e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended October 31, 2005 |
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or |
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
from to |
Commission file number 0-6715
Analogic Corporation
(Exact name of registrant as specified in its charter)
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Massachusetts
(State or other jurisdiction
of incorporation or organization) |
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04-2454372
(I.R.S. Employer
Identification No.) |
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8 Centennial Drive,
Peabody, Massachusetts
(Address of principal executive offices)
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01960
(Zip Code) |
(978) 977-3000
(Registrants 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 þ No o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange
Act). Yes þ No o
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act.) Yes o No þ
The number of shares of Common Stock outstanding at
November 30, 2005 was 13,828,390.
ANALOGIC CORPORATION
TABLE OF CONTENTS
2
Part I. FINANCIAL INFORMATION
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Item 1. |
Financial Statements |
ANALOGIC CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
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October 31, | |
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July 31, | |
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2005 | |
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2005 | |
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ASSETS |
Current assets:
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Cash and cash equivalents
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$ |
207,189 |
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$ |
208,116 |
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Marketable securities, at fair value
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10,921 |
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12,338 |
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Accounts and notes receivable, net of allowance for doubtful
accounts of $1,164 at October 31, 2005, and $1,973 at
July 31, 2005
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45,849 |
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50,978 |
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Inventories
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68,509 |
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63,604 |
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Costs related to deferred revenue
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918 |
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1,300 |
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Refundable and deferred income taxes
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12,895 |
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11,657 |
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Other current assets
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6,964 |
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6,729 |
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Current assets of discontinued operations (Note 2)
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41,364 |
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41,939 |
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Total current assets
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394,609 |
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396,661 |
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Property, plant and equipment, net
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79,191 |
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79,442 |
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Investments in and advances to affiliated companies
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413 |
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983 |
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Capitalized software, net
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8,347 |
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8,463 |
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Intangible assets, net
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3,293 |
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3,688 |
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Other assets
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5,310 |
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5,579 |
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Deferred income taxes
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2,851 |
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1,889 |
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Total Assets
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$ |
494,014 |
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$ |
496,705 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
Current liabilities:
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Accounts payable, trade
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$ |
26,596 |
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$ |
20,833 |
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Accrued liabilities
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18,352 |
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19,620 |
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Deferred revenue
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7,464 |
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6,114 |
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Advance payments
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1,313 |
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8,273 |
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Accrued income taxes
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8,313 |
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11,167 |
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Current liabilities of discontinued operations (Note 2)
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29,795 |
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30,627 |
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Total current liabilities
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91,833 |
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96,634 |
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Long-term liabilities:
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Deferred income taxes
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1,366 |
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914 |
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Total long-term liabilities
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1,366 |
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914 |
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Commitments and guarantees (Note 14)
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Stockholders equity:
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Common stock, $.05 par value
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715 |
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715 |
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Capital in excess of par value
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48,736 |
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47,057 |
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Retained earnings
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348,735 |
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348,499 |
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Accumulated other comprehensive income
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2,629 |
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2,886 |
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Total stockholders equity
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400,815 |
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399,157 |
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Total Liabilities and Stockholders Equity
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$ |
494,014 |
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$ |
496,705 |
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The accompanying notes are an integral part of these unaudited
consolidated financial statements.
3
ANALOGIC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
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Three Months Ended | |
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October 31, | |
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2005 | |
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2004 | |
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Net revenue:
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Product
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$ |
79,721 |
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$ |
67,125 |
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Engineering
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3,812 |
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5,240 |
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Other
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2,877 |
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2,765 |
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Total net revenue
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86,410 |
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75,130 |
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Cost of sales:
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Product
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49,002 |
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41,848 |
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Engineering
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5,733 |
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4,062 |
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Other
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1,386 |
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1,438 |
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Total cost of sales
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56,121 |
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47,348 |
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Gross margin
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30,289 |
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27,782 |
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Operating expenses:
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Research and product development
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13,027 |
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11,674 |
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Selling and marketing
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7,354 |
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6,719 |
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General and administrative
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8,664 |
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9,215 |
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Restructuring and asset impairment charges
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1,025 |
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30,070 |
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27,608 |
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Income from operations
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219 |
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174 |
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Other (income) expense:
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Interest income
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(2,033 |
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(864 |
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Interest expense
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2 |
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Equity (gain) loss in unconsolidated affiliates
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570 |
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(127 |
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Other
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157 |
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(608 |
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(1,306 |
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(1,597 |
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Income from continuing operations before income taxes and
cumulative effect of change in accounting principle
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1,525 |
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1,771 |
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Provision for income taxes
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462 |
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293 |
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Income from continuing operations before discontinued operations
and cumulative effect of change in accounting principle
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1,063 |
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1,478 |
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Income (loss) from discontinued operations (net of income taxes
(benefit) of $126 in 2005, and ($274) in 2004.)
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159 |
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(1,313 |
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Cumulative effect of change in accounting principle (net of
income tax of $61 in 2005.)
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120 |
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Net income
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$ |
1,342 |
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$ |
165 |
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Basic earnings (loss) per share:
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Income from continuing operations
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$ |
0.08 |
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$ |
0.11 |
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Income (loss) from discontinued operations, net of tax
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0.01 |
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(0.10 |
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Cumulative effect of change in accounting principle, net of tax
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0.01 |
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Net Income
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$ |
0.10 |
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$ |
0.01 |
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Diluted earnings (loss) per share:
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Income from continuing operations
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$ |
0.08 |
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$ |
0.11 |
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Income (loss) from discontinued operations, net of tax
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0.01 |
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(0.10 |
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Cumulative effect of change in accounting principle, net of tax
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0.01 |
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Net Income
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$ |
0.10 |
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$ |
0.01 |
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Weighted average shares outstanding:
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Basic
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13,631 |
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13,521 |
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Diluted
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13,734 |
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13,546 |
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The accompanying notes are an integral part of these unaudited
consolidated financial statements.
4
ANALOGIC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Three Months Ended | |
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October 31, | |
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2005 | |
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2004 | |
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OPERATING ACTIVITIES:
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Net income
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$ |
1,342 |
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$ |
165 |
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Income (loss) from discontinued operations
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159 |
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(1,313 |
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Income from continuing operations and cumulative effect of
change in accounting principle
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1,183 |
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1,478 |
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Deferred income taxes
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3,214 |
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244 |
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Depreciation and amortization
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3,948 |
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4,203 |
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Cumulative effect of change in accounting principle
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(120 |
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Allowance for doubtful accounts
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30 |
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49 |
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(Gain) loss on sale of property, plant, and equipment
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5 |
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(1 |
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Equity (gain) loss in unconsolidated affiliates
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570 |
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(127 |
) |
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Equity loss in unconsolidated affiliate classified as research
and product development expense
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759 |
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Restructuring and asset impairment charges
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2,204 |
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Non-cash share-based compensation expense
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954 |
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526 |
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Excess tax benefit from share-based compensation
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(17 |
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Net changes in operating assets and liabilities (Note 11)
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(10,271 |
) |
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12,652 |
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NET CASH PROVIDED BY CONTINUING OPERATIONS
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1,700 |
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19,783 |
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NET CASH PROVIDED BY DISCONTINUED OPERATIONS
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385 |
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4,595 |
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NET CASH PROVIDED BY OPERATING ACTIVITIES
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2,085 |
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24,378 |
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INVESTING ACTIVITIES:
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Investments in and advances to affiliated companies
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(216 |
) |
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(607 |
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Additions to property, plant and equipment
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(3,168 |
) |
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(3,149 |
) |
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Capitalized software
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(250 |
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(1,578 |
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Proceeds from sale of property, plant and equipment
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71 |
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(1 |
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Maturities of marketable securities
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1,360 |
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5,345 |
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NET CASH (USED FOR) PROVIDED BY CONTINUING OPERATIONS
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(2,203 |
) |
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10 |
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NET CASH USED FOR DISCONTINUED OPERATIONS
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(478 |
) |
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(653 |
) |
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NET CASH USED FOR INVESTING ACTIVITIES
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(2,681 |
) |
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(643 |
) |
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FINANCING ACTIVITIES:
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Issuance of stock pursuant to exercise of stock options and
employee stock purchase plan
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|
798 |
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|
228 |
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Excess tax benefit from share-based compensation
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|
17 |
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Dividends paid to shareholders
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(1,106 |
) |
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NET CASH (USED FOR) PROVIDED BY CONTINUING OPERATIONS
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|
(291 |
) |
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|
228 |
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NET CASH USED FOR DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
(743 |
) |
|
|
|
|
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NET CASH USED FOR FINANCING ACTIVITIES
|
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|
(291 |
) |
|
|
(515 |
) |
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|
|
|
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EFFECT OF EXCHANGE RATE CHANGES ON CASH OF CONTINUING OPERATIONS
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|
(64 |
) |
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|
(700 |
) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH OF DISCONTINUED
OPERATIONS
|
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|
24 |
|
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|
98 |
|
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(40 |
) |
|
|
(602 |
) |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(927 |
) |
|
|
22,618 |
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
208,116 |
|
|
|
149,549 |
|
|
|
|
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CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$ |
207,189 |
|
|
$ |
172,167 |
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
Income taxes, net
|
|
$ |
6,450 |
|
|
$ |
886 |
|
|
|
Interest
|
|
|
4 |
|
|
|
16 |
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
5
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
|
|
1. |
Basis of presentation: |
The unaudited 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
accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of
management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair statement of the
results for all interim periods presented. The results of
operations for the three months ended October 31, 2005, are
not necessarily indicative of the results to be expected for the
fiscal year ending July 31, 2006, or any other interim
period. These statements should be read in conjunction with the
consolidated financial statements and notes thereto for the
fiscal year ended July 31, 2005, included in the
Companys Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on October 14, 2005. The
consolidated balance sheet as of July 31, 2005, contains
data derived from audited financial statements.
Certain financial statement items have been reclassified to
conform to the current period presentation.
|
|
2. |
Discontinued operations: |
Prior to the end of the quarter, the Companys board of
directors approved an agreement to sell its wholly owned
subsidiary Camtronics Medical Systems, Ltd.
(Camtronics) for $40,000 in cash. The sale was
completed on November 1, 2005. Previously, Camtronics had
been reported as a separate segment. The Company sold its
Camtronics operating segment to better focus on its other core
lines of business. This business has been reported as a
discontinued operation in accordance with
SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, and all periods
presented have been restated accordingly to reflect these
operations as discontinued. As part of the terms of the
definitive agreement, the Company retained all of the cash and
inter-company balances of Camtronics as of the closing date.
Revenues for Camtronics for the three months ended
October 31, 2005 and 2004 were $11,495 and $8,961,
respectively. The results of discontinued operations for the
three months ending October 31, 2005 and 2004 for
Camtronics were a net income of $159 and a net loss of $1,313,
respectively. The Company expects to recover all of its net
assets sold and expects to record a gain on the transaction
effective upon consummation on November 1, 2005.
