e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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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
April 30, 2006
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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
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Commission File Number 0-6715
Analogic Corporation
(Exact name of registrant as
specified in its charter)
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Massachusetts
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04-2454372
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(State or other jurisdiction
of
incorporation or organization)
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(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)
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(978) 977-3000
(Registrants telephone
number, including area code)
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 a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer o Accelerated
filer þ Non-accelerated
filer 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 May 31,
2006 was 13,948,302.
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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|
|
|
|
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April 30,
|
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July 31,
|
|
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2006
|
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2005
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|
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ASSETS
|
Current assets:
|
|
|
|
|
|
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|
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Cash and cash equivalents
|
|
$
|
250,907
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|
|
$
|
208,116
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Marketable securities, at fair
value
|
|
|
6,794
|
|
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|
12,338
|
|
Accounts and notes receivable, net
of allowance for doubtful accounts of $1,180 at April 30,
2006, and $1,973 at July 31, 2005
|
|
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51,634
|
|
|
|
50,978
|
|
Inventories
|
|
|
69,624
|
|
|
|
64,290
|
|
Refundable and deferred income
taxes
|
|
|
13,588
|
|
|
|
11,657
|
|
Other current assets
|
|
|
7,187
|
|
|
|
7,343
|
|
Current assets of discontinued
operations (Note 2)
|
|
|
|
|
|
|
41,939
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
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|
399,734
|
|
|
|
396,661
|
|
Property, plant and equipment, net
|
|
|
81,481
|
|
|
|
79,442
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|
Investments in and advances to
affiliated companies
|
|
|
792
|
|
|
|
983
|
|
Capitalized software, net
|
|
|
8,608
|
|
|
|
8,463
|
|
Intangible assets, net
|
|
|
2,488
|
|
|
|
3,688
|
|
Other assets
|
|
|
4,774
|
|
|
|
5,579
|
|
Deferred income taxes
|
|
|
2,851
|
|
|
|
1,889
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
500,728
|
|
|
$
|
496,705
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable, trade
|
|
$
|
21,189
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|
|
$
|
20,833
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Accrued liabilities
|
|
|
22,230
|
|
|
|
19,802
|
|
Deferred revenue
|
|
|
5,884
|
|
|
|
6,114
|
|
Advance payments
|
|
|
1,891
|
|
|
|
8,273
|
|
Accrued income taxes
|
|
|
8,499
|
|
|
|
11,167
|
|
Current liabilities of
discontinued operations (Note 2)
|
|
|
|
|
|
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30,445
|
|
|
|
|
|
|
|
|
|
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Total current liabilities
|
|
|
59,693
|
|
|
|
96,634
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
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Deferred income taxes
|
|
|
1,391
|
|
|
|
914
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
1,391
|
|
|
|
914
|
|
|
|
|
|
|
|
|
|
|
Commitments and guarantees
(Note 14)
|
|
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|
|
|
|
|
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Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $.05 par value
|
|
|
697
|
|
|
|
691
|
|
Capital in excess of par value
|
|
|
59,004
|
|
|
|
47,081
|
|
Retained earnings
|
|
|
374,612
|
|
|
|
348,499
|
|
Accumulated other comprehensive
income
|
|
|
5,331
|
|
|
|
2,886
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
439,644
|
|
|
|
399,157
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders Equity
|
|
$
|
500,728
|
|
|
$
|
496,705
|
|
|
|
|
|
|
|
|
|
|
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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|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Net revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
75,670
|
|
|
$
|
77,646
|
|
|
$
|
247,355
|
|
|
$
|
215,766
|
|
Engineering
|
|
|
3,415
|
|
|
|
5,221
|
|
|
|
13,346
|
|
|
|
13,630
|
|
Other
|
|
|
2,221
|
|
|
|
1,715
|
|
|
|
7,026
|
|
|
|
6,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
81,306
|
|
|
|
84,582
|
|
|
|
267,727
|
|
|
|
235,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
46,606
|
|
|
|
47,543
|
|
|
|
149,282
|
|
|
|
132,607
|
|
Engineering
|
|
|
4,222
|
|
|
|
3,817
|
|
|
|
14,064
|
|
|
|
11,359
|
|
Other
|
|
|
1,348
|
|
|
|
1,256
|
|
|
|
3,926
|
|
|
|
3,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
52,176
|
|
|
|
52,616
|
|
|
|
167,272
|
|
|
|
147,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
29,130
|
|
|
|
31,966
|
|
|
|
100,455
|
|
|
|
87,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and product development
|
|
|
12,382
|
|
|
|
13,540
|
|
|
|
39,558
|
|
|
|
38,433
|
|
Selling and marketing
|
|
|
6,972
|
|
|
|
7,172
|
|
|
|
21,600
|
|
|
|
21,694
|
|
General and administrative
|
|
|
8,757
|
|
|
|
9,968
|
|
|
|
27,058
|
|
|
|
28,488
|
|
Restructuring and asset impairment
charges
|
|
|
84
|
|
|
|
1,988
|
|
|
|
1,612
|
|
|
|
2,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
28,195
|
|
|
|
32,668
|
|
|
|
89,828
|
|
|
|
91,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
935
|
|
|
|
(702
|
)
|
|
|
10,627
|
|
|
|
(3,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(2,653
|
)
|
|
|
(1,484
|
)
|
|
|
(7,155
|
)
|
|
|
(3,369
|
)
|
Interest expense
|
|
|
43
|
|
|
|
|
|
|
|
43
|
|
|
|
2
|
|
Equity (gain) loss in
unconsolidated affiliates
|
|
|
332
|
|
|
|
(972
|
)
|
|
|
787
|
|
|
|
(749
|
)
|
Gain on sale of marketable
securities
|
|
|
|
|
|
|
(43,829
|
)
|
|
|
|
|
|
|
(43,829
|
)
|
Other
|
|
|
(116
|
)
|
|
|
312
|
|
|
|
(158
|
)
|
|
|
(292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (income) expense
|
|
|
(2,394
|
)
|
|
|
(45,973
|
)
|
|
|
(6,483
|
)
|
|
|
(48,237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before income taxes and cumulative effect of change in
accounting principle
|
|
|
3,329
|
|
|
|
45,271
|
|
|
|
17,110
|
|
|
|
44,569
|
|
Provision for income taxes
|
|
|
819
|
|
|
|
16,282
|
|
|
|
4,440
|
|
|
|
16,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before discontinued operations and cumulative effect of change
in accounting principle
|
|
|
2,510
|
|
|
|
28,989
|
|
|
|
12,670
|
|
|
|
28,421
|
|
Income (loss) from discontinued
operations (net of income tax benefit of $3,664 and $3,805 for
the three and nine months ended April 30, 2005, and income
tax provision of $126 for the nine months ended April 30,
2006)
|
|
|
|
|
|
|
(869
|
)
|
|
|
159
|
|
|
|
(3,846
|
)
|
Gain on disposal of discontinued
operations (net of income tax of $9,104)
|
|
|
|
|
|
|
|
|
|
|
20,640
|
|
|
|
|
|
Cumulative effect of change in
accounting principle (net of income tax of $61)
|
|
|
|
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,510
|
|
|
$
|
28,120
|
|
|
$
|
33,589
|
|
|
$
|
24,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.18
|
|
|
$
|
2.14
|
|
|
$
|
0.93
|
|
|
$
|
2.10
|
|
Income (loss) from discontinued
operations, net of tax
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
0.01
|
|
|
|
(0.29
|
)
|
Gain on disposal of discontinued
operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
1.51
|
|
|
|
|
|
Cumulative effect of change in
accounting principle, net of tax
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.18
|
|
|
$
|
2.07
|
|
|
$
|
2.46
|
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.18
|
|
|
$
|
2.14
|
|
|
$
|
0.92
|
|
|
$
|
2.10
|
|
Income (loss) from discontinued
operations, net of tax
