ANALOGIC CORP - 10-K Annual Report

Back to GetFilings.com

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------

FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE FISCAL YEAR ENDED: JULY 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER 0-6715

---------------------

ANALOGIC CORPORATION
(Exact name of registrant as specified in its charter)

MASSACHUSETTS 04-2454372
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)

8 CENTENNIAL DRIVE, PEABODY, MASSACHUSETTS 01960
(Address of principal executive offices) (Zip Code)

(978) 977-3000
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, $.05 PAR VALUE
(TITLE OF CLASS)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant at August 31, 2001 was approximately
$314,440,000.

Number of shares of Common Stock outstanding at August 31, 2001: 13,224,267

DOCUMENTS INCORPORATED BY REFERENCE: NONE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

PART I

ITEM 1. BUSINESS

(a) Developments During Fiscal 2001

Total revenues of Analogic Corporation (hereinafter, together with its
subsidiaries, referred to as "Analogic" or the "Company") for the fiscal year
ended July 31, 2001, were $360.6 million as compared to $291.6 million for
fiscal 2000, an increase of 24%. Net income for fiscal 2001 was $15.2 million,
or $1.17 per diluted share as compared to $14.1 million or $1.09 per diluted
share for fiscal 2000. Net income for fiscal 2001 includes a write-down of $3.2
million of certain assets of Anatel Communications Corporation, a wholly owned
subsidiary.

The Company's Danish subsidiary B-K Medical Systems A/S (B-K) announced in
May 2001 the construction of a new 135,000 square foot facility in Herlev, north
of Copenhagen, for the manufacture of specialized diagnostic ultrasound
equipment at an estimated cost of $15.5 million. The new facility, scheduled for
completion in May 2002, will host manufacturing, research and development,
service, marketing, sales and administrative functions. The new facility is
expected to be financed by a combination of internally generated cash and
borrowings.

In July 2001, the Company's ownership of Camtronics Medical Systems, Ltd.
(formerly Camtronics, Ltd.) increased from 81% to 100 %, as a result of the
Company acquiring all outstanding shares of Camtronics common stock. The Company
issued 190,255 shares of common stock from its treasury, for a value of $7.6
million, to acquire the remaining 19% minority interest.

In September 2001, the Corporation announced that it acquired a 19%
interest in Cedara Software Corporation of Mississauga, Ontario, Canada, in
return for an equity investment of $7.5 million and other considerations. Cedara
is a premier independent provider of imaging software technology and custom
imaging software development to leading Original Equipment Manufacturers (OEMs)
in the healthcare industry. Cedara enables healthcare solution providers to
integrate better imaging software into their systems and hardware in such fields
as Computed Tomography (CT) and Magnetic Resonance Imaging (MRI). Analogic has
agreed to refinance the debt owed by Cedara to its bank lender through the
provision of a credit facility with Analogic's principal bank or by refinancing
the debt directly. Analogic will have two of the seats on Cedara's seven person
board of directors.

Mr. Thomas J. Miller was appointed Chief Executive Officer in February
2001. Mr. Bernard M. Gordon, Founder, Chairman of the Board, and Chief Executive
Officer retained the position of Chairman of the Board.

Mr. Lothar Koob joined the Company as Executive Vice President in January
2001.

(b) Financial Information About Industry Segment

The Company's operations are primarily within a single segment within the
electronics industry (Medical Instrumentation Technology Products). The
operations encompass 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 medical and industrial use. (See Note 16 of Notes to Consolidated
Financial Statements)

(c) Narrative Description of Business

Analogic conceives, designs, manufactures, and sells standard and
customized high-precision data acquisition, signal and imaging processing based
medical imaging and industrial systems and subsystems. Analogic's principal
customers are original equipment manufacturers (OEM) who incorporate Analogic's
state-of-the art products into systems used in medical, industrial and
scientific applications.

Analogic has been a leader in the application of precision
analog-to-digital (A/D) and digital-to-analog (D/A) conversion technology, which
involves the conversion of continuously varying (i.e., "analog") electrical
signals, such as those representing temperature, pressure, voltage, weight,
velocity, ultrasound and x-

1

ray intensity, into and from the numeric (or "digital") form required by
computers, medical imaging equipment and other data processing equipment and in
subsystems and systems based on such technology.

In addition to their precision measurement capabilities, most of Analogic's
products perform very high-speed complex calculations on the data being
analyzed. Thus, Analogic's products are an integral part of the communications
link between various analog sensors, detectors or transducers and the people or
systems that interpret or utilize this information.

Analogic's products may be divided into three groupings as described below.
These groupings are classified by product technology and not by application.

Medical Technology Products, consisting primarily of electronic systems and
subsystems for medical imaging equipment, accounted for approximately 79% of
product and engineering revenue in fiscal 2001.

Analogic's medical imaging data acquisition systems and related computing
equipment are incorporated by U.S., European and Asian manufacturers into
advanced X-ray equipment known as Computed Tomography (CT) scanners. These
scanners generate images of the internal anatomy, which are used primarily in
diagnosing medical conditions. Analogic's data acquisition and signal processing
systems have advanced CT scanner technology by substantially increasing
resolution of the image, by reducing the time necessary to acquire the image,
and by reducing the computing time required to produce the image. Analogic
supplies to its medical imaging customers A/D and D/A conversion equipment and
complete data acquisition systems. The Company also manufactures complete mobile
and other CT scanners incorporating proprietary technology.

The Company manufactures electronics for a family of hard copy laser
printers in single and multi-user configurations that address the diagnostic
image market. These printers are used in hospitals world-wide to print
diagnostic quality images on film from the electronic data collected by medical
imaging equipment such as CT scanners and MRI scanners. The Company also designs
and manufactures for OEM customers advanced RF amplifiers, gradient coil
amplifiers and spectrometers for use in Magnetic Resonance Imaging (MRI)
equipment. These MRI scanners are used primarily to create diagnostic medical
images.

The Company manufactures fetal monitoring products for conversion and
display of biomedical signals. These monitors are designed for use in antepartum
applications and have the capability to measure, compute, display and print
fetal heart rates, maternal contraction frequency and relative intensity to
determine both maternal and fetal well being.

The Company also manufactures a lightweight, portable, multi-functional,
custom patient monitor instrument which acquire, calculate and display
combinations of the five most common vital sign parameters -- Electrocardiogram
(ECG), Respiration, Temperature, Non Invasive Blood Pressure (NIBP) and Pulse
Oximetry (SpO2). These monitors are designed to be used in a variety of hospital
settings such as emergency room, step-down units, general care and surgical
centers where ease-of-use, portability, flexibility and costs are important
considerations.

The Company also manufactures a broad line of medical connectivity products
that allows medical equipment such as CT Scanners and MRI and ultrasound
equipment to attach to local Digital Imaging and Communications for Medicine
(DICOM), Picture Archive & Communications Systems (PACS) and wide area networks.
The line includes Computed Radiography (CR) image processing and viewing
workstations.

The Company, through an exclusive OEM relationship with a major
international OEM, is designing, developing, and manufacturing Direct Digital
Radiography (DDR) systems. DDR uses a solid-state, flat-panel detector
technology, consisting of an amorphous selenium coating over a Thin Film
Transistor (TFT) array, to convert X-Rays into electrical signals and create an
image.

B-K Medical Systems A/S, a 100% owned subsidiary, designs and manufactures
ultrasound systems and probes for end user markets in urology, surgery, and
radiology. Their scanners generate real-time images of the internal anatomy that
are used for medical diagnosis and interventional procedures. The Company also
manufactures key subsystems on an OEM basis for ultrasound equipment
manufacturers.

2

Camtronics, a 100% owned subsidiary, manufactures products which are
considered medical technology products. Camtronics designs and manufactures
multi-modality image and information management systems for cardiology. This
system integrates all cardiac patient data into an enterprise-wide information
system. The industry leader in cardiac workstation technology, Camtronics also
designs and manufactures state-of-the-art digital imaging systems for cardiology
and radiology.

Anrad, a 100% owned subsidiary, designs and manufactures a state-of-the-art
direct conversion series of amorphous selenium based, X-ray, flat panel
detectors for diagnostic and interventional applications in mammography and
other digital radiology application.

Signal Processing Technology Products, consisting of A/D converters and
supporting modules, high-speed digital signal processors such as Array
Processors, and image processing equipment, accounted for approximately 12% of
fiscal 2001 product and engineering revenue.

A/D converters convert continuously varying "analog" signals into the
numerical "digital" form required by microprocessors and other data processing
equipment. Analogic manufactures a wide variety of high speed 14 and 16 bit low
noise converters.

Analogic specializes in the manufacture of high-precision and high
performance, rather than lower-cost, low-precision and minimal performance, data
conversion products. Typical applications of these devices include the
conversion of industrial and biomedical signals into computer language.

The Company manufactures a line of Compact Peripheral Computer Interface
(CPCI) boards. These products are fully compatible with the CPCI form factor and
bus structure and take advantage of software written for the PCIbus. The boards,
which are designed for OEM embedded applications requiring precision
measurements and high sampling rates, perform acquisition, conditioning,
multiplexing, as well as signal processing functions, and are supported by
Microsoft Windows NT(R) software.

Analogic manufactures the EXACT system, an advanced computed tomography
imaging system capable of providing data for 3-D images of every object in a
package, parcel, or bag. An OEM customer has exclusive rights to marketing the
EXACT system as part of a comprehensive explosive detection system to scan
checked luggage for aircraft.

