1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended January 31, 2001
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 at February 28, 2001 was
12,976,974.
2
ANALOGIC CORPORATION
INDEX
Page No.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
January 31, 2001 and July 31, 2000 3
Condensed Consolidated Statements of Income for the Three and
Six Months Ended January 31, 2001 and 2000
4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended January 31, 2001 and 2000 5
Notes to Unaudited Condensed Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 10-15
PART 2. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
3
ANALOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
January 31, July 31,
2001 2000
ASSETS ------------- ----------
Current assets:
Cash and cash equivalents $ 30,396 $ 29,132
Marketable securities, at market 82,506 87,242
Accounts and notes receivable net of allowance for doubtful 63,290 63,437
accounts $1,101 in fiscal 2001, and $1,010 in fiscal 2000
Inventories (Note 2) 72,749 62,326
Deferred income taxes 7,743 8,511
Other current assets 5,527 5,239
------------- ----------
Total current assets 262,211 255,887
Property, plant and equipment, net 64,330 63,524
Investments in and advances to affiliated companies (Note 3) 4,693 5,405
Capitalized software, net 5,602 5,368
Other assets 4,264 3,567
------------- ----------
Total assets $ 341,100 $ 333,751
============= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Mortgage and other notes payable $ 366 $ 363
Obligations under capital leases 452 714
Accounts payable, trade 18,241 20,015
Accrued expenses (Note 2) 22,114 20,038
Accrued income taxes 756 1,780
------------- ----------
Total current liabilities 41,929 42,910
Long-term debt:
Mortgage and other notes payable 5,007 5,265
Obligations under capital leases 289 374
------------- ----------
5,296 5,639
Deferred income taxes 2,502 2,501
Excess of acquired net assets over cost, net 47 104
Minority interest in subsidiary 4,051 4,268
Stockholders' equity:
Common stock, $.05 par value 703 699
Capital in excess of par value 31,462 27,703
Retained earnings 273,910 266,695
Accumulated other comprehensive income (1,220) (2,118)
Treasury stock, at cost (11,709) (11,869)
Unearned compensation (5,871) (2,781)
------------- ----------
Total stockholders' equity 287,275 278,329
------------- ----------
Total liabilities and stockholders' equity $ 341,100 $ 333,751
============= ==========
The accompanying notes are an integral part of these financial statements.
3
4
ANALOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended
January 31, January 31,
2001 2000 2001 2000
-------- -------- --------- ---------
Net revenue:
Product $82,705 $ 57,488 $154,440 $111,853
Engineering 6,325 5,056 12,068 10,451
Other revenue 2,638 2,471 6,757 6,424
-------- -------- -------- --------
Total net revenue 91,668 65,015 173,265 128,728
-------- -------- -------- --------
Costs of sales:
Product 52,421 35,974 98,992 70,220
Engineering 6,031 4,862 10,031 8,736
Other 1,496 1,306 3,232 2,988
-------- -------- -------- --------
Total cost of sales 59,948 42,142 112,255 81,944
-------- -------- -------- --------
Gross margin 31,720 22,873 61,010 46,784
Operating expenses:
Research and product development 9,920 9,325 19,493 18,936
Selling and marketing 7,936 6,374 15,302 12,287
General and administration 7,665 6,153 14,993 11,333
-------- -------- -------- --------
25,521 21,852 49,788 42,556
Income from operations 6,199 1,021 11,222 4,228
Other (income) expense:
Interest and dividend income, net (1,455) (1,377) (2,940) (3,015)
Equity in net loss of unconsolidated affiliates 700 760 303 1,809
Other, net 38 (154) 422 (47)
-------- -------- -------- --------
(717) (771) (2,215) (1,253)
Income before income taxes and minority interest 6,916 1,792 13,437 5,481
Provision for income taxes 2,220 556 4,300 1,700
Minority interest in net income of consolidated subsidiary 34 48 118 75
-------- -------- -------- --------
Net income $ 4,662 $1,188 $ 9,019 $ 3,706
======== ======== ======== ========
Earnings per common share (Note 6)
Basic $ 0.36 $ 0.09 $ 0.70 $ 0.29
Diluted $ 0.36 $ 0.09 $ 0.70 $ 0.29
The accompanying notes are an integral part of these financial statements.