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
0.01
|
|
|
|
(0.29
|
)
|
Gain on disposal of discontinued
operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
1.50
|
|
|
|
|
|
Cumulative effect of change in
accounting principle, net of tax
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.18
|
|
|
$
|
2.07
|
|
|
$
|
2.44
|
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
13,732
|
|
|
|
13,573
|
|
|
|
13,667
|
|
|
|
13,546
|
|
Diluted
|
|
|
13,956
|
|
|
|
13,614
|
|
|
|
13,834
|
|
|
|
13,588
|
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
4
ANALOGIC
CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
33,589
|
|
|
$
|
24,575
|
|
Less:
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations
|
|
|
159
|
|
|
|
(3,846
|
)
|
Gain on disposal of discontinued
operations
|
|
|
20,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
and cumulative effect of change in accounting principle
|
|
|
12,790
|
|
|
|
28,421
|
|
Adjustments to reconcile net income
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
2,206
|
|
|
|
(3,127
|
)
|
Depreciation and amortization
|
|
|
12,044
|
|
|
|
12,982
|
|
Cumulative effect of change on
accounting principle
|
|
|
(120
|
)
|
|
|
|
|
Allowance for doubtful accounts
|
|
|
12
|
|
|
|
294
|
|
Gain on sale of property, plant,
and equipment
|
|
|
(55
|
)
|
|
|
(15
|
)
|
Equity (gain) loss in
unconsolidated affiliates
|
|
|
787
|
|
|
|
(749
|
)
|
Equity loss in unconsolidated
affiliate classified as research and product development expense
|
|
|
|
|
|
|
759
|
|
Restructuring and asset impairment
charges
|
|
|
2,791
|
|
|
|
2,935
|
|
Gain on sale of Cedara investment
|
|
|
|
|
|
|
(43,829
|
)
|
Share-based compensation expense
|
|
|
2,479
|
|
|
|
1,532
|
|
Excess tax benefit from share-based
compensation
|
|
|
(180
|
)
|
|
|
|
|
Net changes in operating assets and
liabilities (Note 11)
|
|
|
(25,679
|
)
|
|
|
20,084
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY CONTINUING
OPERATIONS
|
|
|
7,075
|
|
|
|
19,287
|
|
NET CASH PROVIDED BY DISCONTINUED
OPERATIONS
|
|
|
1,898
|
|
|
|
3,005
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING
ACTIVITIES
|
|
|
8,973
|
|
|
|
22,292
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Investments in and advances to
affiliated companies
|
|
|
(1,149
|
)
|
|
|
(2,260
|
)
|
Proceeds from the sale of Cedara
investment
|
|
|
|
|
|
|
50,752
|
|
Proceeds from the sale of Camtronics
|
|
|
38,906
|
|
|
|
|
|
Additions to property, plant and
equipment
|
|
|
(10,005
|
)
|
|
|
(8,069
|
)
|
Capitalized software
|
|
|
(1,039
|
)
|
|
|
(2,965
|
)
|
Proceeds from the sale of property,
plant and equipment
|
|
|
213
|
|
|
|
90
|
|
Maturities of marketable securities
|
|
|
5,400
|
|
|
|
11,060
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY CONTINUING
OPERATIONS
|
|
|
32,326
|
|
|
|
48,608
|
|
NET CASH USED FOR DISCONTINUED
OPERATIONS
|
|
|
|
|
|
|
(1,766
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY INVESTING
ACTIVITIES
|
|
|
32,326
|
|
|
|
46,842
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Issuance of stock pursuant to
exercise of stock options and employee stock purchase plan
|
|
|
8,851
|
|
|
|
1,159
|
|
Excess tax benefit from share-based
compensation
|
|
|
180
|
|
|
|
|
|
Purchase of common stock
|
|
|
(3,883
|
)
|
|
|
|
|
Dividends paid to shareholders
|
|
|
(3,878
|
)
|
|
|
(3,288
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED FOR)
CONTINUING OPERATIONS
|
|
|
1,270
|
|
|
|
(2,129
|
)
|
NET CASH USED FOR DISCONTINUED
OPERATIONS
|
|
|
|
|
|
|
(743
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES
|
|
|
1,270
|
|
|
|
(2,872
|
)
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON
CASH OF CONTINUING OPERATIONS
|
|
|
222
|
|
|
|
(383
|
)
|
EFFECT OF EXCHANGE RATE CHANGES ON
CASH OF DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222
|
|
|
|
(362
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH
EQUIVALENTS
|
|
|
42,791
|
|
|
|
65,900
|
|
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD
|
|
|
208,116
|
|
|
|
149,549
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF
PERIOD
|
|
$
|
250,907
|
|
|
$
|
215,449
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Income taxes, net
|
|
$
|
15,732
|
|
|
$
|
4,417
|
|
Interest
|
|
|
43
|
|
|
|
21
|
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
5
(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
necessary for a fair statement of the results for all interim
periods presented. Certain financial statement items for the
three and nine months ended April 30, 2005 have been
reclassified to conform to the current period presentation.
The results of operations for the three and nine months ended
April 30, 2006, 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.
|
|
2.
|
Discontinued
operations:
|
During the second quarter of fiscal 2006, the Company sold its
wholly owned subsidiary Camtronics Medical Systems, Ltd.
(Camtronics) for $40,000 in cash, and realized net
proceeds of $38,906 after transactional costs. The Company
recorded a net gain on the sale of Camtronics of $20,640, net of
a tax provision of $9,104, or $1.50 per diluted share. In
determining the gain, the Company also provided for estimated
indemnification and tax liabilities of $1,102.
Prior to the sale, 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.
Revenues and net income (loss) for Camtronics for the three and
nine months ended April 30, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Total net sales
|
|
$
|
|
|
|
$
|
9,584
|
|
|
$
|
11,495
|
|
|
$
|
26,751
|
|
Net income (loss)
|
|
|
|
|
|
|
(869
|
)
|
|
|
159
|
|
|
|
(3,846
|
)
|
6
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following represents a detailed listing of the current
assets and current liabilities of discontinued operations:
|
|
|
|
|
|
|
July 31,
|
|
|
|
2005
|
|
|
Current assets of discontinued
operations:
|
|
|
|
|
Accounts receivable, net
|
|
$
|
5,635
|
|
Inventories
|
|
|
6,422
|
|
Costs related to deferred revenue
|
|
|
11,771
|
|
Deferred income taxes
|
|
|
3,271
|
|
Other current assets
|
|
|
651
|
|
Property, plant and equipment, net
|
|
|
8,112
|
|
Capitalized software, net
|
|
|
4,048
|
|
Goodwill
|
|
|
746
|
|
Intangible assets, net
|
|
|
1,283
|
|
|
|
|
|
|
Total current assets
|
|
$
|
41,939
|
|
|
|
|
|
|
Current liabilities of
discontinued operations:
|
|
|
|
|
Obligations under capital leases
|
|
$
|
162
|
|
Account payable, trade
|
|
|
1,699
|
|
Accrued liabilities
|
|
|
2,684
|
|
Deferred revenue
|
|
|
22,667
|
|
Advance payments
|
|
|
1,950
|
|
Deferred income taxes
|
|
|
850
|
|
Accumulated other comprehensive
income
|
|
|
433
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
30,445
|
|
|
|
|
|
|
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.
7
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table presents share-based compensation expenses
for continuing operations included in the Companys
unaudited consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2006
|
|
|
Cost of product sales
|
|
$
|
48
|
|
|
$
|
164
|
|
Research and product development
|
|
|
217
|
|
|
|
755
|
|
Selling and marketing
|
|
|
48
|
|
|
|
162
|
|
General and administrative
|
|
|
463
|
|
|
|
1,398
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
before tax
|
|
|
776
|
|
|
|
2,479
|
|
Provision for income tax
|
|
|
143
|
|
|
|
472
|
|
|
|
|
|
|
|
|
|
|
Net share-based compensation
expense
|
|
$
|
633
|
|
|
$
|
2,007
|
|
|
|
|
|
|
|
|
|
|
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
forfeiture rate, 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 and nine months ended April 30, 2006.
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 and Nine Months Ended
|
|
|
|
April 30,
|
|
|
|
2006
|
|
|
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 qualifies 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 and nine months ended
April 30, 2005, 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
8
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
Prior to the adoption of SFAS 123R, the Company presented
all tax benefits resulting from the exercise of stock options as
operating cash flows in its statements of cash flows.
SFAS 123R requires the cash flows resulting from the tax
benefits resulting from tax deductions in excess of compensation
cost recognized for the options (excess tax
benefits) to be classified as financing cash flows. For
the nine month period ended April 30, 2006 there was $180
of excess tax benefit classified as a financing cash inflow.