SKY Computers, a 100% owned subsidiary, designs and manufactures high
performance multicomputing platforms used in advanced medical, military, and
industrial imaging applications. The company's SKYpack(TM) multiprocessors
provide the image processing power for Analogic's advanced CT scanners.

Industrial Technology Products, consisting of test instruments and
industrial weight measurement equipment, accounted for approximately 9% of
fiscal 2001 product and engineering revenues.

Test instruments are used as components of large Automated Test Equipment
(ATE) for the semiconductor test and other industries. These instruments provide
precision signal source and measurement capabilities for testing high
performance mixed-signal and analog semiconductors. Various instruments provide
a range of speed and accuracy capabilities. Test instruments are also used for
stand-alone operation on a test bench.

Industrial weighing products are sold to both OEMs and end users and are
used in many industrial and process control applications requiring high
precision weight measurement.

Anatel Communications, a 100% owned subsidiary formed in March 2000,
designs, manufactures, and markets Voice over Internet Protocol (VoIP) Data
Signal Processor (DSP) resource boards; network access boards; and media gateway
development systems and associated software for the Internet Telephony market.
Applications include VoIP gateways, softswitch architectures, voice routers
(PBXs) and call center systems.

HOTEL OPERATION

The Company owns a hotel, which is located adjacent to the Company's
principal executive offices and manufacturing facility in Peabody,
Massachusetts. The hotel is strategically situated in an industrial park, is in
close proximity to the historic and tourist area of Boston's North Shore and is
approximately 18 miles from
3

Boston. The hotel has 256 rooms, a ballroom and several other function rooms and
appropriate recreational facilities. The hotel is managed for the Company under
a contract with Marriott Corporation.

MARKETING AND DISTRIBUTION

The Company sells its products domestically and abroad directly through the
efforts of its officers and employees and on occasion through a network of
independent sales representatives and distributors located in principal cities
around the world. In addition, Analogic subsidiaries in England and Denmark act
as distributors. Domestically, Analogic has several regional sales offices
staffed by salespeople who sell the Company's products in the surrounding areas
and supervise independent sales representatives and distributors in their
regions. The majority of distributors order from the Company as they receive
orders from their customers and do not stock inventory for resale. Sales made to
distributors are based on fixed discounts applied to established list prices
under normal payment terms. Returns are allowed for defective products under
authorized warranty repair. Some of Analogic's distributors also represent
manufacturers of competing products.

SOURCES OF COMPONENTS/RAW MATERIALS

In general, Analogic's products are composed of Company-designed
proprietary integrated circuits, printed circuit boards, and precision resistor
networks, manufactured by Analogic and others in accordance with Analogic's
specifications, as well as standard electronic integrated circuits, transistors,
displays and other components. Most items procured are believed to be available
from more than one source. However, it may be necessary, if a given component
ceases to be available, for Analogic to modify its product design to adapt to a
substitute component or to purchase new tooling to enable a new supplier to
manufacture the component which would result in additional expense and/or delays
in product sales. Also, from time to time the availability of certain electronic
components has been disrupted. Accordingly, Analogic carries a substantial
inventory of raw material components in an effort to assure its ability to make
timely delivery to its customers.

PATENTS AND LICENSES

The Company holds approximately 100 patents of varying duration issued in
the United States which covers technology developed by it. In many instances,
the Company holds corresponding foreign patents. The Company regularly files
domestic patent applications and, where appropriate, foreign patents
applications as well as continuations to cover both new and improved methods,
apparatus, processes, designs and products. At present, approximately 275 U.S.
and foreign patents applications are pending.

The Company also relies on a combination of trade secret, copyright and
trademark laws, as well as contractual agreements to safeguard its proprietary
rights in technology and products. In seeking to limit access to sensitive
information to the greatest practical extent, the Company routinely enters into
confidentiality and assignment of invention agreements with each of its
employees and nondisclosure agreements with its key customers and vendors.

Management believes that any legal protection afforded by patent,
copyright, and trade secret laws are of secondary importance as a factor in the
Company's ability to compete. Future prospects are more a function of the
continuing level of excellence and creativity of engineers in developing
products which satisfy customer needs, and the innovative skills, competence and
marketing and managerial skills of its personnel in selling those products.
Moreover, the Company believes that market positioning and rapid market entry
are equally important to the success of its products. Management is of the
opinion that the loss of patent protection would not have a material effect on
the Company's competitive position.

SEASONAL ASPECT OF BUSINESS

There is no material seasonal element to the Company's business, although
plant closings in the summer, particularly in Europe, tend to decrease the
activity of certain buying sources during the first quarter of the Company's
fiscal year.

4

WORKING CAPITAL MATTERS

The Company does not carry a substantial inventory of finished goods but
does carry a substantial inventory of raw material components and
work-in-process to enable it to meet its customers' delivery requirements. (See
Note 4 of Notes to Consolidated Financial Statements.)

MATERIAL CUSTOMERS

The Company's three largest customers in fiscal 2001, each of which is a
significant and valued customer, were Philips, General Electric and Toshiba,
which accounted for approximately 22.6%, 10.5%, and 7.2%, respectively, of
product and engineering revenue for the fiscal year ended July 31, 2001. Loss of
any one of these customers would have a material adverse effect upon the
Company's business. The Company does business with Philips through several of
the Company's product groups and subsidiaries, principally under OEM contracts.
In addition, Philips funds research and development of some products to be
manufactured by Analogic for Philips. No other individual customer accounted for
as much as 7.2% of the Company's product and engineering revenue during fiscal
2001. The Company's ten largest customers, including Philips, General Electric
and Toshiba, accounted for approximately 62% of product and engineering revenue
during fiscal 2001.

BACKLOG

The backlog of orders at July 31, 2001 was approximately $74.8 million
compared with approximately $96.4 million at July 31, 2000. This decrease is
principally due to lower demand for the Company's high frequency Automatic Test
Equipment (ATE) boards. Many of the orders in the Company's backlog permit
cancellation by the customer under certain circumstances. To date, Analogic has
not experienced material cancellation of orders. The Company reasonably expects
to ship most of its July 31, 2001 backlog during fiscal 2002.

GOVERNMENT CONTRACTS

The amount of the Company's business that may be subject to renegotiation
of profits or termination of contracts or subcontracts at the election of the
Government is insignificant.

COMPETITION

Analogic is subject to competition based upon product design, performance,
pricing, quality and service. Analogic believes that its innovative engineering
and product reliability have been important factors in its growth. While the
Company tries to maintain competitive pricing on those products which are
directly comparable to products manufactured by others, in many instances,
Analogic's products will conform to more exacting specifications and carry a
higher price than analogous products manufactured by others.

Analogic's medical X-ray imaging systems are highly specialized. The
Company considers its selection by its OEM customers for design and manufacture
of these products and its other medical products to be much less a function of
other competitors in the field than it is of the "make-or-buy" decision of its
individual OEM customers. Many OEM customers and potential OEM customers of the
Company have the capacity to design and manufacture these products for
themselves. In the Company's area of expertise, the continued signing of new
contracts indicates continued strength in the Company's relationship with its
major customers, although some of these customers continue to commit to
shorter-term contracts.

Analogic's 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 Analogic. The Company believes that it
is a leading manufacturer of CT scanner and MRI electronic sub-systems in the
medical industry.

RESEARCH AND PRODUCT DEVELOPMENT

Research and product development ("R&D") is a significant factor in
Analogic's business. The Company maintains a constant and comprehensive R&D
program directed toward the creation of new
5

products as well as toward the improvement and refinement of its present
products and the expansion of their uses and applications.

Company funds expended for R&D amounted to $41.3 million in fiscal 2001,
$38.3 million in fiscal 2000, and $39.6 million in fiscal 1999. Analogic intends
to continue its emphasis on new product development. As of July 31, 2001,
Analogic had approximately 510 employees, including electronic development
engineers, software engineers, physicists, mathematicians, and technicians,
engaged in research and product development activities. These individuals, in
conjunction with the Company's salespeople, also devote a portion of their time
assisting customers in utilizing the Company's products, developing new uses for
these products, and anticipating customer requirements for new products.

During fiscal 2001, the Company capitalized $3.6 million of computer
software testing and coding costs incurred after technological feasibility was
established. These costs will be amortized by the straight-line method over the
estimated economic life of the related products, generally three years.
Amortization of capitalized software amounted to $1.6 million in fiscal 2001.

ENVIRONMENTAL PROTECTION

The Company does not anticipate any material effect upon its capital
expenditures, earnings or competitive position resulting from compliance by it
and its subsidiaries with presently enacted or adopted Federal, State and local
provisions regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment.

EMPLOYEES

As of July 31, 2001, the Company had approximately 1,830 employees.

FINANCIAL INFORMATION ABOUT SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
REVENUE

The Company's operations are primarily within a single segment within the
electronics industry (Medical Instrumentation Technology Products). The
operations encompass design, manufacture and sale of high technology,
high-performance, high-precision data acquisition, conversion (analog/digital)
and signal processing instruments and systems to customers who manufacture
products for medical and industrial use. (See Note 16 of Notes to Consolidated
Financial Statements)

Domestic and foreign revenues were $330.5 million and $30.0 million
respectively for fiscal 2001 compared to $260.6 million and $31.0 million in
fiscal 2000 and $248.4 million and $24.6 million in fiscal 1999. (See Note 17 of
Notes to Consolidated Financial Statements for further information regarding
foreign and domestic operations.)