4
5
ANALOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
January 31,
OPERATING ACTIVITIES: 2001 2000
---------- ---------
Net Income $ 9,019 $ 3,706
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes 769 (1,058)
Depreciation and amortization 7,085 6,800
Minority interest in net income of consolidated subsidiaries 118 75
Allowance for doubtful accounts 91 271
Gain on sale of equipment (36) (6)
Excess of equity in gain(loss) of unconsolidated affiliates 303 1,809
Loss on investment 332 -
Compensation from stock grants 403 245
Net changes in operating assets and liabilities (Note 7) (12,996) (6,566)
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES: 5,088 5,276
---------- ---------
INVESTING ACTIVITIES:
Investments in and advances to affiliated companies - (2,750)
Additions to property, plant and equipment (7,477) (6,475)
Capitalized software (746) (1,381)
Proceeds from sale of property, plant and equipment 78 9
Purchases of marketable securities - (7,805)
Maturities of marketable securities 6,455 8,885
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (1,690) (9,517)
---------- ---------
FINANCING ACTIVITIES:
Payments on debt and capital lease obligations (602) (558)
Issuance of common stock pursuant to stock options and
employee stock purchase plan 414 924
Dividends paid to shareholders (1,805) (891)
---------- ---------
NET CASH USED IN FINANCING ACTIVITIES (1,993) (525)
---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (141) (174)
---------- ---------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 1,264 (4,940)
---------- ---------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 29,132 30,017
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 30,396 $ 25,077
========== =========
The accompanying notes are an integral part of these financial statements.
5
6
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
The unaudited condensed consolidated financial statements of Analogic
Corporation (the "Company") presented herein have been prepared pursuant to
the rules of the Securities and Exchange Commission for quarterly reports on
Form 10-Q and do not include all of the information and note disclosures
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
(consisting solely of normal recurring adjustments) necessary to fairly
present the Company's financial position as of January 31, 2001 and July 31,
2000, the results of its operations for the three and six months ended
January 31, 2001 and 2000 and statements of cash flows for the six months
ended. The results of the operations for the three and six months ended
January 31, 2001 are not necessarily indicative of the results to be expected
for the fiscal year ending July 31, 2001 or any other interim period.
These statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended July 31, 2000
included in the Company's Form 10-K, as amended, as filed with the Securities
and Exchange Commission on December 12, 2000.
The financial statements are unaudited and have not been examined by
independent certified public accountants.
Certain financial statement items have been reclassified to conform to the
current year's financial presentation format.
2. Balance sheet information:
Additional information for certain balance sheet accounts is as follows for
the periods indicated:
January 31, July 31,
2001 2000
------------ ------------
(in thousands)
Inventory:
Raw materials $ 41,491 $ 31,728
Work-in-process 19,648 20,724
Finished goods 11,610 9,874
----------- -----------
$ 72,749 $ 62,326
=========== ===========
Accrued expenses:
Accrued employee compensation and benefits $ 10,245 $ 10,562
Accrued warranty 3,710 3,636
Other 8,159 5,840
----------- -----------
$ 22,114 $ 20,038
=========== ===========
6
7
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. Investment in and Advances to Affiliated Companies:
During October, 2000, Analogic Scientific, Inc. (ASI), a joint venture
corporation located in The People's Republic of China, entered into separate
agreements with four investors which resulted in these investors buying an
11.8% equity interest in ASI. This transaction had the approval of the
Company and the other shareholder who prior to this transaction each had a
50% equity ownership interest in ASI. As a result, the Company's ownership in
ASI was reduced to 44.6%. On January 18, 2001, the company name was changed
from "Analogic Scientific, Inc." to "Shenzhen Anke High-Tech Co., Ltd"
(SAHCO).