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 and
nine months ended April 30, 2005 as if the Company had
applied the fair value recognition provisions of SFAS 123
to share-based employee awards:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2005
|
|
|
2005
|
|
|
Income from continuing operations,
as reported
|
|
$
|
28,989
|
|
|
$
|
28,421
|
|
Add: Employee compensation expense
for restricted stock options included in reported income
|
|
|
228
|
|
|
|
829
|
|
Less: Total employee compensation
expense for options determined under the fair value method
|
|
|
(851
|
)
|
|
|
(2,841
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma income from continuing
operations
|
|
$
|
28,366
|
|
|
$
|
26,409
|
|
|
|
|
|
|
|
|
|
|
Income per share from continuing
operations:
|
|
|
|
|
|
|
|
|
Basic as reported
|
|
$
|
2.14
|
|
|
$
|
2.10
|
|
pro
forma
|
|
|
2.09
|
|
|
|
1.95
|
|
Diluted as
reported
|
|
|
2.14
|
|
|
|
2.10
|
|
pro
forma
|
|
|
2.08
|
|
|
|
1.94
|
|
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
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2005
|
|
|
2005
|
|
|
Expected option term
|
|
|
5 years
|
|
|
|
5 years
|
|
Expected volatility factor
|
|
|
35
|
%
|
|
|
39
|
%
|
Risk-free interest rate
|
|
|
3.65
|
%
|
|
|
3.32
|
%
|
Expected annual dividend yield
|
|
|
.7
|
%
|
|
|
.8
|
%
|
Stock
Incentive Plans
At April 30, 2006, 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
9
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 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 and Nine Months Ended
|
|
|
|
April 30,
|
|
|
|
2006
|
|
|
Expected option term
|
|
|
.5 years
|
|
Expected volatility factor
|
|
|
25
|
%
|
Risk-free interest rate
|
|
|
3.94
|
%
|
Expected annual dividend yield
|
|
|
.7
|
%
|
At April 30, 2006, 1,022,865 shares were reserved for
grant under the above stock option, bonus and purchase plans.
10
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the stock option and restricted
stock transactions from July 31, 2005 to April 30,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Number of
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
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 (forfeited and expired)
|
|
|
(3,000
|
)
|
|
|
46.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 31,
2005
|
|
|
668,723
|
|
|
|
41.96
|
|
|
|
4.17
|
|
|
|
|
|
|
|
185,512
|
|
|
|
43.48
|
|
Granted
|
|
|
7,500
|
|
|
|
46.85
|
|
|
|
|
|
|
|
|
|
|
|
3,243
|
|
|
|
52.98
|
|
Exercised
|
|
|
(83,701
|
)
|
|
|
37.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,875
|
)
|
|
|
40.42
|
|
Cancelled (forfeited and expired)
|
|
|
(42,575
|
)
|
|
|
40.79
|
|
|
|
|
|
|
|
|
|
|
|
(3,750
|
)
|
|
|
41.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding January 31,
2006
|
|
|
549,947
|
|
|
|
42.75
|
|
|
|
4.24
|
|
|
|
|
|
|
|
170,130
|
|
|
|
43.80
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(113,400
|
)
|
|
|
41.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,750
|
)
|
|
|
46.10
|
|
Cancelled (forfeited and expired)
|
|
|
(2,925
|
)
|
|
|
41.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding April 30,
2006
|
|
|
433,622
|
|
|
|
43.03
|
|
|
|
4.45
|
|
|
|
8,697
|
|
|
|
158,380
|
|
|
|
43.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Exercisable at
April 30, 2006
|
|
|
139,297
|
|
|
|
40.86
|
|
|
|
3.57
|
|
|
|
3,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Vested or expected to
vest at April 30, 2006
|
|
|
396,577
|
|
|
|
42.92
|
|
|
|
4.39
|
|
|
|
7,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three and nine months ended April 30, 2006, the
total intrinsic value of options exercised (i.e. the difference
between the market price and the price paid by the employee to
exercise the options) was $2,449 and $3,953 respectively and the
total amount of cash received from the exercise of these options
was $4,728 and $8,665 respectively. The total fair value of
restricted stock grants that vested during the three and nine
months period ended April 30, 2006 was $754 and $1,722,
respectively.
11
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes information about stock options
outstanding at April 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Vested Options
|
|
|
|
|
|
|
Weighted Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
of Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
|
Contract Life
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Range of Exercise
Prices
|
|
Outstanding
|
|
|
(years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$29.31 - $40.95
|
|
|
108,990
|
|
|
|
2.86
|
|
|
$
|
37.83
|
|
|
|
62,965
|
|
|
$
|
36.37
|
|
40.98 - 41.40
|
|
|
109,425
|
|
|
|
5.17
|
|
|
|
41.26
|
|
|
|
10,867
|
|
|
|
40.98
|
|
41.72 - 47.00
|
|
|
115,606
|
|
|
|
4.89
|
|
|
|
43.22
|
|
|
|
50,569
|
|
|
|
43.32
|
|
48.54 - 52.20
|
|
|
99,601
|
|
|
|
4.91
|
|
|
|
50.47
|
|
|
|
14,896
|
|
|
|
51.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.31 - 52.20
|
|
|
433,622
|
|
|
|
4.45
|
|
|
|
43.03
|
|
|
|
139,297
|
|
|
|
40.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 30, 2006, there was $8,565 of total
unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under the Companys stock
option and restricted stock bonus plans. That cost is expected
to be recognized over a weighted-average period of
2.70 years. The Company amortizes stock-based compensation
on the straight-line method.
The actual tax benefit realized for the tax deductions from
option exercise of the share-based payment arrangements totaled
$201 and $578 for the three and nine months ended April 30,
2006.
|
|
4.
|
Restructuring
and asset impairment charges:
|
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
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Medical Technology Products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Imaging Products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shenzhen Anke High-Tech Co. Ltd
|
|
$
|
|
|
|
$
|
|
|
|
$
|
275
|
|
|
$
|
|
|
PhotoDetection Systems, Inc.
|
|
|
|
|
|
|
1,148
|
|
|
|
216
|
|
|
|
2,095
|
|
Capitalized software
|
|
|
|
|
|
|
479
|
|
|
|
|
|
|
|
479
|
|
Manufacturing license
|
|
|
|
|
|
|
361
|
|
|
|
|
|
|
|
361
|
|
Corporate and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SKY Computers, Inc.
|
|
|
84
|
|
|
|
|
|
|
|
1,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
84
|
|
|
$
|
1,988
|
|
|
$
|
1,612
|
|
|
$
|
2,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shenzhen
Anke High-Tech Co. Ltd. (SAHCO)
The Company has a 44.6% equity interest in SAHCO located in the
Peoples Republic of China. 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 Securities and determined that at
January 31, 2006, its investment in SAHCO was impaired
based on its current fair value. In the second quarter of fiscal
2006, the Company recorded an asset impairment charge related to
this investment of $275 which represented the Companys
book value.
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,
12
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Massachusetts. PDS, a privately held company, developed
proprietary detection systems for high-performance Positron
Tomography, a rapidly growing medical diagnostic imaging
modality. In addition, the Company also received a convertible
promissory note in the principal amount of $1,367 and an
exclusive license of PDS technology for non-PET products. The
convertible promissory note is convertible by the Company into
1,025,559 shares of Series B Convertible Participating
Preferred Stock. During fiscal 2005, upon PDS achievement
of a technology milestone, the exclusive license of PDS
technology reverted back to PDS and the Company received a
warrant for the purchase of 2,250,563 shares of
Series B Convertible Participating Preferred Stock. 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 (EITF
02-14). 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 Securities and determined that at
October 31, 2005, its investments 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. During
the second quarter of fiscal 2006, the Company invested $471 in
PDS. The Company reviewed this investment for
other-than-temporary
impairment and determined that at January 31, 2006 its
investment in PDS was not impaired based on its current fair
value. At January 31, 2006, the Companys investment
in PDS was recorded at a value of $471.
In February 2006, the Company elected to convert the outstanding
principal represented by the convertible promissory note and to
exercise the warrant received into shares of PDS Series B
Convertible Participating Preferred Stock, increasing the
Companys equity interest in PDS to 43.8%. Following the
increase in equity interest, the Company re-evaluated the
accounting for its investment in PDS, including the
consideration of FASB Interpretation No. 46 (revised
December 2003) Consolidation of Variable Interest
Entities an interpretation of ARB No. 51, and
EITF 02-14
and determined that its investment should be accounted for under
the equity method. For the quarter ended April 30, 2006 the
Company recorded its equity share of PDS losses of $332, and the
Companys investment in PDS, net of additional investments,
at April 30, 2006 was $542.
SKY
Computers, Inc.
In September 2005, the Company announced a plan 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. 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 or Disposal Activities, the Company recorded
an additional severance charge of $84 for the three months ended
April 30, 2006.