The following represents a detail of the current assets and
liabilities of discontinued operations:
|
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|
|
|
|
|
|
|
|
|
October 31, | |
|
July 31, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
Current assets of discontinued operations:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$ |
5,723 |
|
|
$ |
5,635 |
|
Inventories
|
|
|
6,036 |
|
|
|
6,422 |
|
Costs related to deferred revenue
|
|
|
10,912 |
|
|
|
11,771 |
|
Deferred income taxes
|
|
|
4,086 |
|
|
|
3,271 |
|
Other current assets
|
|
|
685 |
|
|
|
651 |
|
Property, plant and equipment, net
|
|
|
7,737 |
|
|
|
8,112 |
|
Capitalized software, net
|
|
|
4,365 |
|
|
|
4,048 |
|
Goodwill
|
|
|
746 |
|
|
|
746 |
|
Intangible assets, net
|
|
|
1,074 |
|
|
|
1,283 |
|
|
|
|
|
|
|
|
|
|
$ |
41,364 |
|
|
$ |
41,939 |
|
|
|
|
|
|
|
|
6
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
October 31, | |
|
July 31, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
Current liabilities of discontinued operations:
|
|
|
|
|
|
|
|
|
Note payable
|
|
$ |
42 |
|
|
$ |
42 |
|
Obligations under capital leases
|
|
|
121 |
|
|
|
162 |
|
Account payable, trade
|
|
|
2,138 |
|
|
|
1,699 |
|
Accrued liabilities
|
|
|
3,129 |
|
|
|
2,824 |
|
Deferred revenue
|
|
|
21,406 |
|
|
|
22,667 |
|
Advance payments
|
|
|
2,017 |
|
|
|
1,950 |
|
Accrued income taxes
|
|
|
12 |
|
|
|
|
|
Deferred income taxes
|
|
|
486 |
|
|
|
850 |
|
Accumulated other comprehensive income
|
|
|
444 |
|
|
|
433 |
|
|
|
|
|
|
|
|
|
|
$ |
29,795 |
|
|
$ |
30,627 |
|
|
|
|
|
|
|
|
Effective August 1, 2005, the Company adopted the
provisions of Statement of Financial Accounting Standards
No. 123(R) (SFAS No. 123(R)),
Share-Based Payment, which establishes
accounting for equity instruments exchanged for employee
services. Under the provisions of SFAS No. 123(R),
share-based compensation cost is measured at the grant date,
based on the fair value of the award, and is recognized as an
expense over the employees requisite service period
(generally the vesting period of the equity grant). Prior to
August 1, 2005, the Company accounted for share-based
compensation to employees in accordance with Accounting
Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related
interpretations. The Company also followed the disclosure
requirements of Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123). The
Company elected to adopt the modified prospective transition
method as provided by SFAS No. 123(R) and,
accordingly, financial statement amounts for the prior periods
presented in this Form 10-Q have not been restated to
reflect the fair value method of expensing share-based
compensation.
The following table presents share-based compensation expenses
for continuing operations included in the Companys
unaudited consolidated statements of operations:
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
2005 | |
|
|
| |
Cost of product sales
|
|
$ |
80 |
|
Research and product development
|
|
|
280 |
|
Selling and marketing
|
|
|
67 |
|
General and administrative
|
|
|
527 |
|
|
|
|
|
|
Share-based compensation expense before tax
|
|
|
954 |
|
Provision for income tax
|
|
|
166 |
|
|
|
|
|
|
Net share-based compensation expense
|
|
$ |
788 |
|
|
|
|
|
As a result of adopting FAS 123(R), the Companys
income before income taxes and net income for the quarter ended
October 31, 2005, are $564 and $537 lower, respectively,
than if it had continued to account for share-based compensation
under APB 25. Basic and diluted earnings per share for the
quarter
7
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
ended October 31, 2005 would have been $0.14, if the
Company had not adopted FAS 123(R), compared to reported
basic and diluted earnings per share of $0.10.
Prior to adoption of FAS 123(R), the Company presented all
tax benefits resulting from the exercise of stock options as
operating cash flows in the Statements of Cash Flows.
FAS 123(R) requires the cash flows resulting from the tax
benefits resulting from tax deductions in excess of the
compensation cost recognized for the options (excess tax
benefits) to be classified as financing cash flows. The
$17 tax benefit classified as a financing cash flow would
have been classified as an operating cash flow if the Company
had not adopted FAS 123(R).
The Company estimates the fair value of stock options using the
Black-Scholes valuation model. Key input assumptions used to
estimate the fair value of stock options include the exercise
price of the award, the expected option term, the expected
volatility of the Companys stock over the options
expected term, the risk-free interest rate over the
options expected term, and the Companys expected
annual dividend yield. The Company believes that the valuation
technique and the approach utilized to develop the underlying
assumptions are appropriate in calculating the fair values of
the Companys stock options granted in the three months
ended October 31, 2005. Estimates of fair value are not
intended to predict actual future events or the value ultimately
realized by persons who receive equity awards.
The fair value of each option grant was estimated on the grant
date using the Black-Scholes option-pricing model with the
following assumptions:
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
2005 | |
|
|
| |
Expected option term(1)
|
|
|
5.25 years |
|
Expected volatility factor(2)
|
|
|
30 |
% |
Risk-free interest rate(3)
|
|
|
3.94 |
% |
Expected annual dividend yield
|
|
|
.7 |
% |
|
|
(1) |
The option life was determined using the simplified method for
estimating expected option life, which qualify as
plain-vanilla options. |
|
(2) |
The stock volatility for each grant is determined based on the
review of the experience of the weighted average of historical
weekly price changes of the Companys common stock over the
most recent five years, which approximates the expected option
life of the grant of 5.25 years, |
|
(3) |
The risk-free interest rate for periods equal to the expected
term of the share option is based on the U.S. Treasury yield
curve in effect at the time of grant. |
The Company did not recognize compensation expense for employee
stock option grants for the three months ended October 31,
2004, when the exercise price of the Companys employee
stock options equaled the market price of the underlying stock
on the date of grant.
The Company has recognized compensation expense for its
restricted stock grants. Upon adoption of SFAS 123(R),
using the modified prospective method, the Company recognized a
benefit of $181 ($120 after tax) as a cumulative effect of a
change in accounting principle resulting from the requirement to
estimate forfeitures of the Companys restricted stock
grants at the date of grant instead of recognizing them as
incurred. The estimated forfeiture rate was applied to the
previously recorded compensation expense of the Companys
unvested restricted stock in determining the cumulative effect
of a change in accounting principle. The cumulative benefit, net
of tax, increased both basic and diluted earnings per share by
$0.01.
8
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
The Company had previously adopted the provisions of
SFAS No. 123, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation
Transition and Disclosure through disclosure only. The
following table illustrates the effects on net income and
earnings per share for the three months ended October 31,
2004 as if the Company had applied the fair value recognition
provisions of SFAS 123 to share-based employee awards.
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
2004 | |
|
|
| |
Net income from continuing operations, as reported:
|
|
$ |
1,478 |
|
Add: Employee compensation expense for options included in
reported net income
|
|
|
472 |
|
Less: Total employee compensation expense for options determined
under the fair value method
|
|
|
(1,199 |
) |
|
|
|
|
Pro forma net income from continuing operations
|
|
$ |
751 |
|
|
|
|
|
Earnings per share from continuing operations:
|
|
|
|
|
Basic as reported
|
|
$ |
0.11 |
|
pro forma
|
|
|
0.06 |
|
Diluted as reported
|
|
$ |
0.11 |
|
pro-forma
|
|
|
0.05 |
|
The fair value of each option grant was estimated on the grant
date using the Black-Scholes option pricing model with the
following assumptions:
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
2004 | |
|
|
| |
Expected term
|
|
|
5 years |
|
Volatility
|
|
|
40 |
% |
Risk-free interest rate
|
|
|
3.23 |
% |
Dividend yield
|
|
|
.8 |
% |
At October 31, 2005, the Company had two key employee stock
option plans (one of which has lapsed as to the granting of
options), two key employee stock bonus plans, two non-employee
director stock option plans (one of which has lapsed as to the
granting of options), and one employee stock purchase plan.
Options granted under the two key employee stock option plans
generally become exercisable in installments commencing no
earlier than two years from the date of grant and ending no
later than six years from the date of grant. Unexercised options
expire up to seven years from date of grant. Options issued
under the plans are non-qualified options or incentive stock
options and are issued at prices of not less than 100% of the
fair market value of the common stock at the date of grant.
Options granted under the two non-employee director stock option
plans become exercisable in equal installments over three years
commencing one year from the date of grant and remain
exercisable for ten years from the date of grant. Options issued
under the plans are non-qualified options and are issued at
prices of 100% of the fair market value of the common stock at
the date of grant.
Under the Companys key employee stock bonus plans,
restricted common stock may be granted to key employees under
terms and conditions as determined by the Board of Directors.
Generally, participants
9
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
under the stock bonus plans may not dispose or otherwise
transfer stock granted for three years from date of grant. Stock
granted under these plans generally vest in four equal
installments beginning in the third year from the date of grant.
Under the employee stock purchase plan, eligible participants
are granted options to purchase the Companys common stock
twice a year at the lower of 85% of market value at the
beginning or end of each period. Calculation of the number of
options granted, and subsequent purchase of these shares, is
based upon voluntary payroll deductions during each six-month
period. The number of options granted to each employee under
this plan, when combined with options issued under other plans,
is limited to a maximum outstanding value of $25 during each
calendar year.
The fair value of each option granted under the employee stock
purchase plan was estimated on the expected grant date using the
Black-Scholes option pricing model with the following
assumptions:
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
2005 | |
|
|
| |
Expected term
|
|
|
.5 years |
|
Volatility
|
|
|
25 |
% |
Risk-free interest rate
|
|
|
3.94 |
% |
Dividend yield
|
|
|
.7 |
% |
At October 31, 2005, 993,039 shares were reserved for
grant under the above stock option, bonus and purchase plans.