The Company accounts for this investment under the equity method of
accounting whereby the Company has adjusted the carrying amount to recognize
the Company's share of the earnings or losses, changes in its capital
investment and dividends received by the Company.
As discussed in the prior quarter 10-Q, the Company became aware of certain
differences between local statutory accounting practice used by SAHCO and
U.S. Generally Accepted Accounting Principles (GAAP) primarily with respect
to the valuation of accounts receivable and inventory which has not been
fully evaluated. SAHCO has historically provided the Company with current
quarterly information regarding its financial results. To ensure that the
Company has adequate time to review and adjust the financial information
provided by SAHCO to conform it to U.S. GAAP, the Company has decided to
change its method of recording "SAHCO" financial results and will use the
previous quarters financial information of SAHCO to adjust its investment
account in the current quarter, thereby resulting in a consistently applied
quarterly delay in recording its equity-based accounting. The effect of this
change has been to restate all periods and beginning retained earnings.
Accordingly, during the quarter ended January 31, 2001, the Company evaluated
the potential differences in accounting basis as well as the change to a
delayed recording of SAHCO results. The Company concluded that adjustments
were necessary for prior periods resulting in a reduction in the Company's
investment of SAHCO of $1,825,000 at July 31, 2000 (or $1,240,000 net of tax
effect) which reduced the carrying value of the Company's investment at July
31, 2000 from $6,125,000 to $4,300,000. Therefore, the Company will be filing
an amended Form 10-K for the year ended July 31, 2000 which will decrease the
Company's net profit by $36,000 in fiscal 2000, $249,000 in fiscal 1999,
$105,000 in fiscal 1998 as well as a reduction to beginning retained earnings
as of August 1, 1997 of $850,000.
During the quarter ended January 31, 2001, the company has recognized its
share of SAHCO's loss amounting to $1,100,000. The carrying value of this
investment was $3,200,000 at January 31, 2001 and $4,300,000 at July 31,
2000.
4. Dividends:
The Company declared dividends of $ .07 per common share on March 15, 2001,
payable on April 12, 2001 to shareholders of record on March 29, 2001, $.07
per common share on December 5, 2000, payable on January 9, 2001 to
shareholders of record on December 26, 2000 and $ .07 per common share on
October 12, 2000, payable on November 10, 2000 to shareholders of record on
October 27, 2000.
7
8
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
5. Comprehensive Income:
The following table presents the calculation of comprehensive income and its
components for the three and six months ended January 31, 2001 and 2000:
Three Months Ended Six Months Ended
January 31, January 31,
2001 2000 2001 2000
------ ------ ------- -------
(in thousands) (in thousands)
Net Income $4,662 $1,188 $ 9,019 $ 3,706
Other Comprehensive Income (Loss) Net of Tax:
Unrealized holding gains and losses, net of taxes of $597,000 and $245,000
for the three months ended January 31, 2001 and 2000 and $680,000 and
$534,000 for the six months ended January 31, 2001 and 2000. 913 (545) 1,039 (1,189)
Foreign currency translation adjustment, net of taxes
of $485,000 and $268,000 for the three months ended January 31,
2001 and 2000, and $89,000 and $259,000 for the six months ended January
31, 2001 and 2000. 735 (598) (141) (578)
------ ----- ------- ------
Total Comprehensive Income $6,310 $ 45 $ 9,917 $1,939
====== ===== ======= ======
6. Net income per share:
The following table indicates the number of shares utilized in the earnings
per share calculations for the three and six months ended January 31, 2001
and 2000, respectively:
Three Months Ended Six Months Ended
January 31, January 31,
2001 2000 2001 2000
----------- ------------ ------------ -------------
Net income $ 4,662,000 $ 1,188,000 $ 9,019,000 $ 3,706,000
Basic: ----------- ------------ ------------ -------------