13
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of restructuring activities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
Capital Assets
|
|
|
Sub-total
|
|
|
Inventory
|
|
|
|
|
|
|
Severance
|
|
|
Abandoned
|
|
|
Restructuring
|
|
|
Impairment
|
|
|
Total
|
|
|
Balance at July 31, 2005
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Restructuring charge
|
|
|
499
|
|
|
|
310
|
|
|
|
809
|
|
|
|
1,179
|
|
|
|
1,988
|
|
Cash payments
|
|
|
(15
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2005
|
|
|
484
|
|
|
|
310
|
|
|
|
794
|
|
|
|
1,179
|
|
|
|
1,973
|
|
Restructuring charge
|
|
|
228
|
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
228
|
|
Cash payments
|
|
|
(444
|
)
|
|
|
|
|
|
|
(444
|
)
|
|
|
|
|
|
|
(444
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2006
|
|
|
268
|
|
|
|
310
|
|
|
|
578
|
|
|
|
1,179
|
|
|
|
1,757
|
|
Restructuring charge
|
|
|
84
|
|
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
84
|
|
Cash payments
|
|
|
(95
|
)
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 30, 2006
|
|
$
|
257
|
|
|
$
|
310
|
|
|
$
|
567
|
|
|
$
|
1,179
|
|
|
$
|
1,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company estimates that an additional $92 of involuntary
employee severance 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 April 30, 2006 will approximate $349 in
involuntary employee severance.
|
|
5.
|
Balance
sheet information:
|
Additional information for certain balance sheet accounts is as
follows for the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
July 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
38,566
|
|
|
$
|
37,461
|
|
Work-in-process
|
|
|
18,778
|
|
|
|
15,275
|
|
Finished goods
|
|
|
12,280
|
|
|
|
11,554
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
69,624
|
|
|
$
|
64,290
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Accrued employee compensation and
benefits
|
|
$
|
10,864
|
|
|
$
|
9,817
|
|
Accrued warranty
|
|
|
4,790
|
|
|
|
4,057
|
|
Other
|
|
|
6,576
|
|
|
|
5,928
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,230
|
|
|
$
|
19,802
|
|
|
|
|
|
|
|
|
|
|
Advance payments:
|
|
|
|
|
|
|
|
|
Long-lead time components(A)
|
|
$
|
|
|
|
$
|
6,170
|
|
Ramp-up
funds
|
|
|
472
|
|
|
|
475
|
|
Customer deposits
|
|
|
1,419
|
|
|
|
1,628
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,891
|
|
|
$
|
8,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Long-lead time components represent advance payments received
from L-3 Communications based on certain orders received for the
Companys EXACT systems. |
14
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
6.
|
Results
of affiliated companies:
|
Summarized results of operations of the Companys partially
owned equity affiliates, SAHCO and PDS for the three and nine
months ended April 30, 2006 and 2005, and Cedara Software
Corporation for the nine months ended April 30, 2005 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Net revenue
|
|
$
|
2,820
|
|
|
$
|
9,880
|
|
|
$
|
11,356
|
|
|
$
|
47,802
|
|
Gross margin
|
|
|
845
|
|
|
|
3,654
|
|
|
|
4,092
|
|
|
|
27,773
|
|
Income (loss) from operations
|
|
|
(1,050
|
)
|
|
|
2,154
|
|
|
|
(1,854
|
)
|
|
|
5,674
|
|
Net income (loss)
|
|
|
(954
|
)
|
|
|
2,252
|
|
|
|
(1,834
|
)
|
|
|
5,446
|
|
Intangible assets at April 30, 2006 and July 31, 2005,
which will continue to be amortized, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2006
|
|
|
July 31, 2005
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Intellectual Property
|
|
$
|
8,264
|
|
|
$
|
5,776
|
|
|
$
|
2,488
|
|
|
$
|
8,264
|
|
|
$
|
4,576
|
|
|
$
|
3,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to acquired intangible assets was
$407 and $403 for the three months ended April 30, 2006 and
2005, respectively; and $1,218 and $1,209 for the nine months
ended April 30, 2006 and 2005 respectively. The estimated
life of intangible assets is 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 three months)
|
|
$
|
413
|
|
2007
|
|
|
1,652
|
|
2008
|
|
|
406
|
|
2009
|
|
|
17
|
|
|
|
|
|
|
|
|
$
|
2,488
|
|
|
|
|
|
|
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.
15
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
2,510
|
|
|
$
|
28,989
|
|
|
$
|
12,670
|
|
|
$
|
28,421
|
|
|
|
|
|
Income (loss) from discontinued
operations, net of tax
|
|
|
|
|
|
|
(869
|
)
|
|
|
159
|
|
|
|
(3,846
|
)
|
|
|
|
|
Gain on disposal of discontinued
operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
20,640
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in
accounting principle, net of tax
|
|
|
|
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,510
|
|
|
$
|
28,120
|
|
|
$
|
33,589
|
|
|
$
|
24,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding-basic
|
|
|
13,732
|
|
|
|
13,573
|
|
|
|
13,667
|
|
|
|
13,546
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock
|
|
|
224
|
|
|
|
41
|
|
|
|
167
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding-diluted
|
|
|
13,956
|
|
|
|
13,614
|
|
|
|
13,834
|
|
|
|
13,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share,
net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.18
|
|
|
$
|
2.14
|
|
|
$
|
0.93
|
|
|
$
|
2.10
|
|
|
|
|
|
Income (loss) from discontinued
operations
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
0.01
|
|
|
|
(0.29
|
)
|
|
|
|
|
Gain on disposal of discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
1.51
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.18
|
|
|
$
|
2.07
|
|
|
$
|
2.46
|
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share,
net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.18
|
|
|
$
|
2.14
|
|
|
$
|
0.92
|
|
|
$
|
2.10
|
|
|
|
|
|
Income (loss) from discontinued
operations
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
0.01
|
|
|
|
(0.29
|
)
|
|
|
|
|
Gain on disposal of discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
1.50
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.18
|
|
|
$
|
2.07
|
|
|
$
|
2.44
|
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares related to
outstanding stock options
|
|
|
22
|
|
|
|
288
|
|
|
|
207
|
|
|
|
324
|
|
|
|
|
|
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; a dividend of
$0.10 per common share on December 6, 2005, payable on
January 3, 2006 to shareholders of record on
December 20, 2005; and a dividend of $0.10 per common share
on March 7, 2006, payable on April 4, 2006 to
shareholders of record on March 21, 2006.
16
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
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
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Income from continuing operations
|
|
$
|
2,510
|
|
|
$
|
28,989
|
|
|
$
|
12,670
|
|
|
$
|
28,421
|
|
Income (loss) from discontinued
operations, net of tax
|
|
|
|
|
|
|
(869
|
)
|
|
|
159
|
|
|
|
(3,846
|
)
|
Gain on disposal of discontinued
operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
20,640
|
|
|
|
|
|
Cumulative effect of change in
accounting principle, net of tax
|
|
|
|
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,510
|
|
|
$
|
28,120
|
|
|
$
|
33,589
|
|
|
$
|
24,575
|
|
Other comprehensive income (loss),
net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses from marketable
securities, net of tax benefit of $16 and $72, for the three
months ended April 30, 2006 and 2005, and tax benefit of
$57 and $174 for the nine months ended April 30, 2006 and
2005, respectively
|
|
|
(24
|
)
|
|
|
(109
|
)
|
|
|
(87
|
)
|
|
|
(265
|
)
|
Unrealized gain from securities
classified as investment net of taxes of $16,201
|
|
|
|
|
|
|
(24,743
|
)
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment, net of tax provision of $68 and $6 for the three
months ended April 30, 2006 and 2005, and tax provision of
$421 and $180 for the nine months ended April 30, 2006 and
2005, respectively
|
|
|
1,891
|
|
|
|
(585
|
)
|
|
|
2,532
|
|
|
|
2,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
4,377
|
|
|
$
|
2,683
|
|
|
$
|
36,034
|
|
|
$
|
26,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Accounts and notes receivable
|
|
$
|
(379
|
)
|
|
$
|
(85
|
)
|
Refundable income taxes
|
|
|
(4,918
|
)
|
|
|
|
|
Accounts receivable from affiliates
|
|
|
773
|
|
|
|
31
|
|
Inventories
|
|
|
(5,532
|
)
|
|
|
(2,344
|
)
|
Other current assets
|
|
|
(218
|
)
|
|
|
(1,717
|
)
|
Other assets
|
|
|
7
|
|
|
|
(5,185
|
)
|
Accounts payable, trade
|
|
|
24
|
|
|
|
2,952
|
|
Accrued liabilities
|
|
|
2,067
|
|
|
|
(403
|
)
|
Advance payments and deferred
revenue
|
|
|
(6,769
|
)
|
|
|
10,748
|
|
Accrued income taxes
|
|
|
(10,734
|
)
|
|
|
16,087
|
|
|
|
|
|
|
|
|
|
|
Net changes in operating assets
and liabilities
|
|
$
|
(25,679
|
)
|
|
$
|
20,084
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate on continuing operations for the nine
months ended April 30, 2006 and 2005 was 25.9% and 36.2%,
respectively. The tax rate on the gain on sale of Camtronics was
30.6%. The effective tax rate for discontinued operations for
the nine months ended April 30, 2006 and 2005, was 44.2%
and a benefit of 49.7%, respectively. The lower effective tax
rate on continuing operations in the current nine month period
is largely the result of a higher percentage mix of
U.S. based income due to the sale of Cedara securities
during the nine months ended April 30, 2005, and from a
discrete item consisting of
provision-to-return
adjustments for fiscal year 2005 tax returns filed in the
current quarter, which provided an out-of-period tax benefit of
$329, or 1.9%. The lower rate caused by the income mix was
partially offset by the expiration of the Federal research and
development credit and the phasing out of the extraterritorial
income exclusion.