The following table sets forth the stock option transactions
from July 31, 2004 to the present:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock | |
|
|
Options Outstanding | |
|
Grants Outstanding | |
|
|
| |
|
| |
|
|
|
|
Weighted | |
|
|
|
|
|
|
Weighted | |
|
Average | |
|
|
|
Weighted | |
|
|
|
|
Average | |
|
Remaining | |
|
|
|
Average | |
|
|
Number of | |
|
Exercise | |
|
Contractual | |
|
Number of | |
|
Grant Date | |
|
|
Shares | |
|
Price | |
|
Term | |
|
Shares | |
|
Fair Value | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Outstanding at July 31, 2005
|
|
|
678,324 |
|
|
|
41.71 |
|
|
|
4.31 |
|
|
|
188,345 |
|
|
|
43.36 |
|
Granted
|
|
|
13,600 |
|
|
|
48.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(20,201 |
) |
|
|
37.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,833 |
) |
|
|
51.27 |
|
Cancelled
|
|
|
(3,000 |
) |
|
|
46.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 31, 2005
|
|
|
668,723 |
|
|
|
41.96 |
|
|
|
4.17 |
|
|
|
185,512 |
|
|
|
43.48 |
|
10
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
The following table summarizes information about stock options
outstanding at October 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding | |
|
Vested Options | |
|
|
| |
|
| |
|
|
|
|
Weighted | |
|
|
|
|
|
Weighted | |
|
|
Number of | |
|
Average of | |
|
Weighted | |
|
|
|
Average | |
|
|
Shares | |
|
Remaining | |
|
Average | |
|
Number | |
|
Exercise | |
Range of Exercise Prices |
|
Outstanding | |
|
Contract Life | |
|
Exercise Price | |
|
Exercisable | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
$27.75 - $40.39
|
|
|
215,914 |
|
|
|
2.79 |
|
|
$ |
36.88 |
|
|
|
163,152 |
|
|
$ |
35.99 |
|
40.95 - 42.04
|
|
|
177,500 |
|
|
|
5.52 |
|
|
|
41.33 |
|
|
|
24,251 |
|
|
|
41.19 |
|
42.48 - 47.00
|
|
|
170,559 |
|
|
|
3.83 |
|
|
|
43.73 |
|
|
|
90,299 |
|
|
|
43.62 |
|
48.54 - 52.20
|
|
|
104,750 |
|
|
|
5.25 |
|
|
|
50.58 |
|
|
|
20,745 |
|
|
|
51.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27.75 - 52.20
|
|
|
668,723 |
|
|
|
4.17 |
|
|
|
41.96 |
|
|
|
298,447 |
|
|
|
39.77 |
|
The following table summarizes the status of the Companys
non-vested options since July 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested Restricted | |
|
|
|
|
Stock Grants | |
|
|
Non-Vested Options | |
|
| |
|
|
| |
|
|
|
Weighted | |
|
|
|
|
Weighted | |
|
|
|
Average | |
|
|
Number of | |
|
Average | |
|
Number of | |
|
Grant Date | |
|
|
Shares | |
|
Fair Value | |
|
Shares | |
|
Fair Value | |
|
|
| |
|
| |
|
| |
|
| |
Non-vested at July 31, 2005
|
|
|
425,409 |
|
|
|
16.97 |
|
|
|
188,345 |
|
|
|
43.36 |
|
Granted
|
|
|
13,600 |
|
|
|
15.53 |
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(65,983 |
) |
|
|
16.88 |
|
|
|
(2,833 |
) |
|
|
51.27 |
|
Forfeited
|
|
|
(2,750 |
) |
|
|
17.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at October 31, 2005
|
|
|
370,276 |
|
|
|
16.91 |
|
|
|
185,512 |
|
|
|
43.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2005, there was $8,668 of total
unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under the Companys stock
plans. That cost is expected to be recognized over a
weighted-average period of 4.5 years.
Cash received from option exercises under all share based
payment arrangements for the quarter ended October 31, 2005
was $770. The actual tax benefit realized for the tax deductions
from option exercise of the share-based payment arrangements
totaled $53.
|
|
4. |
Restructuring and asset impairment charges: |
During the three months ended October 31, 2005, the Company
recorded restructuring and asset impairment charges as an
operating expense in the Companys Unaudited Consolidated
Statements of Operations as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
2005 | |
|
|
| |
Medical Technology Products:
|
|
|
|
|
|
Medical Imaging Products:
|
|
|
|
|
|
|
PhotoDetection Systems, Inc.
|
|
$ |
216 |
|
Corporate and other:
|
|
|
|
|
|
SKY Computers, Inc.
|
|
|
809 |
|
|
|
|
|
Total
|
|
$ |
1,025 |
|
|
|
|
|
11
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
|
|
|
PhotoDetection Systems Inc. |
On May 21, 2003, the Company acquired 1,251,313 shares
of Series B Convertible Participating Preferred Stock for
an equity interest of approximately 11% in PhotoDetection
Systems Inc. (PDS) of Acton Massachusetts. PDS, a
privately held company, has developed proprietary detection
systems for high-performance Positron Tomography, a rapidly
growing medical diagnostic imaging modality. Since the second
quarter of fiscal year 2005, the Company had been accounting for
this investment under the cost method of accounting in
accordance with EITF 02-14, Whether an Investor
Should Apply the Equity Method of Accounting to Investments
Other Than Common Stock. The Company reviewed this
investment for other-than-temporary impairment in accordance
with Financial Accounting Standard No. 115,
Accounting for Certain Investments in Debt and Equity
Security and determined that at October 31, 2005,
its investment in PDS was impaired based on its current fair
value, and therefore, recorded an asset impairment charge of
$216 in the quarter ended October 31, 2005. At
October 31, 2005, the Companys investment in PDS was
recorded, net of impairment charges, at $0 value.
In September 2005, the Company announced a plan to restructure
the business operations of its wholly-owned subsidiary, SKY
Computers, Inc.. The decision to restructure SKY was based on
continued lower than expected sales. SKYs manufacturing
and service capability will be maintained in order to service
its commitments to its existing customers. The restructuring
plan involves (1) the termination of approximately 36
employees most of whom have been engaged in product development,
sales, and administrative activities; (2) the write-down of
certain capital assets; and (3) the write-down of certain
inventory. The severance and the write-down of capital assets
charges have been recorded within the operating expenses in the
Unaudited Consolidated Statements of Operations under the
caption Restructuring and asset impairment charges
while the write-down of inventory is recorded in the Unaudited
Consolidated Statements of Operations within product cost of
sales. In accordance with SFAS No. 146,
Accounting for Costs Associated with Exit Disposal
Activities, these charges are recorded when a
liability is incurred.
A summary of the charges is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended October 31, 2005 | |
|
|
| |
|
|
Involuntary | |
|
Capital Assets | |
|
|
|
Inventory | |
|
|
|
|
Employee Severance | |
|
Abandoned | |
|
Sub-Total | |
|
Impairment | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash expensed
|
|
$ |
15 |
|
|
$ |
|
|
|
$ |
15 |
|
|
$ |
|
|
|
$ |
15 |
|
Accrual/non-cash
|
|
|
484 |
|
|
|
310 |
|
|
|
794 |
|
|
|
1,179 |
|
|
|
1,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$ |
499 |
|
|
$ |
310 |
|
|
$ |
809 |
|
|
$ |
1,179 |
|
|
$ |
1,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company estimates that an additional $404 of
personnel-related charges for separate employees who have
minimum retention periods of more than 60 days will be
incurred and recorded as period costs, during the remainder of
fiscal year 2006, which represents the future service period.
The cash expenditures subsequent to the quarter ended
October 31, 2005 will approximate $888 in personnel-related
charges.
These restructuring and asset impairment charges are related to
the Corporate and other segment.
12
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
|
|
5. |
Balance sheet information: |
Additional information for certain balance sheet accounts is as
follows for the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, | |
|
July 31, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
Inventories:
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$ |
40,070 |
|
|
$ |
37,461 |
|
|
Work-in-process
|
|
|
16,589 |
|
|
|
15,275 |
|
|
Finished goods
|
|
|
11,850 |
|
|
|
10,868 |
|
|
|
|
|
|
|
|
|
|
$ |
68,509 |
|
|
$ |
63,604 |
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
|
Accrued employee compensation and benefits
|
|
$ |
9,896 |
|
|
$ |
9,817 |
|
|
Accrued warranty
|
|
|
4,186 |
|
|
|
4,057 |
|
|
Other
|
|
|
4,270 |
|
|
|
5,746 |
|
|
|
|
|
|
|
|
|
|
$ |
18,352 |
|
|
$ |
19,620 |
|
|
|
|
|
|
|
|
Advance payments:
|
|
|
|
|
|
|
|
|
|
Long-lead time components(A)
|
|
$ |
|
|
|
$ |
6,170 |
|
|
Ramp-up funds
|
|
|
475 |
|
|
|
475 |
|
|
Customer deposits
|
|
|
838 |
|
|
|
1,628 |
|
|
|
|
|
|
|
|
|
|
$ |
1,313 |
|
|
$ |
8,273 |
|
|
|
|
|
|
|
|
|
|
(A) |
Long-lead time components represents advance payments received
from L-3 Communications based on certain orders received for the
Companys EXACT systems. |
|
|
6. |
Investments in and advances to affiliated companies: |
Summarized results of operations of the Companys partially
owned equity affiliates, Shenzen Anke High-Tech Co. Ltd.
(SAHCO) for the three months ended October 31,
2005 and 2004, and Cedara Software Corporation for the three
months ended October 31, 2004 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Net revenue
|
|
$ |
3,830 |
|
|
$ |
13,412 |
|
Gross margin
|
|
|
1,352 |
|
|
|
8,964 |
|
Income (loss) from operations
|
|
|
(909 |
) |
|
|
937 |
|
Net income (loss)
|
|
|
(1,214 |
) |
|
|
1,116 |
|
Intangible assets at October 31, 2005 and July 31,
2005, which will continue to be amortized, consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2005 | |
|
July 31, 2005 | |
|
|
| |
|
| |
|
|
|
|
Accumulated | |
|
|
|
|
|
Accumulated | |
|
|
|
|
Cost | |
|
Amortization | |
|
Net | |
|
Cost | |
|
Amortization | |
|
Net | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Intellectual Property
|
|
$ |
8,264 |
|
|
$ |
4,971 |
|
|
$ |
3,293 |
|
|
$ |
8,264 |
|
|
$ |
4,576 |
|
|
$ |
3,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
Amortization expense related to acquired intangible assets was
$405 and $402 for the three months ended October 31, 2005
and 2004, respectively. Amortization lives of intangibles range
from two to five years.
The estimated future amortization expense related to intangible
assets in the current fiscal year, and each of the three
succeeding fiscal years, is expected to be as follows:
|
|
|
|
|
2006 (Remaining nine months)
|
|
$ |
1,230 |
|
2007
|
|
|
1,643 |
|
2008
|
|
|
399 |
|
2009
|
|
|
21 |
|
|
|
|
|
|
|
$ |
3,293 |
|
|
|
|
|
Basic earnings per share are computed using the weighted average
number of common shares outstanding during the period. Diluted
earnings per share are computed using the sum of the weighted
average number of common shares outstanding during the period
and, if dilutive, the weighted average number of potential
shares of common stock, including unvested restricted stock and
the assumed exercise of stock options using the treasury stock
method.
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Income from continuing operations
|
|
$ |
1,063 |
|
|
$ |
1,478 |
|
Income (loss) from discontinued operations, net of tax
|
|
|
159 |
|
|
|
(1,313 |
) |
Cumulative effect of change in accounting principle, net of tax
|
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
1,342 |
|
|
$ |
165 |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding-basic
|
|
|
13,631 |
|
|
|
13,521 |
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock
|
|
|
103 |
|
|
|
25 |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding-diluted
|
|
|
13,734 |
|
|
|
13,546 |
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$ |
.008 |
|
|
$ |
0.11 |
|
|
From discontinued operations
|
|
|
0.01 |
|
|
|
(0.10 |
) |
|
Cumulative effect of change in accounting principle
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.10 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$ |
0.08 |
|
|
$ |
0.11 |
|
|
From discontinued operations
|
|
|
0.01 |
|
|
|
(0.10 |
) |
|
Cumulative effect of change in accounting principle
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.10 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
Anti-dilutive shares related to outstanding stock options
|
|
|
303 |
|
|
|
469 |
|
The Company declared a dividend of $.08 per common share on
September 20, 2005, payable on October 18, 2005 to
shareholders of record on October 4, 2005.