Weighted average number
of common shares outstanding 12,906,106 12,811,208 12,892,049 12,771,893
----------- ------------ ------------ -------------
Net income per share $ 0.36 $ 0.09 $ 0.70 $ 0.29
----------- ------------ ------------ -------------
Diluted:
Weighted average number
of common shares outstanding 12,906,106 12,811,208 12,892,049 12,771,893
Dilutive effect of stock options 99,085 33,106 76,279 46,385
----------- ------------ ------------ -------------
Total 13,005,19 12,844,314 12,968,328 12,818,278
----------- ------------ ------------ -------------
Net income per share $ 0.36 $ 0.09 $ 0.70 $ 0.29
----------- ------------ ------------ -------------
8
9
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
7. Supplemental disclosure of cash flow information:
Changes in operating assets and liabilities are as follows for the six months
ending January 31, 2001 and 2000, respectively:
Six Months Ended January 31,
2001 2000
--------- ---------
(in thousands)
Accounts and notes receivable $ 56 $ 6,758
Inventories (10,423) (10,699)
Other current assets (288) 137
Other assets (697) (264)
Accounts payable trade (1,774) 1,055
Accrued expenses and other current liabilities 1,822 (41)
Accrued income taxes (1,692) (3,512)
---------- ---------
Net changes in operating assets and liabilities $ (12,996) $(6,566)
========== =========
8. Segment information:
The Company's operations are primarily within a single segment within the
electronics industry (Medical Instrumentation Technology Products). These
operations encompass the design, manufacture and sale of high technology,
high-performance, high precision data acquisition, conversion (analog/digital)
and signal processing instruments and systems to customers that both
manufacture and market products for medical and industrial use. The other
segment represents the Company's hotel operation, and other Company's
operations, which do not meet the materiality requirements of the Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures About Segments
of an Enterprise and Related Information," and thus are not required to be
separately disclosed. The table below presents information about the Company's
reportable segments for the periods presented below:
Three Months Ended Six Months Ended
January 31, January 31,
2001 2000 2001 2000
-------- -------- -------- ---------
Revenues: (in thousands) (in thousands)
Medical Instrumentation Technology Products $82,735 $59,845 $155,479 $116,976
Corporate and Other 8,933 5,170 17,786 11,752
------- ------- -------- --------
Total $91,668 $65,015 $173,265 $128,728
------- ------- -------- --------
Income before income taxes and minority interest:
Medical Instrumentation Technology Products $ 5,083 $ 986 $ 8,993 $ 2,757
Corporate and Other 1,833 806 4,444 2,724
------- ------- -------- --------
Total $ 6,916 $ 1,792 $ 13,437 $ 5,481
------- ------- -------- --------
January 31, 2001 July 31, 2000
---------------- -------------
Identifiable Assets:
Medical Instrumentation Technology Products $212,691 $213,184
Corporate and Other, including Cash and
Marketable Securities 128,409 120,567
-------- --------
Total $341,100 $333,751
-------- --------
9
10
ANALOGIC CORPORATION
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
This Report on Form 10-Q contains statements which, to the extent that they
are not recitation of historical facts, constitute "forward-looking
statements" pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that all
forward-looking statements, including statements about product development,
market and industry trends, strategic initiatives, regulatory approvals,
sales, profits, expenses, price trends, research and development expenses and
trends, and capital expenditures involve risk and uncertainties and actual
events and results may differ significantly from those indicated in any
forward-looking statements.
RESULTS OF OPERATIONS
SIX MONTHS FISCAL 2001 (01/31/01) VS. SIX MONTHS FISCAL 2000 (01/31/00)
Product revenue for the six months ended January 31, 2001 was $154,440,000 as
compared to $111,853,000 for the same period last year, an increase of 38%.
