires the presentation of comprehensive
income and its components. Comprehensive income presents a
measure of all changes in equity that result from recognized
transactions and other economic events during the period other
than transactions with stockholders. The following table
presents the calculation of comprehensive income and its
components for the three months ended October 31, 1999 and 1998:
Three Month Ended
October 31,
1999 1998
Comprehensive income:
Net income $ 2,518,000 $ 4,757,000
Other comprehensive (loss)income:
Unrealized holding gains and losses,
net of taxes of $289,000 and
$280,000 for the three months ended
October 31, 1999 and 1998. (644,000) 622,000
Foreign currency translation adjustment,
net of taxes of $9,000 and $407,000 for
the three months ended October 31, 1999
and 1998 20,000 906,000
Total comprehensive income $ 1,894,000 $ 6,285,000
8. Net income per share
The following table indicates the number of shares utilized in
the earnings per share calculations for the three months ending
October 31, 1999 and 1998, respectively.
Three Months Ended
October 31,
1999 1998
Net income $ 2,518,000 $ 4,757,000
Basic:
Weighted average number of common
shares outstanding 12,732,545 12,654,106
Net income per share $ 0.20 $ 0.38
Diluted:
Weighted average number of common
shares outstanding $ 12,732,545 $ 12,654,106
Dilutive effect of stock options 59,663 122,943
Weighted average number of common
and common equivalent shares
outstanding 12,792,208 12,777,049
Net income per share $ 0.20 $ 0.37
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ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
9. Segment information:
Statement of Financial Accounting Standards No. 131 "Disclosures
about Segments of an Enterprise and Selected Information"
requires reporting of segment information that is consistent
with the way in which management operates the Company. The
Company's operations are primarily within a single segment
within the electronics industry (Medical Technology Products):
the design, manufacture and sale of high, technology, high-
performance, high precision, data acquisition, conversion
(analog/digital) and signal processing instruments and systems.
The Corporate and Other segment represents the Company's Hotel
operation, interest and dividend income and other Company
operations which do not meet the materiality requirements of the
statement and thus are not required to be separately disclosed.
The table below presents information about the Company's
reportable segments for the three months ended October 31, 1999
and 1998.
Three Months Ended
October 31,
1999 1998
Revenues:
Medical Technology Products $ 57,131,000 $ 59,484,000
Corporate and Other 8,307,000 7,682,000
Total revenues $ 65,438,000 $ 67,166,000
Income before income taxes
and minority interest:
Medical Technology Products $ 1,771,000 $ 5,105,000
Corporate and Other 1,918,000 1,927,000
Total income before income
taxes and minority interest $ 3,689,000 $ 7,032,000
Identifiable assets:
Medical Technology Products $ 193,045,000 $ 185,539,000
Corporate and Other 125,993,000 120,460,000
Total identifiable assets $ 319,038,000 $ 305,999,000
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ANALOGIC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's balance sheet reflects a current ratio of 6.5 to 1
at October 31, 1999 compared to 7.0 to 1 at July 31, 1999.
Cash, cash equivalents and marketable securities, along with
accounts and notes receivable, constitute approximately 74% of
current assets at October 31, 1999 compared with 75% at July 31,
1999. Liquidity is sustained principally through funds provided
from operations, with short-term time deposits and marketable
securities available to provide additional sources of cash. The
Company places its cash investments in high credit quality
financial instruments and, by policy, limits the amount of
credit exposure to any one financial institution. Management
does not anticipate any difficulties in financing operations at
anticipated levels. The Company's debt to equity ratio was 0.18
to 1 at October 31, 1999 and July 31, 1999.
Capital expenditures totaled approximately $2,646,000 during the
three months ended October 31, 1999.
RESULTS OF OPERATIONS
Three Months Fiscal 2000 (10/31/99) vs. Three Months Fiscal 1999
(10/31/98)
Product, service, engineering and licensing revenues for the
three months ended October 31, 1999 were $59,760,000 as compared
to $61,427,000 for the same period last year. The shortfall of
$1,667,000 was due to decrease in sales of Medical Technology
Products of $2,057,000 (primarily due to lower demand of Laser Imaging
subsystems), a decrease in Signal Processing Technology Products
of $892,000, partially offset by an increase in Industrial
Technology Products of $1,282,000 (primarily due to higher
demand of the Company's high frequency ATE boards). Other
operating revenue of $3,953,000 and $3,620,000 represents
revenue from the Hotel operation for the three months ending
October 31, 1999 and 1998, respectively.