14
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
|
|
10. |
Comprehensive income: |
Components of comprehensive income include net income and
certain transactions that have generally been reported in the
consolidated Statement of Stockholders Equity. The
following table presents the calculation of total comprehensive
income and its components:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Income from continuing operations
|
|
$ |
1,063 |
|
|
$ |
1,478 |
|
Income (loss) from discontinued operations, net of tax
|
|
|
159 |
|
|
|
(1,313 |
) |
Cumulative effect of change in accounting principle, net of tax
|
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,342 |
|
|
|
165 |
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
Unrealized losses from marketable securities, net of tax benefit
of $22 and $52, for the three months ended October 31, 2005
and 2004, respectively
|
|
|
(35 |
) |
|
|
(81 |
) |
|
Foreign currency translation adjustment, net of tax benefit of
$182 and taxes of $976 for the three months ended
October 31, 2005 and 2004, respectively
|
|
|
(211 |
) |
|
|
1,490 |
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$ |
1,096 |
|
|
$ |
1,574 |
|
|
|
|
|
|
|
|
|
|
11. |
Supplemental disclosure of cash flow information: |
Changes in operating assets and liabilities, net of the impact
of acquisitions, from continuing operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Accounts and notes receivable
|
|
$ |
5,151 |
|
|
$ |
4,071 |
|
Refundable income taxes
|
|
|
(4,918 |
) |
|
|
|
|
Accounts receivable from affiliates
|
|
|
(26 |
) |
|
|
88 |
|
Inventories
|
|
|
(6,059 |
) |
|
|
(31 |
) |
Costs related to deferred revenue
|
|
|
388 |
|
|
|
103 |
|
Other current assets
|
|
|
(379 |
) |
|
|
(390 |
) |
Other assets
|
|
|
5 |
|
|
|
3 |
|
Accounts payable, trade
|
|
|
5,741 |
|
|
|
2,079 |
|
Accrued liabilities
|
|
|
(1,238 |
) |
|
|
(241 |
) |
Advance payments and deferred revenue
|
|
|
(5,609 |
) |
|
|
6,980 |
|
Accrued income taxes
|
|
|
(3,327 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
Net changes in operating assets and liabilities
|
|
$ |
(10,271 |
) |
|
$ |
12,652 |
|
|
|
|
|
|
|
|
The effective tax rate for continuing operations for the first
quarter of fiscal 2006 and fiscal 2005 was 30.3% and 16.5%
respectively. The effective tax rate for discontinued operations
for the first quarter of fiscal 2006 and fiscal 2005 was 44.2%
and 17.3% respectively. The higher effective rates in fiscal
2006 are largely the result of higher income, non-deductible
incentive stock option expense, and reductions in the amount of
federal and state research and development credits.
15
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
The Company operates primarily within two major markets within
the electronics industry: Medical Technology Products and
Security Technology Products. Medical Technology Products
consist of two reporting segments: Medical Imaging Products
which consist primarily of electronic systems and subsystems for
medical imaging equipment and patient monitoring; and B-K
Medical ApS (B-K Medical) for ultrasound systems and
probes in the urology, surgery and radiology markets. Security
Technology Products consist of advanced weapon and threat
detection systems and subsystems.
The Companys Corporate and Other represents the
Companys hotel business, net interest income, and other
Company operations, primarily analog to digital (A/ D)
converters and supporting modules, and embedded multi-processing
equipment, which do not meet the materiality requirements for
separate disclosure. The accounting policies of the segments are
the same as those described in the summary of Significant
Accounting Policies included in Note 1 of Notes to
Consolidated Financial Statements in the Companys annual
report on Form 10-K for the fiscal year ended July 31,
2005.
Previously Camtronics had been reported as a separate segment.
Prior to the end of the quarter, the Companys board of
directors approved an agreement to sell Camtronics, and as a
result, the Company is reporting Camtronics as discontinued
operations. On November 1, 2005 the Company sold its
Camtronics operating segment to better focus on its other core
lines of business. See Note 2 of Notes to Unaudited
Consolidated Financial Statements.
The table below presents information about the Companys
reportable segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Revenues:
|
|
|
|
|
|
|
|
|
|
Medical technology products from external customers:
|
|
|
|
|
|
|
|
|
|
|
Medical imaging products
|
|
$ |
46,315 |
|
|
$ |
43,216 |
|
|
|
B-K Medical
|
|
|
14,885 |
|
|
|
16,341 |
|
|
|
|
|
|
|
|
|
|
|
61,200 |
|
|
|
59,557 |
|
|
Security technology products from external customers
|
|
|
19,866 |
|
|
|
10,152 |
|
|
Corporate and other
|
|
|
5,344 |
|
|
|
5,421 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
86,410 |
|
|
$ |
75,130 |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes and
cumulative effects of change in accounting principle:
|
|
|
|
|
|
|
|
|
|
Medical technology products:
|
|
|
|
|
|
|
|
|
|
|
Medical imaging products
|
|
$ |
(2,606 |
) |
|
$ |
(1,145 |
) |
|
|
B-K Medical
|
|
|
(761 |
) |
|
|
1,153 |
|
|
|
|
|
|
|
|
|
|
|
(3,367 |
) |
|
|
8 |
|
|
Security technology products
|
|
|
4,808 |
|
|
|
1,251 |
|
|
Corporate and other
|
|
|
84 |
|
|
|
512 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
1,525 |
|
|
$ |
1,771 |
|
|
|
|
|
|
|
|
16
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
October 31, | |
|
July 31, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
Identifiable assets:
|
|
|
|
|
|
|
|
|
|
Medical imaging products
|
|
$ |
113,714 |
|
|
$ |
106,947 |
|
|
B-K Medical
|
|
|
67,934 |
|
|
|
71,143 |
|
|
Security technology products
|
|
|
16,736 |
|
|
|
15,497 |
|
|
Corporate and other(A)
|
|
|
254,266 |
|
|
|
261,179 |
|
|
|
|
|
|
|
|
|
Total assets from continuing operations
|
|
|
452,650 |
|
|
|
454,766 |
|
|
Assets of discontinued operations
|
|
|
41,364 |
|
|
|
41,939 |
|
|
|
|
|
|
|
|
Total
|
|
$ |
494,014 |
|
|
$ |
496,705 |
|
|
|
|
|
|
|
|
|
|
(A) |
Includes cash equivalents and marketable securities of $191,847
at October 31, 2005, and $195,321 and at July 31, 2005. |
|
|
14. |
Commitments and guarantees: |
The Company has agreements whereby it indemnifies its officers
and directors for certain events or occurrences while the
officer or director is, or was serving, at the Companys
request in such capacity. The term of the indemnification period
is for the officers or directors lifetime. The
potential amount of future payments the Company could be
required to make under these indemnification agreements is
unlimited. Also, to the extent permitted by Massachusetts law,
the Companys Articles of Organization require the Company
to indemnify directors of the Company and the Companys
By-Laws require the Company to indemnify the present or former
directors and officers of the Company, and also permit
indemnification of other employees and agents of the Company for
whom the Board of Directors from time to time authorizes
indemnification. In no instance, however, will indemnification
be granted to a director otherwise entitled thereto who is
determined to have (a) committed a breach of loyalty to the
Company or its stockholders, (b) committed acts or
omissions not in good faith or which involved intentional
misconduct or a knowing violation of the law, or
(c) derived any improper personal benefit in connection
with a particular transaction. Because no claim for
indemnification has been made by any person covered by said
agreements, and/or the relevant provisions of the Companys
Articles of Organization or By-laws, the Company believes that
its estimated exposure for these indemnification obligations is
currently minimal.
Accordingly, the Company has no liabilities recorded for these
indemnity agreements and requirements as of October 31,
2005.
In November 2002, the Financial Accounting Standard Board
(FASB) issued FIN No. 45
Guarantors Accounting and Disclosure Requirements
for Guarantees. Including Indirect Guarantees of Indebtedness of
Other, an interpretation of FASB Statements No. 5, 57, and
107 and rescission of FASB Interpretation No. 34
(FIN 45). FIN 45 requires a guarantor
to recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken by issuing the
guarantee. The following is a summary of agreements that the
Company determined are within the scope of FIN 45.
The Companys standard original equipment manufacturing and
supply agreements entered into in the ordinary course of
business typically contain an indemnification provision pursuant
to which the Company indemnifies, holds harmless, and agrees to
reimburse the indemnified party for losses suffered or incurred
by the indemnified party in connection with any United States
patent, or any copyright or other intellectual property
infringement claim by any third party with respect to the
Companys products. Such provisions generally survive
termination or expiration of the agreements. The potential
amount of future payments the Company could be required to make
under these indemnification provisions is, in some
17
ANALOGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS (Continued)
instances, unlimited. The Company has never incurred costs to
defend lawsuits or settle claims related to these
indemnification obligations. As a result, the Company believes
that its estimated exposure on these agreements is currently
minimal. Accordingly, the Company has no liabilities recorded
for these agreements as of October 31, 2005.
Generally, the Company warrants that its products will perform
in all material respects in accordance with its standard
published specifications in effect at the time of delivery of
the products to the customer for a period ranging from 12 to
24 months from the date of delivery. The Company provides
for the estimated cost of product and service warranties based
on specific warranty claims, claim history and engineering
estimates, where applicable.
The following table presents the Companys product warranty
liability for the reporting periods:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
October 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Balance at the beginning of the period
|
|
$ |
4,057 |
|
|
$ |
4,053 |
|
Accrual for warranties issued during the period
|
|
|
644 |
|
|
|
705 |
|
Accrual related to pre-existing warranties (including changes in
estimate)
|
|
|
795 |
|
|
|
617 |
|
Settlements made in cash or in kind during the period
|
|
|
(1,310 |
) |
|
|
(1,121 |
) |
|
|
|
|
|
|
|
Balance at the end of the period
|
|
$ |
4,186 |
|
|
$ |
4,254 |
|
|
|
|
|
|
|
|
On December 8, 2005, the Company announced that its Board
of Directors, on December 6, 2005, declared a dividend of
$.10 per common share payable on January 3, 2006 to
shareholders of record on December 20, 2005.
On November 1, 2005, Emageon Inc. (Emageon)
purchased from the Company all of the outstanding shares of
capital stock of Camtronics Medical Systems, Ltd.
(Camtronics), a supplier of cardiovascular
information management and hemodynamic monitoring technology and
a wholly-owned subsidiary of the Company, pursuant to the terms
of a Stock Purchase Agreement (the Stock Purchase
Agreement) dated as November 1, 2005, between the
Company and Emageon. The aggregate purchase price paid for all
of the outstanding shares of capital stock of Camtronics was
$40,000. The Stock Purchase Agreement contains customary
representations, warranties, and indemnities. The Company
expects to record a gain from this transaction in the quarter
ending January 31, 2006.