The increase of $42,587,000 was due to an increase in sales of Medical
Technology Products of $29,564,000, 35% the prior year period, primarily due
to digital radiography systems and fully featured mid-range Computed
Tomography (CT) systems, an increase in sales of $11,022,000, 113% over the
prior year period, in Industrial Technology Products due to continued demand
for the Company's high frequency, Automatic Test Equipment (ATE) boards, and
an increase of sales in Signal Processing Technology Products of $2,001,000,
11% over the prior year period, due to the demand for its multi-processor and
inspection systems. Engineering revenue for the six months ended January 31,
2001 was $12,068,000 as compared to $10,451,000 for the same period last
year, an increase of 15%. The increase was primarily due to customer funded
projects for developing imaging products. Other revenue of $6,757,000 and
$6,424,000 represents revenue from the Hotel operation for the six months
ended January 31, 2001 and 2000, respectively.
Product cost of sales for the first six months of fiscal 2001 was 64% of
product revenue compared to 63% for the first six months of fiscal 2000. The
increase was primarily due to higher manufacturing costs and product mix.
Engineering cost of sales for the first six months of fiscal 2001 was 83% of
engineering revenue as compared to 84% for the same period last year. Other
cost of sales, which represents costs associated with the Hotel Operation
during the first six months of fiscal 2001 and 2000 were $3,232,000 and
$2,988,000, respectively.
Research and product development expenses were $19,493,000 for the first six
months of fiscal 2001, or 11% of total revenue, as compared to $18,936,000
for the same period of the prior year or 15% of total revenue. The increase
of $557,000 was due to the continuing research and development activities
across all of the Company product lines. Research and product development
expenses as percentage of total revenue decreased primarily due to increased
revenue.
Selling and marketing expenses were $15,302,000 and $12,287,000 for the six
months of fiscal 2001 and 2000, respectively. The increase of $3,015,000 was
due to higher personnel and related selling activity costs of approximately
$1,500,000 associated with the Company's Camtronics subsidiary selling its
products directly to end users as compared to its prior practice of selling
through OEMs. The remaining balance is primarily associated with increased
selling efforts related to increased sales volume.
General and administrative expenses for the first six months of fiscal 2001
were $14,993,000, or 9% of total revenue as compared to $11,333,000, or 9%
of total revenue, for the same period last year. The increase of $3,660,000
was primarily due to higher personnel-related costs to support the Company's
operational strategic plan.
Computer software costs of $1,640,000 and $1,381,000 were capitalized in the
first six months of fiscal 2001 and 2000, respectively. The increase was
mainly due to Media Gateway development systems and associated software for
the Internet Telephony market. Amortization of capitalized software amounted
to $1,096,000 and $903,000 in the first six months of fiscal 2001 and 2000,
respectively.
10
11
ANALOGIC CORPORATION
RESULTS OF OPERATIONS
SIX MONTHS FISCAL 2001 (01/31/01) VS. SIX MONTHS FISCAL 2000 (01/31/00)
(CONTINUED)
During the six months of fiscal 2000, the Company recorded its share of
losses in a joint venture of $1,782,000 related to research and development
costs for the design and manufacture of medical imaging equipment. This joint
venture was restructured during fiscal year 2000 whereby the joint venture
received license related royalties based on sale of medical imaging equipment
beginning in March 2000. The Company's share of the profit in the joint
venture amounted to $720,000 during the six months of fiscal 2001. The profit
represents license-related royalties based on sales of medical imaging
equipment.
During the first six months of fiscal 2001, the Company's investment in
Shenzhen Anke High-Tech Co., Ltd. (formerly Analogic Scientific, Inc.) was
decreased by $1,100,000, reflecting the Company's share of US GAAP basis
losses. During the first six months of fiscal 2000 the Company determined
that SAHCO's results of operations did not warrant a change in the carrying
value of the Company's investment.
The Company recognized a loss of approximately $332,000 during the first six
months of fiscal 2001 reflecting the difference in value of the restricted
securities it received during fiscal 2000 as a final distribution of shares
in a publicly traded company made by a limited partnership in which the
Company had invested and the book value of the limited partnership
investment.
The effective tax rate for the six months of fiscal 2001 and 2000 was 32% and
31%, respectively.