Export revenue, primarily from sales of products and services to companies
in Europe and Asia, amounted to approximately $110.6 million (32%) in fiscal
2001 as compared to approximately $93.9 million (34%) in fiscal 2000, and
approximately $95.5 million (37%) in fiscal 1999. Management believes that the
Company's export revenue is at least as profitable as its domestic revenue. The
Company's export revenue is primarily denominated in U.S. dollars.

Management does not believe the Company's foreign and export revenue is
subject to significantly greater risks than its domestic revenue.

ITEM 2. PROPERTIES

Analogic's principal executive offices and major manufacturing facility are
located in a building owned by the Company, which it constructed on its site in
Peabody, Massachusetts. This facility consists of approximately 404,000 square
feet of manufacturing, engineering, and office space. The Company owns
approximately 65 acres of land at this location, which will accommodate future
consolidation and expansion as required. The Company uses approximately 7 1/2
acres of this land for the Peabody Marriott Hotel which is owned by a wholly
owned subsidiary of the Company and managed by the Marriott Corporation.

6

The Company and its subsidiaries own and lease various other office,
manufacturing, engineering and sales facilities in both the United States and
abroad. The Company believes that its existing facilities are generally adequate
to meet its current needs, and that suitable additional or substitute space will
be available on commercially reasonable terms when needed.

See Item 13 of this Report and Note 8 of Notes to Consolidated Financial
Statements for further information concerning certain of the aforesaid leases.

ITEM 3. LEGAL PROCEEDINGS

There are no material legal proceedings pending against the Company or its
subsidiaries or of which any of their property is the subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's Common Stock trades on the Nasdaq Stock Market under the
symbol: ALOG. The following table sets forth the range of high and low prices
for the Common Stock, as reported by Nasdaq during the quarterly periods
indicated:

7

As of August 31, 2001, there were approximately 842 holders of record of
the Common Stock.

Dividends of $.07 per share were declared for each of the quarters of
fiscal 2001 and fiscal 2000. The policy of the Company is to retain sufficient
earnings to provide funds for the operation and expansion of its business.

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS

The following discussion provides an analysis of Analogic Corporation's
financial condition and results of operations and should be read in conjunction
with the Consolidated Financial Statements and notes thereto included elsewhere
in this Annual Report on Form 10-K. The discussion below contains
forward-looking statements within the meaning of the Securities Act of 1933 and
the Securities Exchange Act of 1934. Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance, or achievements of Analogic Corporation to differ
from the projected results. All statements other than statements of historical
fact the Company makes in this document or in any document incorporated by
reference are forward-looking. See "Business Environment and Risk Factors" on
page 13.

RESULTS OF OPERATIONS

FISCAL 2001 COMPARED TO FISCAL 2000

Product revenue for fiscal 2001 was $320.1 million as compared with $255.2
million in fiscal 2000, an increase of $64.9 million or 25%. The increase was
principally due to the increase in sales of Medical Technology Products of $70.9
million or 39%, which can be attributed to increased demand for fully featured
mid-range Computed Tomography (CT) systems, digital radiography systems, patient
monitors, and advanced cardiovascular information management systems, and an
increase in sales of $4.1 million or 15%, in Industrial Technology Products, due
to demand for the Company's high frequency Automatic Test Equipment

8

(ATE) boards. This increase in product revenue was partially offset by a
decrease in Signal Processing Technology Products of $10.1 million or 21%,
caused by a dramatic downturn in demand for its network access boards used in
the Internet Telephony market.

Engineering revenue for fiscal 2001 was $27.7 million compared to $23.3
million in fiscal 2000, an increase of 19%. The increase of $4.4 million was
primarily due to increase in projects for developing imaging equipment.

Other revenues of $12.8 million and $13.0 million represent revenue from
the Company's Hotel operation for fiscal 2001 and 2000, respectively.

Cost of product sales was $204.7 million in fiscal 2001 compared to $159.2
million in fiscal 2000. Cost of product sales as a percentage of product revenue
was 64.0% in fiscal 2001, as compared to 62.4% in fiscal 2000. The increase was
primarily due to higher manufacturing costs and changes in product mix.

Engineering cost of sales was $23.2 million in fiscal 2001 as compared to
$17.4 million in fiscal 2000. The total cost of engineering sales as a
percentage of engineering revenue increased from 75% in fiscal 2000 to 84% in
fiscal 2001. The increase was mainly attributable to higher costs of projects
for developing imaging equipment.

Other costs of sales were $6.4 million and $6.2 million from the Company's
Hotel operation for fiscal 2001 and 2000, respectively.

Asset impairment charges of $3.2 million in fiscal 2001 relates to Anatel,
the Company's telecommunications subsidiary. The writedown of certain assets to
their estimated net realizable value was related to the Voice over Internet
Protocol business of Anatel. The estimated fair value of these assets was based
on various methodologies, including a review of the business outlook for the
telecommunications market and a comparison of current asset carrying value to
projected undiscounted cash flow.

R&D expenses were $41.3 million in fiscal 2001, or 11% of total revenue,
compared to $38.3 million or 13% of total revenue in fiscal 2000. The increase
of $3.0 million was due to research and development activities across all the
Company's product lines. The decline in the percentage from 13% to 11% was due
to higher revenue for the period.

Selling and marketing expenses were $33.1 million in fiscal 2001 versus
$26.2 million in fiscal 2000, an increase of $6.9 million or 26%. The increase
was primarily due to the Company's subsidiary, Camtronics, increasing its sales
personnel and marketing programs and switching to selling products directly to
the end users from its prior practice of selling through OEMs; $1.2 million of
the increase was due to Sky Computer, a subsidiary, offering a more "total
solution" sales package and the remaining increase of $2.0 million was primarily
associated with additional selling and marketing efforts to support the
Company's revenue growth. As a percentage of total revenues, selling expenses
remained unchanged at 9%.

General and administrative expenses were $32.8 million in fiscal 2001
compared to $27.5 million in fiscal 2000. As a percentage of total revenues,
general and administrative expenses were 9% in both fiscal 2001 and 2000. The
increase of $5.3 million was primarily due to higher personnel costs of $3.5
million and $1.8 million of other costs to support the Company's growth.

Computer software costs of $3.6 million and $3.0 million were capitalized
in fiscal 2001 and 2000, respectively. Amortization of capitalized software
amounted to $1.6 million and $1.8 million in fiscal 2001 and 2000, respectively,
and is included in research and product development expenses.

Interest income, net for fiscal 2001 was $5.4 million as compared to $5.7
million for fiscal 2000. The decrease was primarily due to $0.3 million in
interest income recorded in fiscal 2000 from a real estate tax abatement.

The Company recorded net income from its equity in unconsolidated
subsidiaries of $1.9 million in fiscal 2001 as compared to losses of $1.3
million in fiscal 2000. This improvement was mainly due to a reduction in the
losses from its investment in Enhanced CT Technology LLC, from $2.2 million loss
in fiscal 2000 to $1.8 million income in fiscal 2001; in addition the Company
recognized a loss of $0.1 million in fiscal 2001
9

from its investment in Shenzhen Anke High-Tech Co., Ltd. as compared to a gain
in fiscal 2000 of $0.9 million. (See Note 6 of Notes to Consolidated Financial
Statements).

Other expense was $0.6 million in fiscal 2001, as compared with $0.2
million in fiscal 2000. The increase in other expense is mainly due to a write
off of approximately $0.4 million which reflect the difference between the
Company's investment cost and the current market value of the restricted
securities the Company received during fiscal 2000 as a final distribution of
shares in a publicly traded company made by a limited partnership in which the
Company had invested.

The effective tax rate decreased to 30% in fiscal 2001 as compared to 31%
in fiscal 2000.

Net income for fiscal 2001 was $15.2 million as compared to $14.1 million
for fiscal 2000. Net income for fiscal 2001 includes an asset impairment charge
of $3.2 million related to the Company's telecommunications subsidiary, Anatel.
Basic earnings per share were $1.18 compared to $1.10 for fiscal 2000. Diluted
per-share earnings were $1.17 compared to $1.09 for fiscal 2000.

FISCAL 2000 COMPARED TO FISCAL 1999

Product revenue for fiscal 2000 was $255.2 million as compared to $242.9
million in fiscal 1999, an increase of $12.3 million or 5.0%. The increase was
principally due to an increase in sales of Industrial Technology Products of
$11.4 million, as a result of higher demand for the Company's high frequency
Automatic Test Equipment (ATE) boards and an increase in sales of $6.4 million
in the Signal Processing Technology Products primarily due to sales of EXACT
(Explosive Assessment Computed Tomography) systems. This increase was offset by
a decrease of $5.4 million in revenues from Medical Technology Products mainly
related to its enterprise-wide information systems for cardiac patient data.

Engineering revenue for fiscal 2000 was $23.3 million compared to $18.1
million in fiscal 1999, an increase of 29%. This increase was primarily due to
revenues generated from designs of the Company's direct conversion series of
amorphous selenium based, x-ray, flat panel detectors.

Other revenues of $13.0 million and $12.0 million represents revenue from
the Company's Hotel operation for fiscal 2000 and 1999, respectively. The
increase was due to an increase in occupancy and room rates over the prior year.