18
Managements Discussion and Analysis of Financial
Condition and Results of Operations
All dollar amounts in this Item 2 are in thousands except
per share data.
The following discussion provides an analysis of the
Companys financial condition and results of operations and
should be read in conjunction with the Unaudited Consolidated
Financial Statements and Notes thereto included elsewhere in
this Quarterly Report on Form 10-Q. The discussion below
contains forward-looking statements within the meaning of the
Securities Exchange Act of 1934. All statements, other than
statements of historical fact, the Company makes in this
document or in any document incorporated by reference are
forward-looking. Such forward-looking statements involve known
and unknown risks, uncertainties, and other factors, which may
cause the actual results, performance, or achievements of the
Company to differ from the projected results. See separate
section entitled Risk Factors.
Summary
The following is a summary of the areas that management believes
are important in understanding the results of the periods
indicated. This summary is not a substitute for the detail
provided in the following pages or for the unaudited
consolidated financial statements and notes that appear
elsewhere in this document.
On September 28, 2005, the Company decided to restructure
the business operations of its wholly-owned subsidiary, Sky
Computers Inc. (Sky). The decision to restructure
Sky was based on continued lower than expected sales. During the
three months ended October 31, 2005 the Company recorded
restructuring costs of $499 for severance, $310 for capital
assets impairment and $1,179 write-down of inventory.
On November 1, 2005, the Company sold its wholly owned
subsidiary Camtronics Medical Systems, Ltd.
(Camtronics) for $40,000 in cash. The Company sold
its Camtronics operating segment to better focus on its other
core lines of business. As part of the terms of the definitive
agreement, the Company retained all of the cash and
inter-company balances as of the closing date. Revenues for
Camtronics for the three months ended October 31, 2005 and
2004 were $11,495 and $8,961, respectively. The results of
discontinued operations for the three months ending
October 31, 2005 and 2004 for Camtronics were a net income
of $159 and a net loss of $1,313, respectively. The Company
expects to recover all of its net assets sold and expects to
record a gain on the transaction effective upon consummation on
November 1, 2005.
Net sales from continuing operations for the first quarter ended
October 31, 2005 were $11,280 or 15% higher than the same
period last year, primarily due to an increase in the sale of
EXACT systems, increased demand for the Companys 64 slice
data acquisition systems, partially offset by lower digital
x-ray systems mainly to one OEM customer. Gross margin for the
quarter ended October 31, 2005 was 35.1% versus 37.0% for
the same period last year. The reduction in gross margin was
primarily due to higher margin customer funded projects in the
prior year. Current year margin has been negatively impacted by
expected losses on customer funded projects. Total operating
expenses increased $2,462 over the same period last year,
primarily due to increased personnel and related costs to
support product development, which continues to be focused on
developing new generations of medical imaging equipment,
including Computed Tomography systems and an extended family of
multi-slice CT data acquisition systems, and a number of
security systems projects; restructuring and asset impairment
charges associated with Sky Computers operation; and expenses
associated with share-based payments in connection with the
adoption of SFAS 123(R) on August 1, 2005. Basic and
diluted earnings per share from continuing operations decreased
by $0.03 per share over the same period late year. The
Companys cash, cash equivalent and marketable securities
decreased $2,344 from July 31, 2005, primarily due to
estimated tax payments.
19
Critical Accounting Policies, Judgments, and Estimates
The SEC considers critical accounting policies to be the ones
that are most important to the portrayal of a companys
financial condition and operating results, and require
management to make its most difficult and subjective judgments,
often as a result of the need to make estimates on matters that
are inherently uncertain. In the case of the Companys
critical accounting policies, these judgments are based on its
historical experience, terms of existing contracts, the
Companys observance of trends in the industry, information
provided by its customers and information available from other
outside sources, as appropriate. The Companys critical
accounting policies, judgments, and estimates include:
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Revenue Recognition and Accounts Receivable |
The Company recognizes the majority of its revenue in accordance
with SEC Staff Accounting Bulletin No. 104,
Revenue Recognition in Financial Statements.
Revenue related to product sales is recognized upon shipment
provided that title and risk of loss have passed to the
customer, there is persuasive evidence of an arrangement, the
sales price is fixed or determinable, collection of the related
receivable is reasonably assured and customer acceptance
criteria, if any, have been successfully demonstrated. For
product sales with acceptance criteria that are not successfully
demonstrated prior to shipment, revenue is recognized upon
customer acceptance, provided all other revenue recognition
criteria have been met. The Companys sales contracts
generally provide for the customer to accept title and risk of
loss when the product leaves the Companys facilities. When
shipping terms or local laws do not allow for passage of title
and risk of loss at the shipping point, the Company defers
recognizing revenue until title and risk of loss transfer to the
customer. The Company classifies shipping and handling costs in
cost of sales.
The Companys transactions sometimes involve multiple
elements (i.e., systems and services). Revenue under multiple
element arrangements is recognized in accordance with Emerging
Issues Task Force (EITF) Issue No. 00-21,
Accounting for Revenue Arrangements with Multiple
Deliverables. Under this method, if an element is
determined to be a separate unit of accounting, the revenue for
the element is based on fair value and determined by verifiable
objective evidence, and recognized at the time of delivery. If
the arrangement has an undelivered element, the Company ensures
that they have objective and reliable evidence of the fair value
of the undelivered element. Fair value is determined based upon
the price charged when the element is sold separately.
Maintenance or service revenues are recognized ratably over the
life of the contracts.
For business units that sell software licenses or products in
which the software is considered more than incidental, the
Company recognizes revenue in accordance with the American
Institute of Certified Public Accountants
(AICPA)s Statement of Position 97-2,
Software Revenue Recognition
(SOP 97-2). The application of
SOP 97-2 requires judgment, including whether a software
arrangement includes multiple elements, and if so, whether
vendor-specific objective evidence (VSOE) of fair
value exists for those elements. License revenue is recognized
upon delivery, provided that persuasive evidence of an
arrangement exists, no significant obligations with regard to
installation or implementation remain, fees are fixed or
determinable, collectibility is probable, and customer
acceptance, when applicable, is obtained. We allocate revenue
first to the fair value of the undelivered elements and allocate
the residual revenue to the delivered elements. Hardware and
software maintenance is marketed under annual and multi-year
arrangements and revenue is recognized ratably over the
contracted maintenance term.
As it relates to services, Camtronics may also provide services
that vary depending on the scope and complexity requested by the
customer. Examples of such services include additional database
consulting, systems configuration, project management,
interfacing to existing systems, and network consulting.
Services generally are not deemed to be essential to the
functionality of the software. If Camtronics has VSOE for the
services, the timing of the software license revenue is not
impacted. If the Company does have VSOE, service revenue is
recognized as the services are performed. Camtronics commonly
performs services for which the Company does not have VSOE;
accordingly, the software license revenue is deferred until the
services are completed.
20
The Company provides engineering services to some of its
customers on a contractual basis and recognizes revenue using
the percentage of completion method. The Company estimates the
percentage of completion on contracts with a fixed fee
arrangement on a monthly basis utilizing costs incurred to date
as a percentage of total estimated costs to complete the
project. If the Company does not have a sufficient basis to
measure progress towards completion, revenue is recognized upon
completion of the contract. When total cost estimates exceed
revenues, the Company accrues for the estimated losses
immediately.
Deferred revenue is comprised of 1) license fee,
maintenance and other service revenues for which payment has
been received and for which services have not yet been performed
and 2) revenues related to delivered components of a
multiple-element arrangement for which VSOE of fair value has
not been determined for components not yet delivered or accepted
by the customer. Deferred costs represent costs related to these
revenues; for example, costs of goods sold and services provided
and sales commission expenses.
Revenue related to the hotel operations is recognized as
services are performed.
The Company grants credit to domestic and foreign original
equipment manufacturers, distributors, and end users, and
performs ongoing credit evaluations of its customers
financial condition. The Company continuously monitors
collections and payments from its customers and maintains a
provision for estimated credit losses based upon historical
experience and any specific customer collection issues that have
been identified.
The Company values inventory at the lower of cost or market
using the first-in, first-out method. Management assesses the
recoverability of inventory based on types and levels of
inventory held, product life cycles, and changes in technology.
A variety of methodologies are used to determine the amount of
inventory reserves necessary for excess and obsolete inventory.
The write-downs are based upon the age of the inventory, lower
of cost or market, along with significant management judgments
concerning future demands for the inventory. If actual demand
for the Companys products is less than its estimates, or
the Company experiences a higher incidence of inventory
obsolescence because of rapidly changing technology and customer
requirements, additional write-downs for existing inventories
may be recorded in future periods.
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Concentration of Credit Risk |
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and
cash equivalents, marketable securities, and accounts
receivable. The Company maintains a bond investment portfolio of
various types and maturities with high credit quality issuers.
Cash and cash equivalents not required for working capital
purposes are placed in short term investments with original
maturities for six months or less. The Company grants credit to
domestic and foreign original equipment manufacturers,
distributors, and end users, and performs ongoing credit
evaluations on its customers financial condition. The
Company continuously monitors collections and payments from its
customers and maintains a provision for estimated credit losses
based upon historical experience and any specific customer
collection issues that have been identified. While such credit
losses have historically been within expectations and provisions
established, there is no guarantee that the Company will
continue to experience the same credit loss rates as in the
past. Since the accounts receivable are concentrated among
relatively few customers, a significant change in the liquidity
or financial position of any one of these customers could have a
material adverse impact on the collectibility of accounts
receivable and future operating results.
The Company provides for the estimated cost of product
warranties at the time products are shipped. Although the
Company engages in extensive product quality programs and
processes, its warranty obligations are affected by product
failure rates and service delivery costs incurred to correct
product
21
failures. Should actual product failure rates or service
delivery costs differ from the Companys estimates (which
are based on specific warranty claims, historical data, and
engineering estimates, where applicable), revisions to the
estimated warranty liability would be required. Such revisions
could adversely affect the Companys operating results.
Generally, the Company warrants that its products will perform
in all material respects in accordance with its standard
published specifications in effect at the time of delivery of
the products to the customer for a period ranging from 12 to
24 months from the date of delivery.
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Investments in and Advances to Affiliated Companies |
The Company has investments in affiliated companies related to
areas of the Companys strategic focus. Investment in
companies over which the Company has the ability to exercise
significant influence are accounted for under the equity method
if the Company holds 50% or less of the voting stock.
Investments in companies over which the Company does not have
the ability to exercise significant influence are accounted for
under the cost method. In assessing the recoverability of these
investments, the Company must make certain assumptions and
judgments based upon changes in the Companys overall
business strategy, the financial condition of the affiliated
companies, market conditions, and the industry and economic
environment in which the entities operate. Adverse changes in
market conditions or poor operating results of affiliated
companies could result in losses or an inability to recover the
carrying value of the investments, thereby requiring an
impairment charge in the future.