Interest and dividend income decreased $394,000, primarily due
to interest earned from the City of Peabody on real estate tax
abatement recorded in the first quarter of fiscal 1999 of
$652,000 versus $253,000 recorded in the first quarter of fiscal
2000.
The percentage of total cost of sales to total net sales for the
three months of fiscal 2000 and fiscal 1999 was 64% and 60%,
respectively. The increase was primarily due to lower volume of
Medical Technology and Signal Processing Products and partially offset
by a benefit of real estate tax abatement of approximately $235,000 and
$575,000 for the three months of fiscal 2000 and fiscal 1999.
Operating costs associated with the Hotel during the first three
months ending October 31, 1999 and 1998 were $1,682,000 and
$1,635,000, respectively.
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ANALOGIC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Fiscal 2000 (10/31/99) vs. Three Months Fiscal 1999
(10/31/98)
(continued)
General and administrative and selling expenses decreased
$233,000, primarily due to decreased staffing in our Danish
subsidiary B-K Medical, a benefit of $235,000 for a
real estate tax abatement in the first quarter of fiscal 2000,
and $170,000 in the first quarter of fiscal 1999. Research and
product development expenses increased $618,000 primarily due to
the company's expanding engineering efforts applicable to
developing complex imaging systems.
Computer software costs of $504,000 and $432,000 were
capitalized in the first three months of fiscal 2000 and 1999,
respectively. Amortization of capitalized software amounted to
$463,000 and $509,000 in the first three months of fiscal 2000
and 1999, respectively.
The Company's share of losses of unconsolidated affiliates
amounted to $1,049,000 and $1,088,000 during the
first quarter of fiscal 2000 and 1999, respectively.
During the first quarter of fiscal 1999, the Company's
investment in Analogic Scientific was decreased by $180,000,
reflecting the Company's share of losses. There was no
adjustment required during the first quarter of fiscal 2000.
The effective tax rate for the first quarter of fiscal 2000 and
1999 was 31%.
Net income for the three months ended October 31, 1999 was
$2,518,000 or $.20 per basic and diluted earnings per share as
compared with $4,757,000 or $.38 basic earnings per share and
$.37 diluted earnings per share for the same period last year.
The decrease was primarily related to decreased sales of
Medical Technology and Signal Processing Technology Products.
Year 2000
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four digits to define the
applicable year. Computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather
than the year 2000. If the Company's internal systems do not
correctly recognize date information when the year changes to
2000, there could be an adverse impact on the Company's
operations.
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ANALOGIC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year 2000 (continued)
After over a year of testing, training, software conversion and
hardware installation, the Company has implemented its new
Enterprise Resource Planning (ERP) system in the first quarter
of fiscal 2000. Due to the size and complexity of the system,
the company anticipated and has experienced problems during the
first quarter of fiscal 2000. The Company continues to resolve
these problems and expects the system to be functioning as
planned in advance of January 1, 2000.
The Company surveyed its major vendors for Y2K compliance and
ensured all products currently manufactured by the Company are
Y2K compliant. The company currently estimates that Year 2000
costs will range from $6.0 million to $8.0 million, of which
approximately $5.8 million was spent through October 31,1999.
The estimated costs are based on management's best projections,
yet there can be no guarantee that these forecasts will be
achieved and actual results could differ materially from those
anticipated. The costs of the project will be funded through
operating cash flows.
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ANALOGIC CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8 - K
(a) Exhibits
None
(b) During the quarter ended October 31, 1999, the Company did
not file any reports on
Form 8-K.
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ANALOGIC CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements 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.
ANALOGIC CORPORATION
Registrant
Date: December 10, 1999 /s/ Bernard M. Gordon
Bernard M. Gordon
Chairman of the Board
Chief Executive Officer
Date: December 10, 1999 /s/ John A. Tarello
John A. Tarello
Senior Vice President
Chief Accounting
Officer