Cost of product sales were $159.2 million in fiscal 2000 compared to $144.1
million in fiscal 1999, an increase of $15.1 million or 11%. Cost of product
sales as a percentage of product revenue was 62.4% in fiscal 2000 compared to
59.3% in fiscal 1999, an increase of 3%. The increase was primarily due to
reduction in selling prices and higher manufacturing costs.

Cost of engineering sales was $17.4 million in fiscal 2000 as compared to
$12.6 million in fiscal 1999. Total cost of engineering sales as a percentage of
engineering revenue increased from 70% in fiscal 1999 to 75% in fiscal 2000.

Operating costs associated with the Hotel for fiscal years 2000 and 1999
were $6.2 million and $6.1 million, respectively. Gross margins for the hotel
operation increased from 49% in fiscal 1999 to 52% in fiscal 2000, mainly due to
increased room rates.

Research and product development ("R&D") expenses were $38.3 million in
fiscal 2000 compared to $39.6 million in fiscal 1999, a decrease of $1.3 million
or 3%. The decrease was due to lower R&D expenses of $1.4 million in the
Company's B-K subsidiary related to its ultrasound products. This decrease was
part of an overall cost reduction plan at the subsidiary in fiscal 2000 to
improve profitability. Accordingly, the Company's R&D expenses as a percentage
of total revenue decreased from 15% in fiscal 1999 to 13.1% in fiscal 2000.

Selling and marketing expenses were $26.2 million in fiscal 2000 versus
$25.7 in fiscal 1999, an increase of $0.5 million or 2%. The increase was
primarily due to increase in sales personnel and marketing programs of $0.7
million at the Company's Camtronic's subsidiary, which was changing its sales
strategy by selling products directly to end users rather than its prior
practice of selling through OEM's; and its Sky Computer subsidiary of $0.7
million, which is offering a more "total solution" sales package. This was
partially offset by

10

$1.4 million by reduced staffing at the Company's B-K subsidiary, which was
reducing operating expenses to improve profitability. As a percentage of total
revenues, selling expenses remained unchanged at 9%.

General and administrative ("G&A") expenses were $27.5 million in fiscal
2000 compared to $21.2 million in fiscal 1999, an increase of $6.3 million or
30%. As a percentage of revenues, G&A expenses increased from 8% in fiscal 1999
to 9% in fiscal 2000. The increase was due primarily to $1.7 million of
additional expenses associated with the Company's Canadian subsidiary, ANRAD,
acquired in June 1999; increased personnel expenses; additions to the bad debt
provision; and operating costs associated with a new Enterprise Resource
Planning (ERP) system. These were partially offset by a decrease of $0.6 million
as a result of decreased staffing, to increase profitability in the Company's
B-K subsidiary.

Net interest income for fiscal 2000 was $5.7 million as compared to $6.4
million for fiscal 1999, a decrease of $0.7 million or 11%. The decrease was
primarily due to interest on a real estate tax abatement recorded in fiscal 2000
of $0.3 million versus $0.8 million recorded in fiscal 1999.

The Company recorded net losses from its equity in unconsolidated
subsidiaries of $1.3 million in fiscal 2000 as compared to losses of $5.1
million is fiscal 1999, a net decrease in losses of $3.8 million. (See Note 6 of
Notes to Consolidated Financial Statements.) This decrease was mainly due to a
reduction in the losses from its investment in Enhanced CT Technology LLC, from
$4.8 million in fiscal 1999 to $2.2 million in fiscal 2000; in addition the
Company recognized income of $0.9 million in fiscal 2000 from its investment in
Shenzhen Anke High-Tech Co., Ltd. as compared to a loss of $0.4 million in
fiscal 1999.

In fiscal 2000, the Company received the final distribution of 1,771,802
shares of restricted securities in a publicly traded company from a limited
partnership. At July 31, 2000, the Company recognized a loss of approximately
$0.1 million on the value of these shares. (See Note 6 of Notes to the
Consolidated Financial Statements.)

The Company's effective tax rate increased from 20% in fiscal 1999 to 31%
in fiscal 2000, primarily as a result of net losses of foreign subsidiaries for
which there were no tax benefits in fiscal 2000. Also, in fiscal 1999 the
effective tax rate reflected the benefit of a reversal of prior year tax
provisions.

Minority interest in the net income of the Company's consolidated
subsidiary, Camtronics, in fiscal 2000 amounted to $0.5 million compared to $0.8
million for fiscal 1999. During fiscal 2000, the founders and employees of
Camtronics exercised their rights to sell their shares back to Camtronics.
Subsequent to these transactions, the Company's share in Camtronics increased to
approximately 81%. (See Note 2 of Notes to Consolidated Financial Statements.)

Net income for fiscal 2000 was $14.1 million as compared to net income of
$19.2 million for the same period last year. Basic per-share earnings were $1.10
compared to $1.51 for fiscal 1999. Diluted per-share earnings were $1.09
compared to $1.50 for fiscal 1999.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and marketable securities totaled $122.9 million
and $116.4 million at July 31, 2001 and 2000, respectively. Working capital was
$224.5 million and $213.0 million at July 31, 2001 and 2000, respectively. The
Company's balance sheet at July 31, 2001, reflects a current ratio of 6.1 to 1,
compared to 6.0 to 1 at July 31, 2000. Liquidity is sustained principally
through funds provided from operations, with short-term time deposits and
marketable securities available to provide additional sources of cash.

The Company faces limited exposure to financial market risks, including
adverse movements in foreign currency exchange rates and changes in interest
rates. These exposures may change over time as business practices evolve and
could have a material adverse impact on the Company's financial results. The
Company's primary exposure has been related to local currency revenue and
operating expenses in Europe.

The carrying amounts reflected in the consolidated balance sheets of cash
and cash equivalents, trade receivables, and trade payables approximate fair
value at July 31, 2001 due to the short maturities of these instruments.

11

The Company maintains a bond investment portfolio of various issuers,
types, and maturities. The Company's cash and investments include cash
equivalents, which the Company considers to be investments purchased with
original maturities of three months or less. Investments having original
maturities in excess of three months are stated at amortized cost, which
approximates fair value, and are classified as available for sale. A rise in
interest rates could have an adverse impact on the fair value of the Company's
investment portfolio. The Company does not currently hedge these interest rate
exposures.

Cash flow provided from operations was $27.5 million in fiscal 2001, $15.0
million in fiscal 2000 and $37.5 million in fiscal 1999. The increase in cash
flows from operations in fiscal 2001 over fiscal 2000 was primarily the result
of an increase in operating income, a decrease in working capital balances, and
an increase in other non-cash items. The decrease in working capital balances
were primarily due to an increase in trade receivables in fiscal 2001 related
primarily to higher sales, and a decrease in accounts payable.

Net cash used in investing activities was $8.0 million in fiscal 2001
compared to net cash used in investing activity of $12.8 million in fiscal 2000,
and $28.7 million in fiscal 1999. The decrease was primarily due to lower
investments in advances to affiliated companies, net proceeds of marketable
securities and increase in property, plant and equipment of $4.8 million
primarily related to the construction of an addition to an existing building by
the Company's wholly owned subsidiary, Camtronics.

Net cash used by financing activities was $2.8 million in fiscal 2001, $2.9
million in fiscal 2000 and $6.3 million in fiscal 1999. The decrease was
primarily due to higher proceeds from stock options exercised.

Minority interest in subsidiary decreased $4.3 million as a result of the
Company acquiring the remaining 19% interest in Camtronics.

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 the
next 12 months.

IMPACT OF INFLATION

Overall, inflation has not had a material impact on the Company's
operations during the past three fiscal years.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations" ("SFAS No. 141"). SFAS No. 141 requires that all business
combinations be accounted for under the purchase method only and that certain
acquired intangible assets in a business combination be recognized as assets
apart from goodwill. SFAS No. 141 is effective for all business combinations
initiated after June 30, 2001 and for all business combinations accounted for by
the purchase method for which the date of acquisition is after June 30, 2001.
Management has reviewed SFAS No. 141 and does not believe it will have a
material effect on its financial position and results of operations.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets"("SFAS No. 142"), which requires that ratable amortization of goodwill be
replaced with periodic tests of the goodwill's impairment and that intangible
assets other than goodwill be amortized over their useful lives. The provisions
of SFAS No. 142 will be effective for fiscal years beginning after December 15,
2001, and will thus be adopted by the Company, as required, on August 1, 2002.
Management has reviewed SFAS No. 142 and does not believe it will have a
material effect on its financial position and results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 supercedes
FASB Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long Lived Assets to Be Disposed of ". SFAS 144 applies to all
long-lived assets (including discontinued operations) and consequently amends
Accounting Principles

12

Board Opinion No. 30 (APB 30), "Reporting Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business." SFAS 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001,
and will thus be adopted by the Company, as required, on August 1, 2002.
Management is currently determining what effect, if any, SFAS 144 will have on
its financial position and results of operations.

BUSINESS ENVIRONMENT AND RISK FACTORS

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contain statements which, to the extent
that they are not recitation of historical facts, constitute "forward looking
statements" pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that all forward-looking
statements, including statements about product development, market and industry
trends, strategic initiatives, regulatory approvals, sales, profits, expenses,
price trends, research and development expenses and trends, and capital
expenditures involve risk and uncertainties and actual events and results may
differ significantly from those indicated in any forward-looking statements as a
result of a number of important factors, including those discussed below.