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Intangible Assets and Other Long-Lived Assets |
Intangible assets consist of: intellectual property, licenses,
and capitalized software. Other long-lived assets consist
primarily of property, plant, and equipment. These assets are
reviewed for impairment annually in the first quarter of each
fiscal year or whenever events or changes in circumstances
indicate that the carrying value of assets may not be
recoverable. Recoverability of these assets is measured by
comparison of their carrying value to future undiscounted cash
flows the assets are expected to generate over their remaining
economic life. If such assets are considered to be impaired, the
impairment to be recognized in earnings equals the amount by
which the carrying value of the assets exceeds their fair market
value determined by either a quoted market price, if any, or a
value determined by utilizing a discounted cash flow technique.
Evaluation of impairment of long-lived assets requires estimates
of future operating results that are used in the preparation of
the expected future undiscounted cash flows. Actual future
operating results and the remaining economic lives of long-lived
assets could differ from the estimates used in assessing the
recoverability of these assets. These differences could result
in impairment charges, which could have a material adverse
impact on the Companys results of operations.
The Company is required to estimate its income taxes in each of
the jurisdictions within which it operates. This process
involves assessing temporary differences resulting from
different treatment of items for tax and accounting purposes.
These differences result in deferred tax assets and liabilities,
which are included within the balance sheet. The Company must
then assess the likelihood that the deferred tax assets will be
recovered from future taxable income and, to the extent that
recovery is not more than likely, a valuation allowance must be
established. To the extent a valuation allowance is established,
the Company must include an expense within the tax provision in
the statement of operations. In the event that actual results
differ from these estimates, the provision for income taxes and
results of operations could be materially impacted. The Company
establishes liabilities for possible assessments by taxing
authorities resulting from known tax exposures including, but
not limited to certain tax credits, and various federal, state
and foreign tax matters. The Company does not provide for US
Federal income taxes on undistributed earnings of consolidated
foreign subsidiaries, as such earnings are intended to be
indefinitely reinvested in those operations. Determination of
the potential deferred income tax liability on these
undistributed earnings is not practicable because such
liability, if any, is dependent on circumstances existing if and
when remittance occurs. The American Jobs Act of 2004 creates a
temporary incentive for U.S. corporations to repatriate
accumulated income earned abroad by providing an 85% dividends
received
22
deduction for certain dividends received from controlled foreign
corporations. The deduction is subject to a number of
limitations. Based on the Companys analysis, this
provision will not provide a benefit to the Company.
Results of Operations
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Three Months Ended October 31, 2005 vs. Three Months
Ended October 31, 2004 |
Product revenue for the three months ended October 31, 2005
was $79,721 compared to $67,125 for the same period last year,
and increase of $12,596 or 19%. The increase in product revenue
was primarily due to increased sales of Security Technology
Products of $11,183 or 146%, related to increased units of the
EXACT systems shipped in the current period versus last year,
and increased sales of Medical Technology Products of $1,594 or
3%, primarily due to increased demand for the Companys
data acquisition and computed tomography systems and subsystems,
partially offset by lower demand for the Companys digital
x-ray and ultrasound systems.
Engineering revenue for the three months ended October 31,
2005 was $3,812 compared to $5,240 for the same period last
year, a decrease of $1,428 or 27%. The decrease was primarily
due to a reduction in certain customer funded projects.
Other revenue of $2,877 and $2,765 represents revenue for the
hotel operations for the three months ended October 31,
2005 and 2004, respectively.
Product gross margin was $30,719 for the three months ended
October 31, 2005 compared to $25,277 for the same period
last year. Product gross margin as a percentage of product
revenue was 38.5% and 37.7% for the three months ended
October 31, 2005 and 2004, respectively. The increase was
primarily due to higher sales of security technology products,
which have a higher margin than most of the other Companys
products, partially offset by the effect of the write-down of
certain inventory of SKY Computers of $1,179.
The engineering gross margin was negative $1,921 for the three
months ended October 31, 2005 as compared to a positive
gross margin of $1,178 for the same period last year. The
negative margin was primarily a result of a determination that
estimated costs at completion of a TSA contract will exceed the
funded amount of the contract by approximately $2,000. The
positive margin for the three months ended October 31, 2004
was primarily due to sale of a license of intellectual property
to the Companys affiliate SAHCO for which there was no
cost.
Research and product development expenses were $13,027 for the
three months ended October 31, 2005 or 15.1% of total
revenue compared to $11,674, or 15.5% of total revenue for the
same period last year. The increase of $1,353 was primarily due
to increased personnel and related costs to support product
development, which continues to be focused on developing new
generations of medical imaging equipment, including Computed
Tomography (CT) systems and an extended family of
multi-slice CT data acquisition systems, and projects for
security systems, including expenses associated with share-based
payments in connection with the adoption of SFAS 123(R).
Selling and marketing expenses were $7,354 for the three months
ended October, 31, 2005, or 8.5% of total revenue, as
compared to $6,719, or 8.9% of total revenue for the same period
last year. The increase of $635 consists primarily of salaries
and other related costs for additional sales and marketing
personnel, travel, and trade show participations.
General and administrative expenses were $8,664 for the three
months ended October 31, 2005 or 10.0% of total revenue,
compared to $9,215 or 12.3% of total revenue for the same period
last year. The decrease of $551 was primarily attributable to
legal expenses incurred last year for the L-3 litigation and the
Camtronics subsidiary review of certain transactions for revenue
recognition costs, and a real estate tax abatement rebate
received during the first quarter of fiscal year 2006. These
reductions were partially offset by expenses associated with
share-based payments in connection with the adoption of
SFAS 123(R).
23
Restructuring and asset impairment charges were $1,025 for the
three months ended October 31, 2005, related to PDS
impairment charges of $216 based on the net realizable value of
the Companys investments, and $809 for severance costs and
certain write-downs of capital assets for the restructuring of
Sky Computers.
Interest income was $2,033 for the three months ended
October 31, 2005 compared with $864 for the same period
last year. The increase was primarily due to higher effective
interest rates on higher invested cash balances.
The Company recorded an equity loss in unconsolidated affiliates
of $570 related to SAHCO for the three months ended
October 31, 2005 versus an equity gain of $127 for the sane
period last year. The equity gain for the same period last year
was due to equity gain of $318 related to SAHCO offset by an
equity loss of $191 reflecting the Companys share of
equity in Cedara.
Other expense was $157 for the three months ended
October 31, 2005 compared to other income of $608 for the
same period last year. Other expenses and other income consisted
predominantly of foreign currency exchange gains or losses
incurred by the Companys Canadian and Danish subsidiaries.
The effective tax rate for continuing operations for the first
quarter of fiscal 2006 and fiscal 2005 was 30.3% and 16.5%
respectively. The higher effective rate in fiscal 2006 is
largely the result of higher income, non-deductible incentive
stock option expense, and reductions in the amount of federal
and state research and development credits.
Net income from continuing operations was $1,063 for the three
months ended October 31, 2005 compared to $1,478 for the
same period last year. Basic and diluted earnings per share from
continuing operation were $0.08 and $0.11 for the first quarter
ended October 31, 2005 and 2004, respectively.
Liquidity and Capital Resources
Cash and cash equivalents and marketable securities totaled
$218,110 and $220,454 at October 31, 2005 and July 31,
2005. The Companys balance sheet reflects a current ratio
of 4.3 to 1 at October 31, 2005 compared to 4.1 to 1 at
July 31, 2005. Liquidity is sustained principally through
funds provided from operations, with short-term deposits and
marketable securities available to provide additional sources of
cash. The Companys debt to equity ratio was .23 to 1 at
October 31, 2005 and .24 to 1 at July 31, 2005. The
Company believes that its balances of cash and cash equivalents,
marketable securities and cash flows expected to be generated by
future operating activities will be sufficient to meet its cash
requirements over at least the next twelve months.
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 Companys financial results. The
Companys primary exposure is related to fluctuations
between the US dollar and local currencies for the
Companys subsidiaries in Canada and Europe.
The carrying amounts reflected in the Unaudited Consolidated
Balance Sheets of cash and cash equivalents, trade receivables,
and trade payables approximate fair value at October 31,
2005, due to the short maturities of these instruments.
The Company maintains a bond investment portfolio of various
issuers, types, and maturities. This portfolio is classified on
the balance sheet as either cash and cash equivalents or
marketable securities, depending on the length of time to
maturity from original purchase. Cash equivalents include all
highly liquid investments primarily invested in US treasury and
US government agency securities with maturities of six months or
less from the time of purchase. Investments having maturities
from the time of purchase in excess of six 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 Companys
investment portfolio. The Company does not currently hedge these
interest rate exposures.
24
Net cash provided by operating activities was $2,085 for the
quarter ended October 31, 2005, including $1,700 by
continuing operations and $385 by discontinued operations. The
cash flow generated by continuing operations from operating
activities of $1,700 for the first quarter ended
October 31, 2005, was primarily due to net income,
depreciation and amortization, non-cash impact of asset
impairment charges, and higher receivable collections; partially
offset by lower advance payments received primarily related to
orders for the EXACT systems, and payment for income taxes.
Net cash used for investing activities was $2,681 for the
quarter ended October 31, 2005, including $2,203 by
continuing operations and $478 by discontinued operations. Net
cash used by continuing operations for investing activities was
primarily due to capital expenditures of $3,168, partially
offset by $1,360 proceeds from maturities of marketable
securities.
Net cash used for financing activities for the quarter ended
October 31, 2005, was $291 for continuing operations and $0
for discontinued operations. Net cash used for continued
operations for financing activities consisted primarily of
$1,106 for dividends paid to stockholders, partially offset by
$798 of cash received from the issuance of stock pursuant to the
Companys employee stock options plans.
The Companys contractual obligations at October 31,
2005, and the effect such obligations are expected to have on
liquidity and cash flows in future periods are as follows:
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Than | |
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1 Year | |
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1-3 Years | |
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4-5 Years | |
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5 Years | |
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Operating leases
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$ |
6,431 |
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|
$ |
1,483 |
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|
$ |
2,040 |
|
|
$ |
1,429 |
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$ |
1,479 |
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Purchasing obligations
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38,434 |
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|
|
33,647 |
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|
4,787 |
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$ |
44,865 |
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$ |
35,130 |
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$ |
6,827 |
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$ |
1,429 |
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$ |
1,479 |
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The Company currently has approximately $23,500 in revolving
credit facilities with various banks available for direct
borrowings. As of October 31, 2005, there were no direct
borrowings.
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New Accounting Pronouncements |
In June 2005, Financial Accounting Standards Board
(FASB) issued FAS No. 154,
Accounting Changes and Error Corrections.
This statement replaces APB Opinion No. 20,
Accounting Changes, and FAS No. 3,
Reporting Accounting Changes in Interim Financial
Statements. The statement applies to all voluntary
changes in accounting for and reporting of changes in accounting
principles. FAS No. 154 requires retrospective
application to prior periods financial statements of a
voluntary change in accounting principles unless it is not
practical to do so. APB No. 20 previously required that
most voluntary changes in accounting principles be recognized by
including in net income of the period of the change the
cumulative effect of changing to the new accounting principle.
FAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after
December 15, 2005. Earlier application is permitted for
accounting changes and errors made occurring in fiscal years
beginning after May 31, 2005. The adoption of
FAS No. 154 is not expected to have a material impact
on the Companys financial position or results of operations
In December 2004, the FASB issued Financial Accounting Standards
No. 151, Inventory Costs
(SFAS 151). SFAS 151 clarifies the
accounting for inventory when there are abnormal amounts of idle
facility expense, freight, handling costs, and wasted materials.
Under existing GAAP, items such as idle facility expense,
excessive spoilage, double freight, and re-handling costs may be
so abnormal as to require treatment as current
period charges rather than recorded as adjustments to the value
of the inventory. SFAS 151 requires that those items be
recognized as current-period charges regardless of whether they
meet the criterion of so abnormal. In addition,
SFAS 151 requires that allocation of fixed production
overheads to the costs of conversion be based on the normal
capacity of the production facilities. The provisions of
SFAS 151 shall be effective for inventory costs incurred
during fiscal years beginning after June 15, 2005. The
Company adopted SFAS 151 in the first quarter of fiscal
2006. The adoption of SFAS 151 did not have a material
impact on the Companys financial position or results of
operations.
25
In October 2004, the American Jobs Creation Act of 2004 (the
AJCA) was passed. The AJCA provides a deduction for
income from qualified domestic production activities which will
be phased in from 2005 though 2010. The AJCA also provides for a
two-year phase-out of the existing extra-territorial income
exclusion for foreign sales that was viewed to be inconsistent
with international trade protocols by the European Union. In
December 2004, the FASB issued FASB Staff Position
No. 109-1, Application of FASB Statement
No. 109, Accounting for Income Taxes, to the Tax Deduction
on Qualified Production Activities by the American Jobs Creation
Act of 2004 (FSP 109-1). FSP 109-1 treats
the deduction as a special deduction as described in
FASB Statement No. 109. As such, the special deduction has
no effect on deferred tax assets and liabilities existing at the
enactment date. Rather, the impact of this deduction will be
reported in the same period in which the deduction is claimed in
the Companys tax return. The Company is currently
evaluating the impact the AJCA will have on its results of
operations and financial position. The AJCA also creates a
temporary incentive for U.S. corporations to repatriate
accumulated income earned abroad by providing an 85% dividends
received deduction for certain dividends received from
controlled foreign corporations. The deduction is subject to a
number of limitations. Based on the Companys analysis,
this provision of the AJCA will not produce a benefit to the
Company.
Forward-Looking Statements
This Quarterly 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, without limitation,
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
statement as a result of a number of important factors,
including those discussed below and elsewhere herein.
Risk Factors
You should carefully consider the risks described below before
making an investment decision with respect to Analogic Common
Stock. Additional risks not presently known to us, or that we
currently deem immaterial, may also impair our business. Any of
these could have a material and negative effect on our business,
financial condition, or results of operations.
|
|
|
Because a significant portion of our revenue currently
comes from a small number of customers, any decrease in revenue
from these customers could harm our operating results. |
We depend on a small number of customers for a large portion of
our business, and changes in our customers orders may have
a significant impact on our operating results. If a major
customer significantly reduces the amount of business it does
with us, there would be an adverse impact on our operating
results. The following table sets forth the percentages of our
net product and engineering revenue from our five largest
customers in each of the last three fiscal years and the
percentage of our product and engineering sales to our ten
largest customers during these periods:
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|
|
|
|
|
|
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|
|
|
|
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|
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|
Year Ended July 31, | |
|
|
October 31, | |
|
| |
|
|
2005 | |
|
2005 | |
|
2004 | |
|
2003 | |
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| |
|
| |
|
| |
|
| |
L-3 Communications
|
|
|
22 |
% |
|
|
16 |
% |
|
|
9 |
% |
|
|
47 |
% |
Toshiba
|
|
|
16 |
% |
|
|
15 |
% |
|
|
14 |
% |
|
|
7 |
% |
Siemens
|
|
|
11 |
% |
|
|
9 |
% |
|
|
10 |
% |
|
|
5 |
% |
General Electric
|
|
|
9 |
% |
|
|
10 |
% |
|
|
9 |
% |
|
|
7 |
% |
Philips
|
|
|
6 |
% |
|
|
7 |
% |
|
|
8 |
% |
|
|
4 |
% |
Ten largest customers as a group
|
|
|
75 |
% |
|
|
66 |
% |
|
|
68 |
% |
|
|
81 |
% |
26
Although we are seeking to broaden our customer base, we will
continue to depend on sales to a relatively small number of
major customers. Because it often takes significant time to
replace lost business, it is likely that our operating results
would be adversely affected if one or more of our major
customers were to cancel, delay, or reduce significant orders in
the future. Our customer agreements typically permit the
customer to discontinue future purchases after timely notice.
In addition, we generate significant accounts receivable in
connection with the products we sell and the services we provide
to our major customers. Although our major customers are large
corporations, if one or more of our customers were to become
insolvent or otherwise be unable to pay for our products and
services, our operating results and financial condition could be
adversely affected.
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|
|
Competition from existing or new companies in the medical
and security imaging technology industry could cause us to
experience downward pressure on prices, fewer customer orders,
reduced margins, the inability to take advantage of new business
opportunities, and the loss of market share. |
We operate in a highly competitive industry. We are subject to
competition based upon product design, performance, pricing,
quality, and services and we believe our innovative engineering
and product reliability have been important factors in our
growth. While we try to maintain competitive pricing on those
products which are directly comparable to products manufactured
by others, in many instances our products will conform to more
exacting specifications and carry a higher price than analogous
products manufactured by others.
Our competitors include divisions of some larger, more
diversified organizations as well as several specialized
companies. Some of them have greater resources and larger staffs
than we have. Many of our OEM customers and potential OEM
customers have the capacity to design and manufacture internally
the products we manufacture for them. We face competition from
research and product development groups and the manufacturing
operations of our current and potential customers, who
continually evaluate the benefits of internal research and
product development and manufacturing versus outsourcing.
|
|
|
We depend on our suppliers, some of which are the sole
source for our components, and our production would be
substantially curtailed if these suppliers are not able to meet
our demands and alternative sources are not available. |
We order raw materials and components to complete our
customers orders, and some of these raw materials and
components are ordered from sole-source suppliers. Although we
work with our customers and suppliers to minimize the impact of
shortages in raw materials and components, we sometimes
experience short-term adverse effects due to price fluctuations
and delayed shipments. In the past, there have been
industry-wide shortages of electronics components. If a
significant shortage of raw materials or components were to
occur, we might have to delay shipments or pay premium pricing,
which could adversely affect our operating results. In some
cases, supply shortages of particular components will
substantially curtail production of products using these
components. We are not always able to pass on price increases to
our customers. Accordingly, some raw material and component
price increases could adversely affect our operating results. We
also depend on a small number of suppliers, some of which are
affiliated with customers or competitors and others of which may
be small, poorly financed companies, for many of the other raw
materials and components that we use in our business. If we are
unable to continue to purchase these raw materials and
components from our suppliers, our operating results could be
adversely affected. Because many of our costs are fixed, our
margins depend on our volume of output at our facilities and a
reduction in volume could adversely affect our margins.
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|
|
If we are left with excess inventory, our operating
results will be adversely affected. |
Because of long lead times and specialized product designs, we
typically purchase components and manufacture products in
anticipation of customer orders based on customer forecasts. For
a variety of reasons, such as decreased end-user demand for our
products, our customers might not purchase all the products we
have manufactured or for which we have purchased components. In
either event, we would
27
attempt to recoup our materials and manufacturing costs by means
such as returning components to our vendors, disposing of excess
inventory through other channels or requiring our OEM customers
to purchase or otherwise compensate us for such excess
inventory. Some of our significant customer agreements do not
give us the ability to require our OEM customers to do this. To
the extent we are unsuccessful in recouping our material and
manufacturing costs, not only would our net sales be adversely
affected, but also our operating results would be
disproportionately adversely affected. Moreover, carrying excess
inventory would reduce the working capital we have available to
continue to operate and grow our business.
|
|
|
Uncertainties and adverse trends affecting our industry or
any of our major customers may adversely affect our operating
results. |
Our business operates primarily within two major markets within
the electronics industry, Medical Technology Products and
Security Technology Products, which are subject to rapid
technological change and pricing and margin pressure. These
markets have historically been cyclical and subject to
significant downturns characterized by diminished product
demand, rapid declines in average selling prices and production
over-capacity. In addition, changes in government policy
relating to reimbursement for the purchase and use of medical
and security related capital equipment could also affect our
sales. Our customers markets are also subject to economic
cycles and are likely to experience recessionary periods in the
future. The economic conditions affecting our industry in
general, or any of our major customers in particular, might
adversely affect our operating results. Our other businesses are
subject to the same or greater technological and cyclical
pressures.
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|
|
Our customers delay or inability to obtain any
necessary United States or foreign regulatory clearances or
approvals for their products could have a material adverse
effect on our business. |
Our products are used by a number of our customers in the
production of medical devices that are subject to a high level
of regulatory oversight. A delay or inability to obtain any
necessary United States or foreign regulatory clearances or
approvals for products could have a material adverse effect on
our business. The process of obtaining clearances and approvals
can be costly and time-consuming. There is a further risk that
any approvals or clearances, once obtained, might be withdrawn
or modified. Medical devices cannot be marketed in the United
States without clearance or clearance from the FDA. Medical
devices sold in the United States must also be manufactured in
compliance with FDA rules and regulations, which regulate the
design, manufacture, packing, storage, and installation of
medical devices. Moreover, medical devices are required to
comply with FDA regulations relating to investigational research
and labeling. States may also regulate the manufacture, sale,
and use of medical devices. Medical devices are also subject to
approval and regulation by foreign regulatory and safety
agencies.
|
|
|
Our business strategy involves the pursuit of acquisitions
or business combinations, which may be difficult to integrate,
disrupt our business, dilute stockholder value or divert
management attention. |
As part of our business strategy, we may consummate acquisitions
or business combinations. Acquisitions are typically accompanied
by a number of risks, including the difficulty of integrating
the operations and personnel of the acquired companies, the
potential disruption of our ongoing business and distraction of
management, expenses related to the acquisition and potential
unknown liabilities associated with acquired businesses. If we
do not successfully complete acquisitions that we pursue in the
future, we may incur substantial expenses and devote significant
management time and resources in seeking to complete proposed
acquisitions that will not generate benefits for us. In
addition, substantial portions of our available cash might be
utilized as consideration for these acquisitions.