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.
18
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. Previously, Camtronics had been reported
as a separate segment.
The table below presents information about the Companys
reportable segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical technology products from
external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical imaging products
|
|
$
|
47,862
|
|
|
$
|
45,858
|
|
|
$
|
143,433
|
|
|
$
|
130,223
|
|
B-K Medical
|
|
|
17,453
|
|
|
|
15,571
|
|
|
|
52,819
|
|
|
|
53,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,315
|
|
|
|
61,429
|
|
|
|
196,252
|
|
|
|
183,609
|
|
Security technology products from
external customers
|
|
|
11,524
|
|
|
|
18,290
|
|
|
|
56,378
|
|
|
|
36,080
|
|
Corporate and other
|
|
|
4,467
|
|
|
|
4,863
|
|
|
|
15,097
|
|
|
|
16,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
81,306
|
|
|
$
|
84,582
|
|
|
$
|
267,727
|
|
|
$
|
235,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes and cumulative effects of change
in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical technology products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical imaging products(A)
|
|
$
|
(77
|
)
|
|
$
|
39,166
|
|
|
$
|
(2,666
|
)
|
|
$
|
31,272
|
|
B-K Medical
|
|
|
128
|
|
|
|
228
|
|
|
|
1,453
|
|
|
|
4,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
39,394
|
|
|
|
(1,213
|
)
|
|
|
35,379
|
|
Security technology products
|
|
|
382
|
|
|
|
5,989
|
|
|
|
12,844
|
|
|
|
7,999
|
|
Corporate and other(B)
|
|
|
2,896
|
|
|
|
(112
|
)
|
|
|
5,479
|
|
|
|
1,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,329
|
|
|
$
|
45,271
|
|
|
$
|
17,110
|
|
|
$
|
44,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
July 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
Medical imaging products
|
|
$
|
114,098
|
|
|
$
|
106,947
|
|
B-K Medical
|
|
|
72,500
|
|
|
|
71,143
|
|
Security technology products
|
|
|
16,609
|
|
|
|
15,497
|
|
Corporate and other(C)
|
|
|
297,521
|
|
|
|
261,179
|
|
|
|
|
|
|
|
|
|
|
Total assets from continuing
operations
|
|
|
500,728
|
|
|
|
454,766
|
|
Assets of discontinued operations
|
|
|
|
|
|
|
41,939
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
500,728
|
|
|
$
|
496,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Includes a gain of $43,829 related to the Companys sale of
its equity investment in Cedara, for the three and nine months
ended April 30, 2005. Also includes asset impairment
charges of $491 for the nine months ended April 30, 2006
and $1,988 and $2,935 for the three and nine months ended
April 30, 2005, respectively. |
19
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(B) |
|
Includes restructuring and asset impairment charges related to
SKY of $84 and $2,300 for the three and nine months ended
April 30, 2006, respectively. |
|
(C) |
|
Includes cash equivalents and marketable securities of $234,097
at April 30, 2006, and $195,321 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
April 30, 2006.
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
Others, 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 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 April 30, 2006.
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.
20
ANALOGIC
CORPORATION
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table presents the Companys product warranty
liability for the reporting periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Balance at the beginning of the
period
|
|
$
|
4,462
|
|
|
$
|
4,331
|
|
|
$
|
4,057
|
|
|
$
|
4,053
|
|
Accrual for warranties issued
during the period
|
|
|
1,021
|
|
|
|
627
|
|
|
|
2,493
|
|
|
|
1,837
|
|
Accrual related to pre-existing
warranties (including changes in estimate)
|
|
|
473
|
|
|
|
158
|
|
|
|
1,876
|
|
|
|
1,378
|
|
Settlements made in cash or in
kind during the period
|
|
|
(1,166
|
)
|
|
|
(932
|
)
|
|
|
(3,636
|
)
|
|
|
(3,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the period
|
|
$
|
4,790
|
|
|
$
|
4,184
|
|
|
$
|
4,790
|
|
|
$
|
4,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
Dividends:
On June 7, 2006 the Company announced that its Board of
Directors, on June 5, 2006, declared a dividend of
$.10 per common share payable on July 3, 2006 to
shareholders of record on June 19, 2006.
21
|
|
Item 2.
|
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 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
and the Companys Annual Report on
Form 10-K
for the year ended July 31, 2005. 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
Analogic Corporation is engaged primarily in the design,
manufacture and sale of high technology, high performance,
high-precision data acquisition conversion (analog/digital) and
signal processing instruments and systems to customers that
manufacture products for major markets within the electronics
industry: Medical Technology Products and Security Technology
Products.
The results from continuing operations are summarized in the
following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
U.S. Dollars (thousands) from Continuing Operations
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Net Sales
|
|
$
|
81,306
|
|
|
$
|
84,582
|
|
|
$
|
267,727
|
|
|
$
|
235,822
|
|
Gross Margin %
|
|
|
35.8
|
%
|
|
|
37.8
|
%
|
|
|
37.5
|
%
|
|
|
37.3
|
%
|
Operating Expenses
|
|
$
|
28,195
|
|
|
$
|
32,668
|
|
|
$
|
89,828
|
|
|
$
|
91,550
|
|
Net Income from continuing
operations before discontinued operations and cumulative effect
of change in accounting principle
|
|
|
2,510
|
|
|
|
28,989
|
|
|
|
12,670
|
|
|
|
28,421
|
|
Diluted EPS from continuing
operations
|
|
|
0.18
|
|
|
|
2.14
|
|
|
|
0.92
|
|
|
|
2.10
|
|
Net sales from continuing operations for the three months ended
April 30, 2006 were $3,276 or 4% lower than prior year
period. Higher revenue primarily for selenium-based X-ray
digital flat-panel detectors and ultrasound equipment, was more
than offset by lower shipments of EXACT systems and spare parts,
continued lower demand for sub-systems used in MRI scanners and
Computed Tomography sub-systems. Net sales from continuing
operations for the nine months ended April 30, 2006 were
$31,905 or 14% higher than the same period last year. The sales
increase for the nine month period was primarily the result of
an additional 55 units of EXACT systems shipped over the
same period last year, higher demand for the Companys 64
slice data acquisition systems, increased shipments of
selenium-based X-ray digital flat-panel detectors, partially
offset by lower volume for sub-systems used in MRI scanners.
Gross margin percentage for the three months ended
April 30, 2006 decreased by 2%, primarily due to
engineering margin loss, over the same period last year. For the
nine months ended April 30, 2006 gross margin percentage
remained essentially flat year over year.
Operating expenses for the three month period were $4,473 or 14%
lower than the same period last year, due to lower legal and
accounting expenses, a reduction in Sarbanes-Oxley
implementation costs, and reduced restructuring and asset
impairment charges, partially offset by higher expenses for the
adoption of SFAS 123(R).
Operating expenses for the nine months ended April 30, 2006
were $1,722 lower than the same period last year. Higher
expenses under SFAS 123(R)associated with share based
payments were offset by lower legal
22
and accounting expenses associated with the Companys
review of revenue recognition procedures followed by Camtronics
in prior periods.
Diluted earnings per share from continuing operations were $0.18
and $2.14 for the three months ended April 30, 2006 and
2005, respectively. Included in the prior year is a gain of
$2.01 per share from the sale of Cedara equity interest,
and the effect of the restructuring and asset impairment
charges. For the nine months ended April 30, 2006 and 2005,
diluted earnings per share from continuing operations were $0.92
and $2.10, respectively. Included in the prior year is a gain of
$2.01 per share from the sale of Cedara equity interest,
and the effect of the restructuring and asset impairment charges.
The Companys cash, cash equivalent and marketable
securities increased $37,247 from July 31, 2005 to
April 30, 2006 primarily due to proceeds from the sale of
Camtronics partially offset by an increase in working capital
requirements.
In February 2006, the Company elected to convert the outstanding
principal represented by its convertible promissory note and to
exercise its warrant for shares of PDS Series B Convertible
Participating Preferred Stock, increasing the Companys
equity interest in PDS to 43.8%. Following the increase in
equity interest, the Company re-evaluated the accounting for its
investment in PDS, including the consideration of FASB
Interpretation No. 46 (revised December 2003)
Consolidation of Variable Interest Entities
an interpretation of ARB No. 51, and
EITF 02-14
and determined that its investment should be accounted for under
the equity method.