Net income for the six months ended January 31, 2001 was $9,019,000 or $.70
per diluted share as compared with $3,706,000 or $.29 per share for the same
period last year. The increased performance over prior year was primarily due
to increased sales volume of fully featured mid-range of Computed Tomography
(CT) systems, digital radiography systems and Automatic Test Equipment (ATE)
boards; this was partially offset by the Company's previously discussed share
of loss in Shenzken Anke High-Tech Co., Ltd., of $1,100,000 and the loss in
investment of $322,000 recognized on the value of restricted securities
received from a limited partnership.
11
12
ANALOGIC CORPORATION
RESULTS OF OPERATIONS
SECOND QUARTER FISCAL 2001 (01/31/01) VS. SECOND QUARTER FISCAL 2000
(01/31/00)
Product revenue for the three months ended January 31, 2001 was $82,705,000
as compared to $57,488,000 for the same period last year, an increase of 44%.
The increase of $25,217,000 was due to an increase in sales of Medical
Technology Products of $17,491,000, or 40% above the prior year period,
primarily due to fully featured mid-range Computed Tomography (CT) systems
and digital radiography systems; an increase in sales of $7,136,000, or 158%
over the prior year period, in Industrial Technology Products arising from
demand for the Company's high frequency, Automatic Test Equipment (ATE)
boards; and an increase in sales of $594,000, or 7% over the prior year
period, in Signal Processing Technology Products and multi-processor
systems. Engineering revenue for the three months ended January 31, 2001 was
$6,325,000 as compared to $5,056,000 for the same period last year, an
increase of 25%. The increase was primarily due to customer funded projects
for developing imaging products. Other revenue of $2,638,000 and $2,471,000
represents revenue from the Hotel operation for the three months ended
January 31, 2001 and 2000, respectively.
Product cost of sales was 63% of product revenue for the second quarter of
fiscal 2001, unchanged from the prior year period. Engineering cost of sales
was 95% of engineering revenue for the three months of fiscal 2001 as
compared to 96% for the same period last year. Other cost of sales which
prepresent operating costs associated with the Hotel during the second
quarter of fiscal 2001 and 2000 were $1,496,000 and $1,306,000, respectively.
Research and product development expenses for the second quarter of fiscal
2001 were $9,920,000, or 11% of total revenue, as compared to $9,325,000, or
14% of total revenue for the same period last year. The increase of $595,000
was due to continuing research and development activities across all of the
Company product lines. Expenses as a percentage of revenue decreased as a
result of revenue increasing at a faster rate than expenses.
Selling and marketing expenses for the second quarter of fiscal 2001 were
$7,936,000, or 9% of total revenue, as compared to $6,374,000, or 10% of
total revenue, for the same period last year. The increase of $1,562,000 was
due to higher personnel-related costs of approximately $800,000 to support
Camtronics expanding its direct selling operations. The remaining balance is
primarily to support the Company's overall revenue growth. Selling and
marketing expenses as a percentage of revenue decreased as a result of
revenue increasing at a faster rate than expenses.
General and administrative expenses for the second quarter of fiscal 2001
were $7,665,000, or 8% of total revenue, as compared to $6,153,000, or 9% of
total revenue, for the same period last year. The increase of $1,512,000 was
primarily due to higher personnel-related costs to support the Company's
operational strategic plan.
12
13
ANALOGIC CORPORATION
RESULTS OF OPERATIONS
SECOND QUARTER FISCAL 2001 (01/31/01) VS. SECOND QUARTER FISCAL 2000
(01/31/00)
(CONTINUED)
Computer Software costs of $911,000 and $877,000 were capitalized in the
second quarter of fiscal 2001 and 2000, respectively. Amortization of
capitalized software amounted to $536,000 and $439,000 in the second quarter
of fiscal 2001 and 2000, respectively.
During the second quarter of fiscal 2000, the Company recorded its share of
losses in a joint venture of $795,000 related to research and development
costs for the design and manufacture of medical imaging equipment. This joint
venture was restructured during fiscal year 2000 whereby the joint venture
received license related royalties based on sale of medical imaging equipment
beginning in March 2000. The Company's share of the profit in the joint
venture amounted to $404,000 during the second quarter of fiscal 2001. The
profit represents license-related royalties based on sales of medical imaging
equipment.