28
|
|
|
Our annual and quarterly operating results are subject to
fluctuations, which could affect the market price of our common
stock. |
Our annual and quarterly results may vary significantly
depending on various factors, many of which are beyond our
control, and may not meet the expectations of securities
analysts or investors. If this occurs, the price of our common
stock would likely decline. These factors include:
|
|
|
|
|
variations in the timing and volume of customer orders relative
to our manufacturing capacity; |
|
|
|
introduction and market acceptance of our customers new
products; |
|
|
|
changes in demand for our customers existing products; |
|
|
|
the timing of our expenditures in anticipation of future orders; |
|
|
|
effectiveness in managing our manufacturing processes; |
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|
|
changes in competitive and economic conditions generally or in
our customers markets; |
|
|
|
changes in the cost or availability of components or skilled
labor; |
|
|
|
foreign currency exposure; and |
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|
|
investor and analyst perceptions of events affecting the
Company, our competitors and/or our industry. |
As is the case with many technology companies, we typically ship
a significant portion of our products in the last month of a
quarter. As a result, any delay in anticipated sales is likely
to result in the deferral of the associated revenue beyond the
end of a particular quarter, which would have a significant
effect on our operating results for that quarter. In addition,
most of our operating expenses do not vary directly with net
sales and are difficult to adjust in the short term. As a
result, if net sales for a particular quarter were below our
expectations, we could not proportionately reduce operating
expenses for that quarter, and, therefore, that revenue
shortfall would have a disproportionate adverse effect on our
operating results for that quarter.
|
|
|
Loss of any of our key personnel could hurt our business
because of their industry experience and their technological
expertise. |
We operate in a highly competitive industry and depend on the
services of our key senior executives and our technological
experts. The loss of the services of one or several of our key
employees or an inability to attract, train and retain qualified
and skilled employees, specifically engineering and operations
personnel, could result in the loss of customers or otherwise
inhibit our ability to operate and grow our business
successfully.
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|
|
If we are unable to maintain our technological expertise
in research and product development and manufacturing processes,
we will not be able to successfully compete. |
We believe that our future success will depend upon our ability
to provide research and product development and manufacturing
services that meet the changing needs of our customers. This
requires that we successfully anticipate and respond to
technological changes in design and manufacturing processes in a
cost-effective and timely manner. As a result, we continually
evaluate the advantages and feasibility of new product design
and manufacturing processes. We cannot, however, be certain that
our development efforts will be successful.
|
|
Item 3. |
Quantitative and Qualitative Disclosures about Market
Risk |
All dollar amounts in this Item 3 are in thousands.
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
29
business practices evolve and could have a material adverse
impact on the Companys financial results. The
Companys primary exposure is related to fluctuations
between the US dollar and local currencies for the
Companys subsidiaries in Canada and Europe.
The Company maintains a bond investment portfolio of various
issuers, types, and maturities with high credit quality issuers.
Cash and cash equivalents not required for working capital
purposes are primarily invested in US treasury and US government
agency securities, with original maturities of six months or
less. Investments having original maturities in excess of six
months are stated at fair value, and are classified as available
for sale. Total interest income for the period ended
October 31, 2005 was $2,033. An interest rate change of 10%
would not have a material impact on the fair value of the
portfolio or on future earnings.
|
|
Item 4. |
Controls and Procedures |
The Company maintains disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the Exchange Act).
The term disclosure controls and procedures means
controls and other procedures of a company that are designed to
ensure that information required to be disclosed by the company
in the reports that it files or submits under the Exchange Act
is recorded, processed, summarized, and reported, within the
time periods specified in the SECs rules and forms.
Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it
files or submits under the Exchange Act is accumulated and
communicated to the companys management, including its
chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding required
disclosure. It should be noted that any system of controls,
however well designed and operated, can provide only reasonable,
and not absolute, assurance that the objectives of the system
are met.
The Company has evaluated the effectiveness of its disclosure
controls and procedures as of October 31, 2005, the end of
the period covered by this Quarterly Report on Form 10-Q.
This evaluation was carried out by management, with the
participation of the chief executive officer and chief financial
officer. Based on this evaluation, the Companys chief
executive officer and chief financial officer have concluded
that the Companys disclosure controls and procedures were
not effective at a reasonable assurance level as of
October 31, 2005 because of a material weakness in the
Companys internal control over financial reporting.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the chief
executive officer and chief financial officer and effected by
the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A material weakness in
internal control over financial reporting is a control
deficiency, or combination of control deficiencies, that results
in more than a remote likelihood that a material misstatement of
the annual or interim financial statements will not be prevented
or detected. As of October 31, 2005, the Company had a
material weakness in its internal control over financial
reporting in that it did not maintain effective controls over
software revenue and related deferred revenue. Specifically, the
Companys review and approval controls over the
completeness and accuracy of revenue and deferred revenue under
multiple-element software arrangements at its Camtronics Medical
Systems, Ltd. subsidiary, which was sold by the Company
subsequent to October 31, 2005, were ineffective to ensure
revenues were recorded in the correct period. Please refer to
Item 9A of the Companys Annual Report on
Form 10-K for the fiscal year ended July 31, 2005 for
a further description of this material weakness in internal
control over financial reporting.
As a result of this material weakness, management performed
additional procedures designed to ensure that the Companys
consolidated financial statements contained in this Quarterly
Report on Form 10-Q are prepared in accordance with
generally accepted accounting principles. Accordingly, the
Company believes that the financial statements included in this
Quarterly Report on Form 10-Q fairly
30
present in all material respects the Companys financial
condition, results of operations, and cash flows for the periods
presented in accordance with generally accepted accounting
principles.
The Companys management has taken significant actions to
remediate the material weakness in its internal control over
financial reporting as reported in Form 10-K. Summarized
below are the remediation measures that the Company has
initiated through October 31, 2005.
|
|
|
Quarter Ended January 31, 2005 |
|
|
|
|
|
Appointment of a President of Camtronics, succeeding the former
President who left the employ of the Company. |
|
|
|
Appointment of a Controller, replacing Camtronics Vice
President and Controller who left the employ of the Company. |
|
|
|
All subsidiary Controllers, who formerly reported to subsidiary
General Managers, also now report directly to the Companys
corporate finance organization. |
|
|
|
Detailed quarterly review of all software revenue transactions
by the Companys corporate finance organization. |
|
|
|
Quarter Ended April 30, 2005 |
|
|
|
|
|
Reviewed and revised, as required, Camtronics software
revenue recognition policies, procedures, and processes to
ensure compliance with SOP 97-2. |
|
|
|
Conducted periodic internal audit reviews of Camtronics
business practices and software revenue recognition policies and
procedures. |
|
|
|
Conducted software revenue recognition training for all
Camtronics personnel who have responsibility for
generating, administering, and recording software revenue. |
|
|
|
Quarter Ended July 31, 2005 |
|
|
|
|
|
Completed SOP 97-2 revenue contract checklists for all
Camtronics recognized system revenue transactions. |
|
|
|
Completed revenue cycle narratives and the Committee of
Sponsoring Organizations of the Treadway Commission
(COSO) Matrices for Camtronics software revenue
cycles. All key controls were identified, documented, and tested
during the quarters ended April 30, 2005 and July 31,
2005 to ensure internal controls functioning in compliance with
stated policies and procedures. |
|
|
|
Reviewed and revised Camtronics customer order forms,
contracts, and invoices, where required to ensure terms and
conditions were aligned with the revenue recognition
requirements set forth in SOP 97-2. |
|
|
|
Reorganized Camtronics customer contract files to ensure
that all documentation is present to support each revenue
transaction. |
|
|
|
Implemented requirement that Camtronics salespersons to
sign letters representing that all terms and conditions of the
order with the customer have been disclosed to the company and
included in the customer file. |
|
|
|
Implemented requirement that the President and Controller of
Camtronics, on a quarterly basis, contact each customer with
recognized system revenues in the quarterly period in excess of
$100,000 and complete a standardized checklist for the purpose
of obtaining assurances from the customer that it has received
and fully accepted all hardware, software, and other related
services in accordance with the terms and conditions of the
customers order. |
31
|
|
|
Quarter Ended October 31, 2005 |
|
|
|
|
|
Implemented additional controls over the analysis of deferred
revenue and the timing of revenue recognition of these amounts. |
While these remediation measures have improved the design
effectiveness of the internal control over financial reporting,
not all of the newly designed controls were operating
effectively at October 31, 2005 and not all had operated
for a sufficient period of time prior to October 31, 2005
to demonstrate operating effectiveness.
There were no changes to the Companys internal control
over financial reporting, other than the changes discussed
above, during the first quarter ended October 31, 2005 that
materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial
reporting.
The certifications of the Companys chief executive officer
and chief financial officer attached as Exhibits 31.1 and
31.2 to this Quarterly Report on Form 10-Q include, in
paragraph 4 of such certifications, information concerning
the Companys disclosure controls and procedures and
internal control over financial reporting. Such certifications
should be read in conjunction with the information contained in
this Item 4 for a more complete understanding of the
matters covered by such certifications.
PART II OTHER INFORMATION
|
|
Item 2. |
Unregistered Sales of Equity Securities and Use of
Proceeds |
All dollar amounts in this Item 2 are in thousands, except
per share data
The Company has a Key Employee Stock Option Plan dated
June 11, 1998 (as amended). From August 1, 2005
through October 14, 2005, a total of 7,439 shares of
common stock of the Company were issued and sold by the Company
under this Plan, at an average exercise price of $38.24 per
share or $284 in total. The Company recently discovered that
none of such shares were registered under the Securities Act of
1933 and that the sales of such shares were likely made in
contravention of the registration requirements of Section 5
of the Securities Act. The Company filed a registration
statement on Form S-8 on October 14, 2005 covering all
remaining shares issuable under such Plan.
On June 7, 2005, the Company announced that the Board of
Directors had authorized the repurchase of up to $25,000 of the
Companys common stock in the public market or in privately
negotiated transactions. The stock repurchase will be funded
using the Companys working capital and is expected to be
completed during fiscal 2006. As of October 31, 2005, the
Company had not repurchased any of its common stock under this
program.
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|
|
Exhibit |
|
Description |
|
|
|
|
31 |
.1 |
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/Rule 15d-15(a) of the Securities
Exchange Act of 1934, as amended |
|
|
31 |
.2 |
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/Rule 15d-15(a) of the Securities
Exchange Act of 1934, as amended |
|
|
32 |
.1 |
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(b)/Rule 15d-15(b) of the Securities
Exchange Act of 1934, as amended |
|
|
32 |
.2 |
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(b)/Rule 15d-15(b) of the Securities
Exchange Act of 1934, as amended |
32
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 |
|
|
/s/ John W. Wood Jr. |
|
|
|
|
|
John W. Wood Jr. |
|
President and Chief Executive Officer |
|
(Principal Executive Officer) |
Date: December 12, 2005
|
|
|
John J. Millerick |
|
Senior Vice President, |
|
Chief Financial Officer and Treasurer |
|
(Principal Financial Officer) |
Date: December 12, 2005
33
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
Description |
|
|
|
|
31 |
.1 |
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/Rule 15d-15(a) of the Securities
Exchange Act of 1934, as amended |
|
|
31 |
.2 |
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/Rule 15d-15(a) of the Securities
Exchange Act of 1934, as amended |
|
|
32 |
.1 |
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(b)/Rule 15d-15(b) of the Securities
Exchange Act of 1934, as amended |
|
|
32 |
.2 |
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(b)/Rule 15d-15(b) of the Securities
Exchange Act of 1934, as amended |
34