On November 1, 2005, the Company sold its wholly owned
subsidiary Camtronics for $40,000 in cash, and realized net cash
of $38,906 after transactional costs. The Company recorded a net
gain on the sale of Camtronics of $20,640, net of a tax
provision of $9,104, or $1.50 per diluted share, at time of
transaction. 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. Revenue for the three months
ended April 30, 2006 and 2005, were $0 and $9,584,
respectively. Revenue for the nine months ended April 30,
2006 and 2005, were $11,495 and $26,751, respectively. The
results of discontinued operations for the three months ended
April 30, 2006 and 2005 were $0 and a net loss of $869,
respectively, versus a net income of $159 and a net loss of
$3,846 for the nine months ended April 30, 2006 and 2005,
respectively.
On September 28, 2005, the Company decided to restructure
the business operations of its wholly-owned subsidiary, SKY. The
decision to restructure Sky was based on continued lower than
expected sales. During the nine months ended April 30,
2006, the Company recorded restructuring costs of $811 for
severance, $310 for capital assets impairment and an asset
impairment of $1,179 for an inventory write-down.
Results
of Operations
Three
Months Ended April 30, 2006 Compared to Three Months Ended
April 30, 2005
Net sales and gross margin for the three months ended
April 30, 2006 as compared with the three months ended
April 30, 2005, are summarized in the tables below.
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
(in thousands)
|
|
|
Percentage
|
|
|
|
2006
|
|
|
2005
|
|
|
Growth (Decline)
|
|
|
Products
|
|
$
|
75,670
|
|
|
$
|
77,646
|
|
|
|
(3
|
%)
|
Gross margin
|
|
|
29,064
|
|
|
|
30,103
|
|
|
|
(3
|
%)
|
Gross margin %
|
|
|
38.4
|
%
|
|
|
38.8
|
%
|
|
|
|
|
Product revenue for the three months ended April 30, 2006
decreased $1,976 or 3% from the three months ended
April 30, 2005. Security Technology Products sales
decreased $5,559 due to 7 fewer EXACT
23
systems shipped in the current period and lower spare parts
volume compared to the same period last year. Additionally,
Corporate and other revenue decreased by $902 primarily due to
lower embedded multiprocessing equipment sales, as the Company
exits this business. These decreases in product revenue were
partially offset by increased sales of $4,485 of Medical
Technology Products over the prior year period. Increased
shipments of digital flat-panel detectors and ultrasound
equipment exceeded the continued lower demands for CT systems
and sub-systems used in MRI scanners.
Gross margin percentage for products decreased to 38.4% for the
three months ended April 2006, from 38.8% for the same period
last year. The decrease was primarily the result of lower volume
for the security products, which have a higher margin than most
of the Companys other products, as well as lower
manufacturing efficiency due to the volume decline. Partially
offsetting this decline was increased gross margin percentage
related to the ultrasound business of the Medical Technology
Products.
Engineering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
(in thousands)
|
|
|
Percentage
|
|
|
|
2006
|
|
|
2005
|
|
|
Growth (Decline)
|
|
|
Engineering
|
|
$
|
3,415
|
|
|
$
|
5,221
|
|
|
|
(35
|
%)
|
Gross margin
|
|
|
(807
|
)
|
|
|
1,404
|
|
|
|
(157
|
%)
|
Gross margin %
|
|
|
(23.6
|
%)
|
|
|
26.9
|
%
|
|
|
|
|
Engineering revenue decreased $1,806 or 35% for the three months
ended April 30, 2006 as compared to the prior year period.
The decrease was primarily due to the completion in 2005 of a
large customer funded project for security products, and to
lower volume for medical imaging funded projects in 2006.
The engineering gross margin loss for the three months ended
April 30, 2006 was ($807) as compared to a gross margin of
$1,404 for the same period last year. The decrease in
engineering gross margin of 157% for the three months ended
April 30, 2006 was primarily related to approximately $300
of higher margin on completed projects for the security
technology products last year, and, for certain funded projects
for both security and medical imaging products, approximately an
additional $1,800 of costs incurred in excess of the contract
revenue in order to complete the contracts.
Other
Other revenue of $2,221 and $1,715 represents revenue for the
hotel operations for the three months ended April 30, 2006
and 2005, respectively. The increase was primarily due to a
higher occupancy rate.
Operating
Expenses
Research and product development expenses were $12,382 for the
three months ended April 30, 2006 or 15% of total revenue
as compared to $13,540 or 16% of total revenue for the same
period last year. The decrease of $1,158 was primarily related
to lower personnel and related costs due to the termination of
product development activities due to the restructuring of SKY
in September 2005, partially offset by the impact of stock
option expense of approximately $217.
Selling and marketing expenses were $6,972 for the three months
ended April 30, 2006, as compared to $7,172 for the same
period last year, or 9% of total revenue for both periods. The
decrease of approximately $200 related primarily to savings
resulting from the September 2005 restructuring of SKY.
General and administrative expenses were $8,757 for the three
months ended April 30, 2006 or 11% of total revenue,
compared to $9,968 or 12% of total revenue for the same period
last year. General and administrative expenses were $1,211 lower
than last year primarily due to a recovery of bad debt of $765
and lower external consulting and audit expenses incurred by the
Company to comply with financial reporting and disclosure
controls as required by the Sarbanes-Oxley Act.
24
Restructuring and asset impairment charges were $84 for the
three months ended April 30, 2006, related to additional
severance costs for the restructuring of SKY. Prior year
impairment charges of $1,988, included $1,148 related to the
change in accounting method for the Companys investment in
PDS from equity to cost method of accounting, as well as the
requirements to evaluate the net realizable value of its
investment. In addition, the re-alignment of R & D
activities resulted in a $840 charge related to abandoned
technologies.
Other
(Income) Expense
Interest income was $2,653 for the three months ended
April 30, 2006 compared with $1,484 for the same period
last year. The increase was primarily due to higher effective
interest rates and higher invested cash balances. Interest
expenses of $43 for the three months ended April 30, 2006,
is due to interest incurred for late payment of withholding
taxes by our Canadian subsidiary.
The Company recorded an equity loss in unconsolidated affiliates
of $332 related to its equity investment in PDS for the three
months ended April 30, 2006, versus an equity gain of $972
for the Companys equity share in SAHCO for the same period
last year.
Other income was $116 for the three months ended April 30,
2006 compared to other expenses of $312 for the same period last
year. The change in other income consisted primarily of lower
foreign currency exchange losses incurred by the Companys
Canadian and Danish subsidiaries.
Provision
for Income Taxes
The effective tax rate on continuing operations for the third
quarters of fiscal 2006 and fiscal 2005 was 24.6% and 36%
respectively. The lower effective tax rate on continuing
operations in the current quarter is largely the result of a
higher percentage mix of U.S. based income due to the sale
of Cedara securities in the quarter ended April 30, 2005,
and from the discrete item of
provision-to-return
adjustments for fiscal year 2005 tax returns filed in the
current quarter. The
provision-to-return
adjustments provided an out-of-period tax benefit of $329, or
9.9%. The lower rate caused by the income mix was partially
offset by the expiration of the Federal research and development
credit and the phasing out of the extraterritorial income
exclusion.
Net
Income and Earnings per Share
Net Income and earnings per share from continuing operations for
the three months ended April 30, 2006 and 2005, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
(in thousands)
|
|
|
|
except EPS
|
|
|
|
2006
|
|
|
2005
|
|
|
Income from continuing operations
before discontinued operations and cumulative effect of change
in accounting principle
|
|
$
|
2,510
|
|
|
$
|
28,989
|
|
% of net sales
|
|
|
3.1
|
%
|
|
|
34.3
|
%
|
Diluted EPS from continuing
operations
|
|
$
|
0.18
|
|
|
$
|
2.14
|
|
Income from continuing operations was $2,510 for the three
months ended April 30, 2006 as compared to a net income of
$28,989 for the same period last year. Basic and diluted
earnings per share from continuing operations were $0.18 as
compared to basic and diluted earnings per share of $2.14 for
the third quarter ended April 30, 2006 and 2005,
respectively. Last year, income from continuing operations
included a net gain of $27,388 or $2.01 per basic and
diluted earnings per share related to the Companys sale of
its equity interest in Cedara.
25
Nine
Months Ended April 30, 2006 Compared to Nine Months Ended
April 30, 2005
Net
Sales
Net sales and gross margin for the nine months ended
April 30, 2006 as compared with the nine months ended
April 30, 2005, are summarized in the tables below.
