1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 ON
FORM 10-Q/A
[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.
[X] Yes [ ] No
The number of shares of Common Stock outstanding at February 28, 2001 was
12,976,974.
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2
ANALOGIC CORPORATION
Analogic Corporation ("the Company") hereby amends its Form 10-Q for the
period ended January 31, 2001, filed with the Commission on March 16, 2001 for
the purpose of restating the carrying value of the Company's investment in
Shenzhen Anke High-Tech Co., Ltd (SAHCO) formerly known as Analogic Scientific,
Inc. The Company recently 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 and revenue recognition which had not been fully
evaluated.
Accordingly, during the quarter ended January 31, 2001, the Company
evaluated the potential differences in accounting basis and concluded that
adjustments were necessary for prior periods resulting in a reduction in the
Company's investment of SAHCO of $2,375,000 at July 31, 2000 (or $1,808,000 net
of tax effect) which reduced the carrying value of the Company's investment at
July 31, 2000 from $6,125,000 to $3,750,000.
Additionally, during the quarter ended January 31, 2001, the Company had
recognized its share of SAHCO's loss amounting to $1,100,000. After further
evaluation, the Company should have recognized a loss amounting to $1,350,000
(an additional $250,000) during the quarter ended January 31, 2001. After taking
into consideration the adjustments above (which includes an additional $550,000
reduction to the SAHCO investment from prior periods than previously reported)
and the additional loss during the quarter ended January 31, 2001, the carrying
value of the Company's investment of SAHCO at January 31, 2001 is reduced from
$3,750,000 to $2,400,000.
Also, 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 calendar quarters
financial information of SAHCO to adjust its investment account in the current
quarter, thereby resulting in a consistently applied calendar quarterly delay in
recording its equity-based accounting. Accordingly, the Company recognized its
share of SAHCO's previous calendar quarter profit of $414,000 (or $282,000 net
of tax effect) in the three months ended October 31, 2000 and adjusted the
beginning retained earnings by the $282,000. This change has no impact in fiscal
year 2000.
This amendment amends Part I (Item 1 and 2) of the quarterly report on Form
10-Q for the period ended January 31, 2001.
3
INDEX
PAGE
NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of January 31,
2001 and July 31, 2000................................ 2
Condensed Consolidated Statements of Income for the
Three and Six Months Ended January 31, 2001 and
2000.................................................. 3
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended January 31, 2001 and 2000............ 4
Notes to Unaudited Condensed Consolidated Financial
Statements............................................ 5-9
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition..................... 10-14
SIGNATURES................................................ 15
1
4
ANALOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
JULY 31,
JANUARY 31, 2000
2001 (NOTE 1)
----------- --------
RESTATED RESTATED
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 accounts $1,101 in fiscal 2001, and $1,010 in
fiscal 2000............................................. 63,290 63,437
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)........................................................ 3,893 4,855
Capitalized software, net................................... 5,602 5,368
Other assets................................................ 4,264 3,567
-------- --------
Total assets....................................... $340,300 $333,201
======== ========
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....................................... 2,440 2,519
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......................................... 273,172 266,127
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......................... 286,537 277,761
-------- --------
Total liabilities and stockholders' equity......... $340,300 $333,201
======== ========
The accompanying notes are an integral part of these financial statements.
2
5
ANALOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
RESTATED RESTATED
------------------- -------------------
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....... 950 760 139 1,809
Other, net............................................ 38 (154) 422 (47)
------- ------- -------- --------
(467) (771) (2,379) (1,253)
Income before income taxes and minority interest........ 6,666 1,792 13,601 5,481
Provision for income taxes.............................. 2,140 556 4,352 1,700
Minority interest in net income of consolidated
subsidiary............................................ 34 48 118 75
------- ------- -------- --------
Net income.............................................. $ 4,492 $ 1,188 $ 9,131 $ 3,706
======= ======= ======== ========
Earnings per common share (Note 6)
Basic................................................. $0.35 $0.09 $0.71 $0.29
Diluted............................................... $0.34 $0.09 $0.70 $0.29
The accompanying notes are an integral part of these financial statements.