During the second quarter of fiscal 2001, the Company's investment in
Shenzhen Anke High-Tech Co., Ltd. (formerly Analogic Scientific, Inc.) was
decreased by $1,100,000, reflecting the Company's share of US GAAP basis
losses. During the second quarter fiscal 2000 the Company determined that
SAHCO's results of operations did not warrant a change in the carrying value
of the Company's investment.
The Company recognized a loss of approximately $166,000 during the second
quarter of fiscal 2001 on the value of the restricted securities it received
during fiscal 2000 as a final distribution of shares in a publicly traded
company made by a limited partnership in which the Company had invested.
The effective tax rate for the second quarter of fiscal 2001 and 2000 was 32%
and 31%, respectively.
Net income for the second quarter ended January 31, 2001 was $4,662,000 or
$.36 per diluted share as compared with $1,188,000 or $.09 per share for the
same period last year. The increase of $3,474,000 in net income over prior
year was primarily due to increased sales volume of fully featured mid-range
of Computed Tomography (CT) systems, digital radiography systems and
Automatic Test Equipment (ATE) boards; partially offset by the Company's
share of loss in Shenzhen High-Tech Co. of $1,100,000 and the loss in
investment of $166,000 recognized on the value of restricted securities
received from a limited partnership.
FINANCIAL CONDITION
13
14
ANALOGIC CORPORATION
FINANCIAL CONDITION
(CONTINUED)
The Company's balance sheet reflects a current ratio of 6.3 to 1 at January
31, 2001 compared to 6.0 to 1 at July 31, 2000. Cash, cash equivalents and
marketable securities, along with accounts and notes receivable, constitute
approximately 67% of current assets at January 31, 2001. 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 0.19 to 1 at January 31, 2001 and 0.20 to 1 at July
31, 2000.
The Company faces limited exposure to financial market risks, including
adverse movements in foreign currency exchange rates and changes in interest
rates. These exposures may change over time as business practices evolve and
could have a material adverse impact on the Company's financial results. The
Company's primary exposure has been related to local currency revenue and
operating expenses in Europe.
The carrying amounts reflected in the consolidated balance sheets of cash and
cash equivalents, trade receivables, and trade payables approximate fair
value at January 31, 2001 due to the short maturities of these instruments.
The Company maintains a bond investment portfolio of various issuers, types,
and maturities. The Company's cash and investments include cash equivalents,
which the Company considers to be investments purchased with original
maturities of three months or less. Investments having original maturities in
excess of three months are stated at amortized cost, which approximates fair
value, and are classified as available for sale. A rise in interest rates
could have an adverse impact on the fair value of the Company's investment
portfolio. The Company does not currently hedge these interest rate
exposures.
Accounts and notes receivable decreased $147,000 during the six months ended
January 31, 2001, and the days sales outstanding (DSO) decreased from 61 to
57 days.
Inventory increased $10,423,000 during the six months ended January 31, 2001
primarily due to increases in raw materials. The Company made the decision to
procure adequate supplies of key components to ensure that it could meet
customer requirements and support the Company's revenue growth.
During October, 2000, Analogic Scientific, Inc. (ASI), a joint venture
corporation located in The People's Republic of China, entered into separate
agreements with four investors which resulted in these investors buying an
11.8% equity interest in ASI. This transaction had the approval of the
Company and the other shareholder who prior to this transaction each had a
50% equity ownership interest in ASI. As a result, the Company's ownership in
ASI was reduced to 44.6%. On January 18, 2001, the company name was changed
from "Analogic Scientific, Inc." to "Shenzhen Anke High-Tech Co., Ltd"
(SAHCO).
14
15
ANALOGIC CORPORATION
FINANCIAL CONDITION
(CONTINUED)
The Company accounts for this investment under the equity method of
accounting whereby the Company has adjusted the carrying amount to recognize
the Company's share of the earnings or losses, changes in its capital
investment and dividends received by the Company.