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 RISKS 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 THESES 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 total net sales
for our three largest customers in any of the last three fiscal years and the
percentage of our total net sales to our ten largest customers in those years:

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
services, our operating results and financial condition could be adversely
affected.

COMPETITION FROM EXISTING OR NEW COMPANIES IN THE MEDICAL INSTRUMENTATION
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.

13

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 the products we manufacture for themselves. 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 may have
to delay shipments or pay premium pricing, which would 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 whom are
affiliated with customers or competitors and others of whom 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 would 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 will 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 for customer orders or in
anticipation of customer orders based on customer forecasts. For a variety of
reasons, such as decreased end-user demand for the products we are
manufacturing, our customers may not purchase all of 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.

UNCERTAINTIES AND ADVERSE TRENDS AFFECTING OUR INDUSTRY OR ANY OF OUR MAJOR
CUSTOMERS MAY ADVERSELY AFFECT OUR OPERATING RESULTS.

Our business depends primarily on a specific segment of the electronics
industry, medical instrumentation technology products, which is subject to rapid
technological change and pricing and margin pressure. This

14

industry has 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 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, may adversely affect our operating results. Our
businesses outside the medical instrumentation technology product sector 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 the subject of 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, may be withdrawn or modified. Medical devices cannot be marketed in
the United States without clearance or approval by the FDA. Medical devices sold
in the United States must also be manufactured in compliance with FDA Good
Manufacturing Practices, 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 device products are also subject to approval and regulation by
foreign regulatory and safety agencies.

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;

- changes in competitive and economic conditions generally or in our
customers' markets;

- changes in the cost or availability of components or skilled labor; and

- foreign currency exposure.

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.

15

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, assure you that our development efforts will be successful.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company places its cash investments in high credit quality financial
instruments and, by policy, limits the amount of credit exposure to any one
financial institution. The Company faces limited exposure to financial market
risks, including adverse movements in foreign currency exchange rates and
changes in interest rates. These exposures may change over time as business
practices evolve and could have a material adverse impact on the Company's
financial results. The Company's primary exposure has been related to local
currency revenue and operating expenses in Europe.

The Company maintains a bond investment portfolio of various issuers,
types, and maturities. The Company's cash and investments include cash
equivalents, which the Company considers to be investments purchased with
original maturities of three months or less. Investments having original
maturities in excess of three months are stated at amortized cost, which
approximates fair value, and are classified as available for sale.

The Company's three largest customers, each of which is a significant and
valued customer, were Philips, General Electric and Toshiba, which accounted for
approximately 22.6%, 10.5%, and 7.2%, respectively, of product and engineering
revenue for the fiscal year ended July 31, 2001. Loss of any one of these
customers would have a material adverse effect upon the Company's business.

16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data are listed under PART IV,
Item 14 in this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table lists the directors of the Company as of August 31,
2001.

---------------

* The Board of Directors is divided into three classes, each having a three year
term of office. The term of one class expires each year. Directors hold office
until the Annual Meeting of Stockholders held during the year noted and until
their respective successors have been duly elected and qualified.

The following table lists the executive officers of the Company as of
August 31, 2001.

---------------

(1) Mr. Gordon retired as Chief Executive Officer on February 1, 2001.

(2) Mr. Miller assumed the title of Chief Executive Officer on February 1, 2001

(3) Mr. Koob joined the Company as Executive Vice President in January 2001.

(4) Mr. Bauer joined the Company as Vice President of Legal Affairs in December
2000 and was elected to this position in in January 2001. Mr. Bauer resigned
from the Company in October 2001.

Each such officer is elected for a term continuing until the first meeting
of the Board of Directors following the annual meeting of stockholders, and in
the case of the President, Treasurer and Clerk, until their successors are
chosen and qualified; provided that the Board may remove any officer with or
without cause.

There are no family relationships among any of the directors or executive
officers of the Company.

Bernard M. Gordon has been the Chairman of the Board of Directors of the
Company since 1969 and, was President from 1980 to 1995. Mr. Gordon also is
Chairman of the Board of Directors of the Lahey Clinic.

17

Thomas J. Miller, Jr. joined the Company as President and Chief Operating
Office in October 1999 and was elected President and Chief Executive Officer in
February 1, 2001. Mr. Miller was the President and CEO of Carl Zeiss, Inc. from
1997 to 1999. Prior to Carl Zeiss, Inc., Mr. Miller was Group Vice President,
Imaging Systems, for Siemens Medical Systems, Inc. from 1995 to 1997. He also is
a director of Photoelectron Corporation.

Julian Soshnick joined the Company in October 1981 as General Counsel and
served as a Vice President since July 1982 and Clerk since 1988 before retiring
from these positions in January 2001 upon his election as a Director. Mr.
Soshnick was reappointed Vice President and General Counsel in October 2001.

John A. Tarello retired from Analogic in November 1999. Mr. Tarello was the
Company's Controller from May 1970 through July 1982, a Vice President of the
Company from 1971 to 1980, a Senior Vice President since 1980, and Treasurer
since 1985. He also is a director of Spire Corporation.

M. Ross Brown retired from Analogic in November 1999. Mr. Brown joined the
Company in August 1984 and was responsible for managing its manufacturing
operations. He was elected a Vice President in October 1984.

Edward F. Voboril has been President and CEO of Wilson Greatbatch
Technologies of Clarence, New York since December 1990. He was elected Chairman
of the Board of that company in 1997.

Dr. Gerald L. Wilson is the former Dean of the School of Engineering at
Massachusetts Institute of Technology and the Vannevar Bush Professor of
Engineering at the Massachusetts Institute of Technology. Dr. Wilson has served
on MIT's faculty since 1965 and currently serves as a Professor of Electrical
and Mechanical Engineering. He is a trustee of NSTAR Corporation and a director
of SATCON Corporation.

Dr. Bruce W. Steinhauer became the President and Chief Executive Officer of
the Regional Medical Center at Memphis in 1998. Prior to this position, he was
the Chief Executive Officer of the Lahey-Hitchcock Clinic from 1992 to 1998.
Prior to that, he was Senior Vice President for Medical Affairs and Chairman of
the Board of Governors for the Medical Group Practice of the Henry Ford Hospital
from 1988 to 1992.

Dr. Michael T. Modic has been Chairman of the Division of Radiology at the
Cleveland Clinic Foundation in Cleveland, Ohio since 1989 and has been on its
Board of Governors since 2000. Dr. Modic also has been a Professor of Radiology
at the Ohio State University since 1993.

Gene M. Bauer joined Analogic as Vice President of Legal Affairs in
December, 2000 and was elected Vice President and Clerk as well as being
appointed General Counsel in January 2001. From 1995 to 2000, Mr. Bauer was
employed by Copley Pharmaceutical, Inc., first as Vice President, General
Counsel and Secretary and, since 1997, as Executive Vice President, General
Counsel and Secretary. Mr. Bauer resigned from the Company in October 2001.

Lothar Koob joined Analogic as Executive Vice President in January 2001.
From 1998 to 2001 Mr. Koob was President of Humphrey Systems, a subsidiary of
Carl Zeiss, Inc. Prior to that time, Mr. Koob was employed by Siemens Medical
Engineering Group in various positions including General Manager of ultrasound
business (1992 to 1998) and General Manager of the magnetic resonance business
(1989 to 1992).

John J. Millerick joined the Company as Senior Vice President, Chief
Financial Officer and Treasurer in January 2000. Mr. Millerick was previously
Senior Vice President and Chief Financial Officer of CalComp Technology Inc.
from 1996 to 1999. Prior to CalComp Technology Inc., Mr. Millerick was Vice
President-Finance of Digital Equipment Corporation's Personal Computer Unit from
1994 to 1995. Before joining Digital Equipment Corporation, Mr. Millerick served
in several management positions at Wang Laboratories, leaving as Vice
President-Corporate Controller and Acting Chief Financial Officer.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Upon review of the forms and representations furnished to the Company
pursuant to Item 405 of Regulation S-K, the Company identifies Dr. Michael T.
Modic as the only "reporting person" (as defined in said Item 405) who failed to
file on a timely basis a report required by Section 16(a) of the Securities
Exchange Act of 1934 (the "Exchange Act"). Dr. Modic filed the Form 3 required
upon his election as a Director 10 days late; Dr. Modic had no transactions to
report.

18

ITEM 11. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain compensation information for the
Chief Executive Officer and each of the next four most highly compensated
executive officers of the Company during the last fiscal year ("Named Officers")
for services rendered in all capacities for the last three fiscal years.