3
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ANALOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JANUARY 31,
-------------------
RESTATED
2001 2000
-------- -------
OPERATING ACTIVITIES:
Net Income................................................ $ 9,131 $ 3,706
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes.................................. 821 (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............................................ 139 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.
4
7
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 filed with the Securities and Exchange Commission
on October 20, 2000, the Company's Form 10K/A as filed with the Securities and
Exchange Commission on December 12, 2000, and the Company's Form 10K/A, as
amended, as filed with the Securities and Exchange Commission on June 4, 2001.
The financial statements are unaudited and have not been examined by
independent certified public accountants. The consolidated balance sheet as of
July 31, 2000 contains data derived from audited financial statements.
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
======= =======
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 10.8%
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,
5
8
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
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 recently 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 and revenue recognition
which had not been fully evaluated. During the quarter ended January 31, 2001,
the Company evaluated the potential differences in accounting basis and
concluded that adjustments were necessary for prior periods resulting in a
reduction in the Company's investment of SAHCO of $2,375,000 (restated) at July
31, 2000 (or $1,808,000 (restated) net of tax effect) which reduced the carrying
value of the Company's investment at July 31, 2000 from $6,125,000 to $3,750,000
(restated).
Additionally, during the quarter ended January 31, 2001, the Company had
recognized its share of SAHCO's loss amounting to $1,100,000. After further
evaluation, the Company should have recognized a loss amounting to $1,350,000
(an additional $250,000) during the quarter ended January 31, 2001. After taking
into consideration the adjustments above (which includes an additional $550,000
reduction to the SAHCO investment from prior periods than previously reported)
and the additional loss during the quarter ended January 31, 2001, the carrying
value of the Company's investment of SAHCO at January 31, 2001 is reduced from
$3,750,000 to $2,400,000.
Also, 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 calendar quarters
financial information of SAHCO to adjust its investment account in the current
quarter, thereby resulting in a consistently applied calendar quarterly delay in
recording its equity-based accounting. As SAHCO uses a calendar fiscal year and
Analogic uses a July 31(st) fiscal year-end, Analogic will use SAHCO's first
calendar quarter financial information in Analogic's fourth fiscal quarter
results, SAHCO's second calendar quarter financial information in Analogic's
first fiscal quarter results, SAHCO's third calendar quarter financial
information in Analogic's second fiscal quarter results, and SAHCO's fourth
calendar quarter financial information in Analogic's third fiscal quarter
results. Accordingly, the Company recognized its share of SAHCO previous
calendar quarter profit of $414,000 (or $282,000 net of tax effect) in the three
months ended October 31, 2000 and adjusted the beginning retained earnings by
the $282,000. This change has no impact in fiscal year 2000.
6
9
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
This restatement resulted in the following changes to the investment in and
advances to affiliated companies account, retained earnings and to the
consolidated statements of income:
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
-------------------- ------------------
2001 2000 2001 2000
-------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Equity in net loss of unconsolidated affiliates
As restated................................... $ 950 $ 760 $ 139 $1,809
As reported................................... $ 700 $ 760 $ 303 $1,809
Provision for income taxes
As restated................................... $2,140 $ 556 $4,352 $1,700
As reported................................... $2,220 $ 556 $4,300 $1,700
Net income
As restated................................... $4,492 $1,188 $9,131 $3,706
As reported................................... $4,662 $1,188 $9,019 $3,706
Net income per share
As restated -- Basic.......................... $ 0.35 $ 0.09 $ 0.71 $ 0.29
As reported -- Basic.......................... $ 0.36 $ 0.09 $ 0.70 $ 0.29
As restated -- Diluted........................ $ 0.34 $ 0.09 $ 0.70 $ 0.29
As reported -- Diluted........................ $ 0.36 $ 0.09 $ 0.70 $ 0.29
JANUARY 31, JULY 31,
2001 2000
----------- --------
(IN THOUSANDS)
Retained earnings
As restated...................................... $273,172 $266,127
As reported...................................... $273,910 $267,935
Investments in and advances to affiliated companies
As restated...................................... $ 3,893 $ 4,855
As reported...................................... $ 4,893 $ 7,230
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
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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,
-------------------- ------------------
RESTATED RESTATED
2001 2000 2001 2000
-------- ------- -------- ------