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars (in
thousands)
|
|
|
Growth in
|
|
|
|
2006
|
|
|
2005
|
|
|
Percentage
|
|
|
Products
|
|
$
|
247,355
|
|
|
$
|
215,766
|
|
|
|
15
|
%
|
Gross margin
|
|
|
98,073
|
|
|
|
83,159
|
|
|
|
18
|
%
|
Gross margin %
|
|
|
39.6
|
%
|
|
|
38.5
|
%
|
|
|
|
|
Product revenue for the nine months ended April 30, 2006,
increased $31,589 or 15% over the prior year due to increased
sales of Security Technology Products of $22,529, related
primarily to 55 additional EXACT systems shipped in the first
nine months of 2006 over the same period last year, and
increased sales of Medical Technology Products of $10,688.
Partially offsetting this growth were lower corporate and other
sales of $1,628 primarily due to lower demand for the
Companys embedded multiprocessing equipment, as the
Company exits this business. The increased sales of Medical
Technology Products of $10,688 were primarily the result of
increased sale of 64 slice data acquisition systems, digital
flat-panel detectors, and fetal monitoring products. Continued
lower demand for the Companys sub-systems used in MRI
scanners partially offset the growth of the other Medical
Technology Products.
The increase product gross margin percentage was primarily due
to higher sales of Security Technology Products, which have a
higher margin than most of the Companys other products,
partially offset by the effect of the write-down of certain
inventory of $1,179 related to the restructuring of SKY business
operations.
Engineering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
|
|
|
(in thousands)
|
|
|
Percentage
|
|
|
|
2006
|
|
|
2005
|
|
|
Growth (Decline)
|
|
|
Engineering
|
|
$
|
13,346
|
|
|
$
|
13,630
|
|
|
|
(2
|
%)
|
Gross margin
|
|
|
(718
|
)
|
|
|
2,271
|
|
|
|
(132
|
%)
|
Gross margin %
|
|
|
(5.4
|
%)
|
|
|
16.7
|
%
|
|
|
|
|
Engineering revenue decreased slightly for the nine months end
April 30, 2006 as compared to the nine months ended
April 30, 2005. In security engineering, revenue for funded
projects decreased approximately $2,200 over prior year period,
primarily due to a large funded project which was completed last
year. This decrease was partially offset by increased funding
for certain customer funded projects for Medical Technology
Products.
The engineering gross margin decreased $2,989 primarily as a
result of the Transportation Security Administration
(TSA) contract costs exceeding the funded amount of
the security contracts by approximately $2,000, and
approximately $800 of margin realized on a large security funded
project which was completed last year. This decrease in security
engineering gross margin was partially offset by a gross margin
of approximately $1,900 for additional funds received on a
completed project with no related costs, and additional costs of
approximately $1,400 in excess of the value of certain funded
projects of Medical Imaging Technology Products. In addition,
prior year engineering gross margin included a license sale of
$750 to the Companys affiliate SAHCO.
26
Other
Other revenue of $7,026 and $6,426 represents revenue for the
Companys hotel operation for the nine months ended
April 30, 2006 and 2005, respectively. The increase was
primarily due to a higher occupancy rate.
Operating
Expenses
Research and product development expenses were $39,558, or 15%
of total revenue, and $38,433, or 16% of total revenue, for the
nine months ended April 30, 2006 and 2005, respectively.
The increase of $1,125 was primarily due to increased personnel,
expenses under SFAS 123(R) associated with share-based
payments, and related costs to support product development,
focused on developing new generations of medical imaging
equipment, including CT systems and an extended family of
multi-slice CT data acquisition systems, as well as a number of
projects for security systems. Partially offsetting this
increase were savings of approximately $1,700 due to the
September 2005 SKY restructuring.
Selling and marketing expenses were $21,600 or 8% of total
revenue and $21,694 or 9% of total revenue, for the nine months
ended April 30, 2006 and 2005, respectively. The decrease
in selling and marketing expenses as a percentage of total
revenue was primarily the result of higher revenue over the same
period last year.
General and administrative expenses were $27,058 or 10% of total
revenue, and $28,488 or 12% of total revenue for the nine months
ended April 30, 2006 and 2005, respectively. The decrease
of $1,430 was primarily attributable to legal expenses incurred
during the comparable period last fiscal year for the
L-3 Communications
litigation and costs related to the Camtronics subsidiary review
of revenue recognition procedures; and for the nine months ended
April 30, 2006 a bad debt recovery and a real estate tax
abatement rebate. These reductions were partially offset by
expenses associated with share-based payments in connection with
the adoption of SFAS 123(R) and other general expenses.
Restructuring and asset impairment charges were $1,612 and
$2,935 for the nine months ended April 30, 2006 and 2005,
respectively. For the nine months ended April 30, 2006, the
Company recorded $1,121 for severance costs and certain
write-downs of capital assets for the restructuring of SKY, and
impairment charges of $275 related to SAHCO and $216 related to
PDS based on the net realizable value of the Companys
investments. For the nine months ended April 30, 2005, the
Company recorded asset impairment charges of $2,095 related to
the change in accounting method for the Companys
investment in PDS from equity to cost method of accounting, and
the requirement to evaluate the net realizable value of its
investment. Also, certain other technologies valued at $840 were
abandoned due to a re-alignment of research and development
activities in the prior year.
Other
(Income) Expense
Interest income was $7,155 and $3,369 for the nine months ended
April 30, 2006 and 2005, respectively. The increase was due
to higher effective interest rates and higher invested cash
balances. Interest expense of $43 for the nine months ended
April 30, 2006, relates primarily to interest incurred for
the late payment of withholding taxes by our Canadian subsidiary.
The Company recorded an equity loss in unconsolidated affiliates
of $787 related to an equity loss of $455 in SAHCO and $332 in
PDS for the nine months ended April 30, 2006, and an equity
gain for the nine months ended April 30, 2005 of $749
primarily due to $939 related to an equity gain in SAHCO, offset
by an equity loss of $191 in Cedara Software Corporation.
Other income was $158 and $292 for the nine months ended
April 30, 2006 and 2005, respectively. The change in other
income consisted primarily of lower foreign currency exchange
gain incurred by the Companys Canadian and Danish
subsidiaries.
27
Provision
for Income Taxes
The effective tax rate on continuing operations for the nine
months ended April 30, 2006 and 2005 was 25.9% and 36.2%,
respectively. The tax rate on the gain on sale of Camtronics was
30.6%. The effective tax rate for discontinued operations for
the nine months ended April 30, 2006 and April 30,
2005, was 44.2% and a benefit of 49.7%, respectively. The lower
effective tax rate on continuing operations in the current nine
month period is largely the result of a higher percentage mix of
U.S. based income due to the sale of Cedara securities
during the nine months ended April 30, 2005, and from a
discrete item consisting of
provision-to-return
adjustments for fiscal year 2005 tax returns filed in the
current quarter, which provided an out-of-period tax benefit of
$329, or 1.9%. The lower rate caused by the income mix was
partially offset by the expiration of the Federal research and
development credit and the phasing out of the extraterritorial
income exclusion.
Net
Income and Earnings per Share
Net income and earnings per share from continuing operations for
the nine months ended April 30, 2006 and 2005, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollars
|
|
|
|
(in thousands)
|
|
|
|
Except EPS
|
|
|
|
2006
|
|
|
2005
|
|
|
Income from continuing operations
before discontinued operations and cumulative effect of change
in accounting principle
|
|
$
|
12,670
|
|
|
$
|
28,421
|
|
% of net sales
|
|
|
4.7
|
%
|
|
|
12.1
|
%
|
Diluted EPS from continuing
operations
|
|
$
|
0.92
|
|
|
$
|
2.10
|
|
Basic earnings per share from continuing operations for the nine
months ended April 30, 2006 were $0.93, as compared to
$2.10 for the same period last year. Diluted earnings per share
from continuing operations for the nine months ended
April 30, 2006 were $0.92 as compared to $2.10 for the same
period last year. Last years income included a net gain of
$27,388 or $2.01 per basic and diluted earnings per share
related to the Companys sale of its equity interest in
Cedara. The increase in net income, excluding the gain from the
sale of Cedara equity interest, was primarily related to higher
sales of security and medical technology products, and higher
interest income.
Liquidity
and Capital Resources
Cash and cash equivalents and marketable securities totaled
$257,701 and $220,454 at April 30, 2006 and July 31,
2005, respectively. The Companys balance sheet reflects a
current ratio of 6.7 to 1 at April 30, 2006 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 .14
to 1 at April 30, 2006 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 April 30,
2006, 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,
28
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 three months or less from the time
of purchase. Investments having maturities from the time of
purchase in excess of three months are stated at amortized cost,
which approximates fair value, and are classified as available
for sale. A rise in interest rates could have an adverse impact
on the fair value of the Companys investment portfolio.
The Company does not currently hedge these interest rate
exposures.