Notes to Compensation Table
---------------

(1) Mr. Miller joined the Company in October 1999.
(2) Mr. Millerick joined the Company in January 2000.
(3) Mr. Koob joined the Company in January 2001.
(4) Mr. Bauer joined the Company in December 2000.
(A) Represents car allowance and relocation assistance for Mr. Koob in fiscal
2001 and for Mr. Miller in fiscal 2000.
(B) Represents stock grants under the Company's Key Employee Stock Bonus Plans,
pursuant to which Common Stock of the Company may be granted to key
employees to encourage them to exert their best efforts on behalf of the
Company. Each recipient of the Common Stock pursuant to the Bonus Plan is
required to execute a noncompetition agreement in a form satisfactory to the
Company. The Bonus Plan is administered by a committee appointed by the
Board of Directors consisting of the Chairman of the Board and three other
Directors who are not eligible to participate in the Bonus Plan. Generally,
the Common Stock granted pursuant to the Bonus Plan is not transferable for
a period of three years from the date of the grant and is subject to a risk
of forfeiture in the event that the recipient leaves the employ of the
Company during this period for any reason. Generally, during the subsequent
four-year period, the transfer restrictions will lapse with respect to 25%
of the Common Stock for each year the recipient remains in the employ of the
Company. Failure to remain in the Company's employ during all of the
subsequent four-year period will result in a forfeiture of shares as to
which restrictions on disposition still exist. The Common Stock granted
pursuant to the Bonus Plan is held in escrow by the Company until such
restrictions on disposition lapse. However, while in escrow, the recipient
has the right to vote such shares of Common Stock and to receive any cash
dividends thereon. The Board of Directors, acting upon the recommendation of
the Stock Bonus Plan Committee, may at the time of grant designate a
different schedule upon which the transfer restrictions lapse.
(C) As of July 31, 2001, the following table reflects stock bonus awards for
which transfer restrictions have not yet lapsed.

---------------

(D) Represents options granted pursuant to the Key Employee Stock Option Plan
dated June 11, 1998.
(E) Represents Profit Sharing distribution and 401(k) match for all Officers
listed.

19

STOCK OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information regarding stock option
grants to the Named Officers in fiscal 2001 and their fiscal year end option
holdings:

---------------

(1) The exercise price per share of each option was equal to the fair market
value per share of the Common Stock on the date of grant. Options became
exercisable in equal installments over four years beginning in the third
year from date of grant and terminates seven years from date of grant or
upon termination of the Named Officer's employment with the Company,
whichever occurs earlier.

(2) The 5% and 10% assumed rates of appreciation are required by the rules and
regulations of the Securities and Exchange Commission and do not represent
the Company's estimate or projection of the price of the Common Stock in the
future. The amounts shown in this table are are net of the option exercise
price, but do not include deductions for taxes or other expenses associate
with the exercise of the option or the sale of the underlying shares. The
actual gains, if any, upon the exercise of stock options will depend upon
the future performance of the Common Stock, the optionholders' continued
employment through the option period, and the date on which the options are
exercised. There can be no assurances that the rates of appreciation in this
table can be achieved or that the amounts reflected will be received by the
Named Officer.

STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth certain information regarding stock options
held by Named Officers as of July 31, 2001. No Named Officer exercised any stock
options during the last fiscal year.

---------------

(1) The value of in-the-money options at year-end represents the aggregate
difference between the option exercise price and the market value of the
common stock at July 31, 2001. "In-the-money" options are options whose
exercise price was less than the market value of the Common Stock at July
31, 2001.

20

COMPENSATION OF DIRECTORS

Each Director who is not an employee of the Company is entitled to an
annual fee of $10,000 plus a fee of $1,000 per meeting for each of the first
four meetings of the Board or any Board Committee attended by him, together with
reimbursement of travel expenses under certain circumstances.

In June 1996, the Board of Directors adopted and stockholders approved at
the January 1997 Annual Meeting of Stockholders, the 1997 Non-Qualified Stock
Option Plan for Non-Employee Directors (the "1997 Plan"). Pursuant to the 1997
Plan, options to purchase 50,000 shares of Common Stock may be granted only to
directors of the Company or any subsidiary who are not otherwise employees of
the Company and any subsidiary. The exercise price of options granted under the
1997 Plan is the fair market value of the Common Stock on the date of grant. The
1997 Plan provides each new non-employee Director who is elected to the Board
shall be granted an option to acquire 5,000 shares, effective as of the date he
or she is first elected to the Board.

Every four (4) years from the date on which a non-employee Director was
last granted a non-employee Director option, that non-employee Director shall be
granted an option to acquire 5,000 shares, effective as of the date of that
fourth anniversary.

Options granted under the 1997 Plan become exercisable in three equal
annual installments on each of the first three anniversaries of the date of
grant, and expire 10 years after the date of grant.

The 1997 Plan is administered by members of the Company's Board of
Directors. In fiscal 2001, the only option granted under the 1997 plan was an
option for 5000 shares, at an option price of $44.00 per share, granted to Dr.
Modic on April 12, 2001.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee of the Company's Board of
Directors during fiscal 2001 were Mr. Voboril, Dr. Wilson and Dr. Steinhauer. No
executive officer of the Company has served as a director or member of the
Compensation committee of any other company whose executive officers serve as a
member of the Company's Board of Directors or Compensation Committee.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as to all persons (including any
"group", as defined in section 13(d)(3) of the Exchange Act) known by the
Company to have owned beneficially 5% or more of its Common Stock, as of August
31, 2001:

---------------

(1) Mr. Gordon serves as Trustee of the Bernard Gordon Charitable Remainder
Unitrust (the "Trust") along with Julian Soshnick. The Trustees, acting by a
majority, have full power to vote or dispose of the shares held by the
Trust. Upon the death of Mr. Gordon, all of the assets of the Trust, in
general, will be distributed to The Gordon Foundation, a Section 501(c)(3)
trust formed by Mr. Gordon with its principal office located at 8 Centennial
Drive, Peabody, Massachusetts. The total shares reported above include
12,900 shares owned by the Gordon Foundation.

21

(2) The Company has been advised informally by T. Rowe Price and Private Capital
Management Inc. that in their capacity as investment advisors they may be
deemed a beneficial owner on August 31, 2001, of 1,748,780 shares, or 13.2%
of the Company's Common Stock and 1,044,364 shares, or 7.9% of the Company's
Common Stock, respectively.

The following table sets forth information as to ownership of the Company's
Common Stock, by its Directors and by Executive Officers as a group, as of
August 31 2001:

---------------

* Represents less than 1% ownership

(1) The amounts shown are based upon information furnished by the individual
directors and officers. Unless otherwise noted, the beneficial owners have
sole voting and investment power with respect to the shares listed.

(2) Mr. Gordon serves as Trustee of the Bernard Gordon Charitable Remainder
Unitrust (the "Trust") along with Julian Soshnick. The Trustees, acting by a
majority, have full power to vote or dispose of the shares held by the
Trust. Upon the death of Mr. Gordon, all of the assets of the Trust, in
general, will be distributed to the Gordon Foundation, a Section 501(c)(3)
trust formed by Mr. Gordon with its principal office located at 8 Centennial
Drive, Peabody, Massachusetts. The total shares reported above includes
12,900 shares owned by the Gordon Foundation

(3) These amounts include certain shares deemed beneficially owned under
Exchange Act Rule 13d-3(d)(1).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Bernard M. Gordon owns a 48% interest and Mr. Bernard L. Friedman, the
Company's former Vice Chairman of the Board (Mr. Friedman resigned on July 31,
1993), own 52% interest in a limited partnership (Audubon Realty), which owns
the Danvers, Massachusetts facilities leased by the Company for a term which
expired July 31, 2001. These facilities include a 50,000 square foot building
completed in 1978; a 40,000 square foot addition to that building, completed in
1982; and an 80,000 square foot building which the Company moved into during
1980. The annual rent on the entire 170,000 square feet was increased from
$1,219,000 to $1,346,000 effective March 1, 2001. A total of 155,000 square feet
of the facilities were sublet to Siemens Medical Electronics, Inc. under two
subleases for terms, which ended on December 1, 2000 and July 31, 2001,
respectively.

Mr. Gordon owns a 48% interest and Mr. Friedman own a 52% interest in a
limited partnership which owns the facility located at 360 Audubon Road,
Wakefield, Massachusetts, which is leased by the Company for a term expiring on
July 31, 2003. This facility has been utilized by the Company for manufacturing
and office space since May 1, 1981. The annual rent for this facility was
increased from $333,000 to $357,000

22

effective May 1, 1999, and shall be adjusted as of May 1 every third year to
reflect increases in the cost of living.

All of the foregoing rents are on a net lease basis, and accordingly the
Company pays, in addition to the above rental payments, all taxes, maintenance,
insurance, and other costs relating to the leased premises.

The terms of the several lease agreements, at the time they were executed,
were at least as favorable as those that could have been obtained from
unaffiliated third parties. Prior to execution of each such lease, two
independent appraisals were obtained in order to establish the fair market rate
for subject premises. A rent, in each case discounted below the fair market rate
established by the appraisals, was then agreed upon by the parties.

The leases each incorporated periodic rent escalation clauses, based upon
the CPI. At the present time, the rent that the Company is paying under the
Wakefield, Massachusetts lease reflects fair rental value for the property.

See Item 2 of this Report for information as to the character of the leased
premises, and Note 8 of Notes to Consolidated Financial Statements for further
information as to the leases.

23

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

PAGE
NUMBER
-----

(a) 1... Financial Statements
Report of Independent Accountants........................... 26
Consolidated Balance Sheets at July 31, 2001 and 2000....... 27
Consolidated Statements of Income for the years ended July
31, 2001,
2000 and 1999............................................... 28
Consolidated Statements of Stockholders' Equity for the
years ended
July 31, 2001, 2000 and 1999................................ 29
Consolidated Statements of Cash Flows for the years ended
July 31, 2001
2000 and 1999............................................... 30
Notes to Consolidated Financial Statements.................. 31-47
Financial Statement Schedule II.--Valuation and Qualifying
2... Accounts.................................................... 48
Other schedules have been omitted because they are not
required, not applicable, or the required information is
furnished in the consolidated statements or notes thereto
3... Exhibits--See Index to Exhibits............................. 49-53
(b) Report on Form 8-K
No reports on Form 8-K were filed by the registrant during
the quarter
ended July 31, 2001.