As discussed in the prior quarter 10-Q, the Company became aware of certain
differences between local statutory accounting practice used by SAHCO and
U.S. Generally Accepted Accounting Principles (GAAP) primarily with respect
to the valuation of accounts receivable and inventory which has not been
fully evaluated. SAHCO has historically provided the Company with current
quarterly information regarding its financial results. To ensure that the
Company has adequate time to review and adjust the financial information
provided by SAHCO to conform it to U.S. GAAP, the Company has decided to
change its method of recording "SAHCO" financial results and will use the
previous quarters financial information of SAHCO to adjust its investment
account in the current quarter, thereby resulting in a consistently applied
quarterly delay in recording its equity-based accounting. The effect of this
change has been to restate all periods and beginning retained earnings.
Accordingly, during the quarter ended January 31, 2001, the Company evaluated
the potential differences in accounting basis as well as the change to a
delayed recording of SAHCO results. The Company concluded that adjustments
were necessary for prior periods resulting in a reduction in the Company's
investment of SAHCO of $1,825,000 at July 31, 2000 (or $1,240,000 net of tax
effect) which reduced the carrying value of the Company's investment at July
31, 2000 from $6,125,000 to $4,300,000. Therefore, the Company will be filing
an amended Form 10-K for the year ended July 31, 2000 which will decrease the
Company's net profit by $36,000 in fiscal 2000, $249,000 in fiscal 1999,
$105,000 in fiscal 1998 as well as a reduction to beginning retained earnings
as of August 1, 1997 of $850,000.
During the quarter ended January 31, 2001, the company has recognized its
share of SAHCO's loss amounting to $1,100,000. The carrying value of this
investment was $3,200,000 at January 31, 2001 and $4,300,000 at July 31,
2000.
Other assets increased $697,000 for the six months ending January 31, 2001.
The increase was primarily due to goodwill of $516,000 incurred by Camtronics
in acquiring certain assets and property rights to a product which will be
sold by Camtronics.
Accounts payable trade decreased by $ 1,774,000 for the six months ending
January 31, 2001.
Net cash provided from operations for the six months of fiscal 2001 was
$5,088,000, versus $5,276,000 for the prior year. The decrease of $188,000 in
cash provided from operations was primarily due to increase of $5,313,000 in
net income, offset by increases in accounts and notes receivable of
$6,702,000, due to increased revenue. Net cash used by investing activities
decreased $7,827,000 over prior period primarily due to lower investments and
advances to affiliated companies of $2,750,000 and lower purchases of
marketable securities of $7,805,000. Net cash used in financing activities
increased by $1,468,000 primarily due to the timing of dividends paid to
shareholders.
15
16
ANALOGIC CORPORATION
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on January 19, 2001, the
following proposals were adopted by the vote specified below:
Withheld Authority
Proposal For To Vote
-------- --- -------------------
1. Election of Directors
Bernard M. Gordon 11,816,495 161,782
John A. Tarello 11,814,502 163,775
Gerald L. Wilson 11,831,261 147,016
Julian Soshnick 11,814,791 163,486
For Against Abstain
--- ------- -------
2. Ratification of Independent Auditors 11,954,242 10,854 13,181
3. To approve the Company's
Key Employee Stock Bonus Plan 11,565,452 239,367 173,458
dated October 12, 2000
Please see the Company's Proxy Statement filed with the Commission in
connection with this Annual Meeting for a description of the matters voted
upon.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 - K
(a) Exhibits
None
(b) During the quarter ended January 31, 2001, the Company did not file any
reports on Form 8-K.
16
17
ANALOGIC CORPORATION
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: March 19, 2001 /s/ Thomas J. Miller, Jr.
Thomas J. Miller, Jr.
Chief Executive Officer and
President
DATE: March 19, 2001 /s/ John J. Millerick
John J. Millerick
Senior Vice President,
Chief Financial Officer and
Treasurer (Principal Financial
and Accounting Officer)
17