Net cash provided by operating activities was $8,973 for the
nine months ended April 30, 2006, including $7,075 provided
by continuing operations and $1,898 provided by discontinued
operations. The cash provided by operating activities of
continuing operations of $7,075 for the nine months ended
April 30, 2006, was primarily due to an increase in net
income, depreciation and amortization, and non-cash impact of
asset impairment charges partially offset by higher operating
assets and liabilities. The increase in operating assets and
liabilities was primarily due to inventories, accrued income
taxes due to payments and lower advance payments received
primarily related to orders for the EXACT systems.
Net cash provided by investing activities was $32,326 for the
nine months ended April 30, 2006, including $38,906
provided by proceeds of the sale of Camtronics, and the receipt
of $5,400 of proceeds from maturities of marketable securities,
offset primarily by capital expenditures of $10,005, and
investment in and advances to affiliated companies of $1,149.
Net cash provided by financing activities for the nine months
ended April 30, 2006 was $1,270, primarily due to $8,851 of
cash received from the issuance of stock pursuant to the
Companys employee stock option and stock purchase plans,
and reduced by $3,883 to repurchase the Companys shares of
common stock, and $3,878 used for dividends paid to stockholders.
Commitments,
Contractual Obligations and Off-Balance Sheet
Arrangements
The Companys off-balance sheet arrangements, at
April 30, 2006, and the effect such obligations are
expected to have on liquidity and cash flows in future periods
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
4 -5 Years
|
|
|
5 Years
|
|
|
Operating leases
|
|
$
|
6,988
|
|
|
$
|
1,611
|
|
|
$
|
2,065
|
|
|
$
|
1,377
|
|
|
$
|
1,935
|
|
Purchasing obligations
|
|
|
35,517
|
|
|
|
30,930
|
|
|
|
4,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,505
|
|
|
$
|
32,541
|
|
|
$
|
6,652
|
|
|
$
|
1,377
|
|
|
$
|
1,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company currently has approximately $23,600 in revolving
credit facilities with various banks available for direct
borrowings. As of April 30, 2006, there were no direct
borrowings.
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 did not have a material impact on the
Companys financial position or results of operations
In November 2005, the FASB issued FASB Staff Position (FSP)
No. FAS 115-1,
The Meaning of
Other-Than-Temporary
Impairment and Its Application to Certain Investments.
This FSP nullifies certain requirements of
Issue 03-1
and supersedes EITF Topic
No. D-44,
Recognition of Other Than-Temporary
29
Impairment upon the Planned Sale of a Security Whose Cost
Exceeds Fair Value. The FSP establishes the steps
required in determining when an investment is considered
impaired, whether that impairment is other than temporary, and
the measurement of an impairment loss. Under this FSP,
impairment shall be assessed at the individual security level
and the assessment of whether an investment shall be assessed at
the individual security level and the assessment of whether an
investment is impaired shall be performed in each reporting
period. When impairment has been determined to be other than
temporary, an impairment loss will be recognized on an
impairment loss equal to the difference between the
investments cost and its fair value. The provisions of FSP
115-1 shall be effective for reporting periods beginning after
December 15, 2005. The adoption of FSP 115-1 did not have a
material impact on the Companys financial position or
results of operations.
Critical
Accounting Policies, Judgments, and Estimates
This discussion and analysis of our financial condition and
results of operations is based on our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of
America. Our most critical accounting policies have a
significant impact on the preparation of these condensed
consolidated financial statements. These policies include
estimates and significant judgments that affect the reported
amounts of assets, liabilities, revenues and expense, and
related disclosures of contingent assets and liabilities. With
the exception of revenue recognition and accounts receivable
which has been modified to reflect the Camtronics divestment as
well as accounting for stock based compensation which was
adopted on August 1, 2005. We continue to have the same
critical accounting policies and estimates as we described in
Item 7, beginning on page 11, in our Annual Report on
Form 10-K
for the year ended July 31, 2005. Those policies and
estimates were identified as those relating to inventory;
concentration of credit risk; warranty reserve; goodwill,
intangible assets, and other long-lived assets; income taxes. We
continue to evaluate our estimates and judgments on an on-going
basis. By their nature, these estimates and judgments 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 estimates and 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.
Revenue
Recognition
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.
30
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.
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) 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.
Stock
Based Compensation
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).
Therefore, no stock-based employee compensation expense had been
recorded in connection with the issuance of employee and
director stock options as all stock options granted under the
plans were fixed awards and had an exercise price equal to the
market value of our common stock at the time of the grant.
Stock-based compensation expenses related to restricted stock
granted at no cost to the employees were reflected in net
income. 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 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
forfeiture rate, 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
31
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 nine months
ended April 30, 2006. Estimates of fair value are not
intended to predict actual future events or the value ultimately
realized by persons who receive equity awards.
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 for the nine months ended April 30, 2006 as well
as each of the last three fiscal years and the percentage of our
product and engineering sales to our ten largest customers
during these periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
Year Ended
July 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
L-3 Communications
|
|
|
19
|
%
|
|
|
16
|
%
|
|
|
9
|
%
|
|
|
47
|
%
|
Toshiba
|
|
|
18
|
%
|
|
|
15
|
%
|
|
|
14
|
%
|
|
|
7
|
%
|
Siemens
|
|
|
8
|
%
|
|
|
9
|
%
|
|
|
10
|
%
|
|
|
5
|
%
|
General Electric
|
|
|
8
|
%
|
|
|
10
|
%
|
|
|
9
|
%
|
|
|
7
|
%
|
Philips
|
|
|
5
|
%
|
|
|
7
|
%
|
|
|
8
|
%
|
|
|
4
|
%
|
Ten largest customers as a group
|
|
|
70
|
%
|
|
|
66
|
%
|
|
|
68
|
%
|
|
|
81
|
%
|
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.
32
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.
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 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.
33
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.
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.
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;
|
34
|
|
|
|
|
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
|
|
|
|
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.
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 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 are primarily invested in US treasury
and US government agency securities, with original maturities of
three months or less. Investments having original maturities in
excess of three months are stated at fair value, and are
classified as available for sale. Total interest income for the
three and nine months ended April 30, 2006 was $2,653 and
$7,155, respectively. 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 Companys management, with the participation of the
Companys chief executive officer and chief financial
officer, evaluated the effectiveness of the Companys
disclosure controls and procedures as of April 30, 2006.
The term 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), means controls and other procedures of a
35
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 and procedures, however well designed and
operated, can provide only reasonable, and not absolute,
assurance that the objectives of the system are met and
management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
Based on the evaluation of the Companys disclosure
controls and procedures as of April 30, 2006, the
Companys chief executive officer and chief financial
officer concluded that, as of such date, the Companys
disclosure controls and procedures were effective at the
reasonable assurance level.
There were no changes to the Companys internal control
over financial reporting, as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act, during the fiscal quarter ended
April 30, 2006 that materially affected or are reasonably
likely to materially affect, the Companys internal control
over financial reporting.
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 following table provides information about repurchases by
the Company of its common stock for the nine months ended
April 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Value of Shares that
|
|
|
|
|
|
|
Average
|
|
|
Purchased as Part of
|
|
|
May Yet be
|
|
|
|
Total Number of
|
|
|
Price Paid
|
|
|
Publicity Announced
|
|
|
Purchased Under
|
|
Period
|
|
Shares Purchased(1)
|
|
|
per Share
|
|
|
Program(2)
|
|
|
the Program
|
|
|
8/1/05-11/30/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/1/05-12/31/05
|
|
|
60,000
|
|
|
$
|
48.45
|
|
|
|
60,000
|
|
|
|
|
|
1/1/06-1/31/06
|
|
|
20,000
|
|
|
|
48.77
|
|
|
|
20,000
|
|
|
|
|
|
2/1/06-4/30/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
80,000
|
|
|
|
48.53
|
|
|
|
80,000
|
|
|
$
|
21,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All repurchases by the Company of its common stock during the
periods indicated were done pursuant to the repurchase program
that the Company publicly announced on June 7, 2005 (The
Program). |
|
(2) |
|
The Companys Board of Directors approved the repurchase of
$25,000 of the Companys common stock pursuant to the
Program. |
36
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
31
|
.1
|
|
Certification of Chief Executive
Officer pursuant to
Rule 13a-14(a)/Rule 15d-14(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-14(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-14(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-14(b)
of the Securities Exchange Act of 1934, as amended
|
37
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
John W. Wood Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: June 9, 2006
John J. Millerick
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: June 9, 2006
38
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
31
|
.1
|
|
Certification of Chief Executive
Officer pursuant to
Rule 13a-14(a)/Rule 15d-14(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-14(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-14(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-14(b)
of the Securities Exchange Act of 1934, as amended
|
39