24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

ANALOGIC CORPORATION

Date: October 25, 2001 By /s/ BERNARD M. GORDON
------------------------------------
Bernard M. Gordon
Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Date: October 25, 2001 /s/ BERNARD M. GORDON
--------------------------------------------------------
Bernard M. Gordon
Chairman of the Board

Date: October 25, 2001 /s/ THOMAS J. MILLER, JR.
--------------------------------------------------------
Thomas J. Miller, Jr.
President, Chief Executive Officer and Director

Date: October 25, 2001 /s/ M. ROSS BROWN
--------------------------------------------------------
M. Ross Brown
Director

Date: October 25, 2001 /s/ JOHN J. MILLERICK
--------------------------------------------------------
John J. Millerick
Senior Vice President,
Chief Financial Officer and Treasurer

Date: October 25, 2001 /s/ MICHAEL T. MODIC
--------------------------------------------------------
Michael T. Modic
Director

Date: October 25, 2001 /s/ JULIAN SOSHNICK
--------------------------------------------------------
Julian Soshnick
Director

Date: October 25, 2001 /s/ BRUCE W. STEINHAUER
--------------------------------------------------------
Bruce W. Steinhauer
Director

Date: October 25, 2001 /s/ JOHN A. TARELLO
--------------------------------------------------------
John A. Tarello
Director

Date: October 25, 2001 /s/ EDWARD F. VOBORIL
--------------------------------------------------------
Edward F. Voboril
Director

Date: October 25, 2001 /s/ GERALD L. WILSON
--------------------------------------------------------
Gerald L. Wilson
Director

25

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Analogic Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 24 present fairly, in all material
respects, the financial position of Analogic Corporation and its subsidiaries at
July 31, 2001 and 2000, and the results of their operations and their cash flows
for each of the three years in the period ended July 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the
index appearing under Item 14(a)(2) on page 24, presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
the financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

/S/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
October 1, 2001

26

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

27

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of these financial statements.
28

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 31, 2001, 2000 AND 1999
(000 OMITTED, EXCEPT SHARE DATA)

The accompanying notes are an integral part of these financial statements.

29

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.
30

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

1. SUMMARY OF BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS OPERATIONS:

Analogic Corporation and its subsidiaries ("Analogic" or the "Company") are
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 medical and industrial use. The Company is subject to risks common to
companies in the medical instrumentation technology industry, including, but not
limited to, development by its competitors of new technological innovations,
dependence on key personnel, loss of any significant customer, protection of
proprietary technology, and compliance with regulations of domestic and foreign
regulatory authorities and agencies.

Significant accounting policies are as follows:

(A) PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. Investments in companies in
which ownership interests range from 20 to 50 percent and/or the Company
exercises significant influence over operating and financial policies are
accounted for using the equity method. Other investments are accounted for using
the cost method. All intercompany accounts and transactions have been
eliminated.

(B) INVENTORIES:

Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method. Inventories include material, labor and manufacturing
overhead costs.

(C) PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are recorded at cost and depreciated using
the straight-line method over their estimated useful lives. Assets under capital
leases and leasehold improvements are amortized over the shorter of their
estimated useful lives or the term of the respective leases or the life of the
improvements. Upon retirement or disposal, the cost of the asset disposed of and
the related accumulated depreciation are removed from the accounts and any gain
or loss is reflected in income. Expenditures for maintenance and repairs are
charged to expense while the cost of significant improvements which extend the
life of the underlying asset are capitalized.

The annual provisions for depreciation and amortization have been computed
in accordance with the following ranges of estimated useful lives:

Buildings................................................... 35 years
Property under capital lease................................ up to 22 years
Manufacturing equipment..................................... 4 to 7 years
Furniture, fixtures and computer equipment.................. 4 to 8 years
Leasehold and capital lease improvements.................... up to 15 years
Motor vehicles.............................................. 3 years

Interest is capitalized in connection with the in house construction of
fixed assets. The capitalized interest is recorded as part of the asset to which
it relates and is amortized over the asset's estimated useful life. Total
interest of $108, $171 and $154 was capitalized in fiscal 2001, 2000 and 1999,
respectively.

31

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(D) REVENUE RECOGNITION:

Revenue related to product sales is recognized upon shipment provided that
title and risk of loss has 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. Service revenues are recognized at the time
the services are rendered and the Company has no significant further obligations
to the customer. The Company provides engineering services to some of its
customers on a contractual basis and recognizes revenue using the percentage of
completion method. License revenue, based on contractual agreements reached with
customers, is recognized over the term of the license. Revenues related to the
hotel operations are recognized as services are performed. For certain
transactions, at the request of customers, revenue was recognized on a bill and
hold basis after completion of manufacture. All bill and hold transactions had
met specified revenue recognition criteria which included normal billing, credit
and payment terms, firm commitment and transfer to the customers of all risks
and rewards of ownership. Total receivable related to bill and hold transactions
were approximately $1,151, $1,806 and $2,049 at July 31, 2001, 2000, and 1999
respectively.

(E) CAPITALIZED SOFTWARE COSTS:

In accordance with FAS 86, the Company capitalizes certain computer
software costs, primarily labor and overhead, it develops for use in its own
products. Capitalization commences when the Company determines, after a detailed
review, that the product is technologically feasible. Capitalized costs are
amortized on a straight-line basis over the economic lives of the related
products, generally three years. Amortization expense was $1,647, $1,778 and
$1,977 in fiscal 2001, 2000 and 1999, respectively. The unamortized balance of
capitalized software was $5,488 and $5,368 at July 31, 2001 and 2000,
respectively.

(F) WARRANTY COSTS:

The Company provides for estimated warranty costs as products are shipped.

(G) RESEARCH AND PRODUCT DEVELOPMENT COSTS:

Research and product development costs are expensed as incurred.

(H) INCOME TAXES:

The Company accounts for income taxes under the liability method, which
requires recognition of deferred tax assets, subject to valuation allowances,
and liabilities for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of asset and liabilities for financial reporting and income tax
purposes. A valuation allowance is established if it is more likely than not
that all or a portion of the net deferred tax assets will not be realized.

(I) NET INCOME PER SHARE:

Basic net income per share is based upon the weighted average common shares
outstanding during the period. Diluted net income per share is based upon the
weighted average common shares and is calculated by considering the impact of
common stock equivalents (outstanding stock options and restricted stock) as if
they were converted into common stock at the beginning of the period.

32

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(J) CASH AND CASH EQUIVALENTS:

The Company considers all short-term deposits with an original maturity of
three months or less at acquisition date to be cash equivalents. Cash
equivalents amounted to approximately $46,000 and $26,000 at July 31, 2001 and
2000, respectively.

(K) CONCENTRATION OF CREDIT RISK:

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents,
marketable securities and accounts receivable. The Company places its cash
investments and marketable securities in high credit quality financial
instruments and by policy, limits the amount of credit exposure to any one
financial institution. The Company grants credit to domestic and foreign
original equipment manufacturers, distributors and end users, and performs
ongoing credit evaluations on its customers' financial condition.

(L) MARKETABLE SECURITIES:

The Company's marketable securities are categorized as available-for-sale
securities, as defined by the Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Unrealized marketable securities gains and losses are reflected as a net amount
in a separate component of stockholders' equity until realized. For the purpose
of computing realized gains and losses cost is identified on a specific
identification basis.

(M) ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations" ("SFAS No. 141"). SFAS No. 141 requires that all business
combinations be accounted for under the purchase method only and that certain
acquired intangible assets in a business combination be recognized as assets
apart from goodwill. SFAS No. 141 is effective for all business combinations
initiated after June 30, 2001 and for all business combinations accounted for by
the purchase method for which the date of acquisition is after June 30, 2001.
Management has reviewed SFAS No. 141 and does not believe it will have a
material effect on its financial position and results of operations.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" ("SFAS No. 142"), which requires that ratable amortization of goodwill
be replaced with periodic tests of the goodwill's impairment and that intangible
assets other than goodwill be amortized over their useful lives. The provisions
of SFAS No. 142 will be effective for fiscal years beginning after December 15,
2001, and will thus be adopted by the Company, as required, on August 1, 2002.
Management has reviewed SFAS No. 142 and does not believe it will have a
material effect on its financial position and results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 supercedes
FASB Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long Lived Assets to Be Disposed of ". SFAS 144 applies to all
long-lived assets (including discontinued operations) and consequently amends
Accounting Principles Board Opinion No. 30 (APB 30), "Reporting Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business." SFAS
144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001, and will thus be adopted by the Company, as required,
on August 1, 2002. Management is currently determining what effect, if any, SFAS
144 will have on its financial position and results of operations.

33

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(n) USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting periods.
These estimates include reserves on accounts receivable, inventories and other
liabilities. Actual results could differ from those estimates.

(o) COMPREHENSIVE INCOME

Statement of Financial Accounting Standards No. 130, ("SFAS 130"),
"Reporting Comprehensive Income" established standards for reporting and display
of comprehensive income and its components. Components of comprehensive income
include net income and certain transactions that have generally been reported in
the consolidated statements of stockholders' equity. Other comprehensive income
consists of unrealized gains and losses on marketable securities and foreign
currency translation adjustments.