(IN THOUSANDS) (IN THOUSANDS)
Net Income............................................... $4,492 $1,188 $ 9,131 $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............................... $6,140 $ 45 $10,029 $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,
-------------------------- --------------------------
RESTATED RESTATED
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net income............................... $ 4,492,000 $ 1,188,000 $ 9,131,000 $ 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................... $ 0.35 $ 0.09 $ 0.71 $ 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.................................. 13,005,191 12,844,314 12,968,328 12,818,278
=========== =========== =========== ===========
Net income per share..................... $ 0.34 $ 0.09 $ 0.70 $ 0.29
=========== =========== =========== ===========
8
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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
------- ------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
Revenues:
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
(restated):
Medical Instrumentation Technology Products........ $ 4,833 $ 986 $ 8,743 $ 2,757
Corporate and Other................................ 1,833 806 4,444 2,724
------- ------- -------- --------
Total................................................ $ 6,666 $ 1,792 $ 13,187 $ 5,481
------- ------- -------- --------
JANUARY 31, 2001 JULY 31, 2000
---------------- -------------
Identifiable Assets (Restated):
Medical Instrumentation Technology Products............... $211,891 $212,634
Corporate and Other, including Cash and Marketable
Securities............................................. 128,409 120,567
-------- --------
Total....................................................... $340,300 $333,201
-------- --------
9
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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.
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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 equity investment
loss from Shenzhen Anke High-Tech Co., Ltd. (formerly Analogic Scientific, Inc.)
was $936,000 (restated). 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 $9,131,000
(restated) 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 Shenzhen Anke High-Tech Co., Ltd., and the loss in
investment recognized on the value of restricted securities received from a
limited partnership.
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.
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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.
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 $1,350,000 (restated), 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 $4,492,000
(restated) or $.34 per diluted share as compared with $1,188,000 or $.09 per
share for the same period last year. The increase of $3,304,000 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. and the loss in investment recognized on the
value of restricted securities received from a limited partnership.
FINANCIAL CONDITION
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.
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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 10.8%
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.
The Company recently 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 and revenue recognition with had not been fully
evaluated.
During the quarter ended January 31, 2001, the Company evaluated the
potential differences in accounting basis and concluded that adjustments were
necessary for prior periods resulting in a reduction in the Company's investment
of SAHCO of $2,375,000 (restated) at July 31, 2000 (or $1,808,000 (restated) net
of tax effect) which reduced the carrying value of the Company's investment at
July 31, 2000 from $6,125,000 to $3,750,000 (restated).
Additionally, during the quarter ended January 31, 2001, the Company had
recognized its share of SAHCO's loss amounting to $1,100,000. After further
evaluation, the Company should have recognized a loss amounting to $1,350,000
(an additional $250,000) during the quarter ended January 31, 2001. After taking
into consideration the adjustments above (which includes an additional $550,000
reduction to the SAHCO investment from prior periods than previously reported)
and the additional loss during the quarter ended January 31, 2001, the carrying
value of the Company's investment of SAHCO at January 31, 2001 is reduced from
$3,750,000 to $2,400,000.
Also, 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 calendar quarters
financial information of SAHCO to adjust its investment account in the current
quarter, thereby resulting in a consistently applied calendar quarterly delay in
recording its equity-based accounting. Accordingly, the Company recognized its
share of SAHCO's previous calendar quarter profit of $414,000 (or $282,000 net
of tax effect) in the three months ended October 31, 2000 and adjusted the
beginning retained earnings by the $282,000. This change has no impact in fiscal
year 2000.
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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.
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ANALOGIC CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
ANALOGIC CORPORATION
Registrant
/s/ JOHN J. MILLERICK
--------------------------------------
John J. Millerick
Senior Vice President,
Chief Financial Officer and
Treasurer (Principal Financial
and Accounting Officer)
Date: June 4, 2001
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