(p) STOCK-BASED COMPENSATION:

Statement of Financial Accounting Standards No. 123, ("SFAS 123"),
"Accounting for Stock-based Compensation" encourages, but does not require,
recognition of compensation expense based on the fair value of employee
stock-based compensation instruments. The Company has not adopted the fair value
method of accounting for employee stock-based compensation, but instead complies
with the pro forma disclosure requirements.

(q) FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying amounts of cash, cash equivalents, receivables, mortgages and
other notes payable approximate fair value. The Company believes similar terms
for mortgage and other notes payable would be attainable. The fair values of
marketable securities are estimated based on quoted market price for these
securities.

(r) IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates the recoverability of its long-lived assets,
primarily fixed assets, in accordance with Statement of Financial Accounting
Standards No. 121, (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets to be Disposed of ". SFAS 121 requires recognition of impairment of
long-lived assets in the event the net book value of such assets exceeds the
estimated future undiscounted cash flows attributable to such assets.

(s) TRANSLATION OF FOREIGN CURRENCIES

The assets and liabilities of the Company's foreign subsidiaries, whose
cash flows are primarily in their local currency, have been translated into U.S.
dollars using the current exchange rates at each balance sheet date. The
operating results of these foreign subsidiaries have been translated at average
exchange rates that prevailed during each reporting period. Adjustments
resulting from translation of foreign currency financial statements are
reflected as cumulative translation adjustments in the consolidated balance
sheet. Exchange gains and losses resulting from foreign currency transactions
(transactions denominated in a currency other than that of the entities primary
cash flow) are included in operations in the period in which they occur.

34

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(T) BASIS OF PRESENTATION:

Certain financial statement items have been reclassified to conform to the
current year's format.

2. BUSINESS COMBINATIONS:

In July 2001, the Company ownership of Camtronics Medical Systems, Ltd.
(formerly Camtronics, Ltd.) increased from 81% to 100%, as a result of the
Company acquiring all outstanding shares of Camtronics common stock. The Company
issued 190,255 shares of common stock from its treasury, for a value of $7,584,
to acquire the remaining 19% of minority interest. The Company recorded a
premium in excess of book value of $3,227, of which $1,240 was applied to
property, plant and equipment, and $1,987 was applied to intangible assets
(classified as other assets on the balance sheet) related to software and
systems technology.

In January 1993, the Company acquired an interest of approximately 57% in a
newly formed company, B-K Medical Systems A/S ("B-K"). B-K, a Danish
Corporation, is primarily engaged in the design and manufacture of ultrasound
imaging devices used in urology and various sonographic techniques. The
Company's ownership interest was adjusted upward to 59% in fiscal 1994 in
accordance with the shareholders' agreement. In July 1996, the Company acquired
the remaining 41% interest in B-K for $3,416 in cash. The Company's equity in
net assets of B-K exceeded the purchase price for this portion of the investment
by approximately $565. This excess was fully amortized in fiscal 2001.
Accumulated amortization amounted to $565 and $462 as of July 31, 2001 and 2000,
respectively.

On June 28, 1999, the Company acquired the fixed assets of Noranda Advanced
Materials' medical detectors and pure metal businesses for approximately $5,500.
The company was renamed ANRAD Corporation and is located in St. Laurent, Quebec.
ANRAD's objective is to develop and manufacture selenium-based flat panel x-ray
detectors for the medical and industrial markets. The acquisition was accounted
for as a purchase and ANRAD operations have been included in the Company's
consolidated financial statements since June 28, 1999. During the fourth quarter
of fiscal 2000, ANRAD sold the assets of its pure metal business at cost for
approximately $700 in cash to former employees. No gain or loss was recognized
by the Company in connection with the sale.

3. MARKETABLE SECURITIES:

Marketable securities are categorized as available-for-sale securities and
summarized as follows:

35

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The cost and estimated fair value of current debt securities at July 31,
2001, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because the issuers of the securities may have the
right to repay obligations without prepayment penalties.

4. BALANCE SHEET INFORMATION:

Additional information for certain balance sheet accounts is as follows for
the years ended:

The decrease in property under capital lease and leasehold and capital
lease improvements was due to expiration of a real estate capital lease.

36

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. ASSET IMPAIRMENT CHARGES:

The Company recognized asset impairment charges of $3,200 in fiscal 2001
attributable to certain assets of Anatel, the Company's telecommunications
subsidiary. As a result of the significant deterioration of the
telecommunication business, the Company evaluated the recoverability of certain
assets and wrote off $1,500 of inventory, $1,500 of capitalized software and
$200 of capital equipments. The Company was required to reduce the carrying
value of the assets to fair value and recognized asset impairment charges,
because the carrying value of the affected assets exceeded the projected future
undiscounted cash flows.

6. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES:

A) INVESTMENT IN SHENZHEN ANKE HIGH-TECH CO., LTD:

During October 2000, Analogic Scientific, Inc. (ASI), a joint venture
corporation located in The People's Republic of China, entered into separate
agreements with four investors which resulted in these investors buying a 10.8%
equity interest in ASI from its existing investors. This transaction had the
approval of the Company and the other shareholder who prior to this transaction
each had a 50% equity ownership interest in ASI. As a result, the Company's
ownership in ASI was reduced by 5.4% to 44.6%. On January 18, 2001, the company
name was changed from "Analogic Scientific, Inc. " to "Shenzhen Anke High-Tech
Co., Ltd" (SAHCO).

The Company accounts for this investment under the equity method of
accounting whereby the Company adjusts its investment balance to recognize its
share of SAHCO's earnings or losses, changes in SAHCO's capital investment and
dividends received.

During fiscal 2001 the Company became aware of certain differences between
local statutory accounting practices used by SAHCO and U.S. Generally Accepted
Accounting Principles (GAAP) primarily with respect to the valuation of accounts
receivable and inventory and revenue recognition. During the quarter ended
January 31, 2001, the Company evaluated the potential differences in accounting
basis and concluded that adjustments were necessary for the prior periods
resulting in a reduction in the Company's investment in SAHCO of $2,375 at July
31, 2000 (or $1,808 net of tax effect) which reduced the carrying value of the
Company's investment at July 31, 2000 from $6,125 to $3,750.

SAHCO has historically provided the Company with current quarterly
information regarding its financial results. To ensure that the Company has
adequate time to review and adjust the financial information provided by SAHCO
to conform it to U.S. GAAP, the Company changed, effective with the first fiscal
quarter ended October 31, 2000, its method of recording SAHCO's financial
results and uses the previous quarter's financial information of SAHCO to adjust
its investment account in the current quarter, thereby resulting in a
consistently applied quarterly delay in recording its equity-based accounting.
Accordingly, the Company recognized its share of SAHCO's previous calendar
quarter profit of $414,000 (or $282,000 net of tax effect) in the three months
ended October 31, 2000 and adjusted the beginning retained earnings by the
$282,000. This change has no impact in fiscal year 2000.

The Company's share of SAHCO's losses amounted to $51 in fiscal year 2001,
as compared to a profit of $865 in fiscal year 2000. The carrying value of this
investment was $3,699 at July 31, 2001 and $3,750 at July 31, 2000. Transactions
with SAHCO for fiscal years 2001, 2000 and 1999 consisted of revenues of
approximately $3,237, $5,575, $2,610, respectively. At July 31, 2001 and 2000,
net accounts receivable from this affiliate were $2,350 and $3,063,
respectively.

B) OTHER INVESTMENTS:

The Company along with another investor each owned a 50% interest in a
private company for the design and development of medical imaging equipment.
Upon completion of the research and development phase, the private company sold
its intellectual property in a form of license to a newly formed limited
liability

37

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

company called Enhanced CT Technology LLC ("ECTT"), distributed its assets to
the Company and the other original investor, and ceased operations.

The Company, in conjunction with its original investor, retains a 50%
interest in ECTT, which will receive license related royalties based upon future
sales of medical imaging equipment. The Company accounted for this transfer at
historical cost and will continue to account for this investment using the
equity method of accounting. The Company's share of losses from the previous
private company amounted to $2,665. The Company's share of profit in the newly
formed limited partnership was $1,789 in fiscal 2001 and $441 in fiscal 2000.
The carrying value of the Company's investment in ECTT at July 31, 2001 was
$1,230 and $441 at July 31, 2000.

The Company owns 1,771,802 shares of Norland Medical Systems, Inc., which
were received in fiscal 2000 from a limited partnership (Norland Partners) that
was 25% owned by Analogic. The partnership was dissolved in fiscal 2000 upon
distributing all its shares in Norland Medical Systems, Inc. to the respective
partners. At the time of distribution the shares were restricted, however, the
restriction on 620,865 shares lapsed on January 1, 2001 and the remaining
1,150,937 shares became unrestricted on March 29, 2001. At July 31, 2000 the
Company recognized a loss of approximately $110 and reduced the value of the
Norland shares to its market value of $664 because it believed an other than
temporary impairment of value had occurred. During fiscal 2001, the Company
recorded an additional loss of $487 and reduced the value of the shares to their
market value of $177 at July 31, 2001.

7. MORTGAGE AND OTHER NOTES PAYABLE:

Mortgage and other notes payable consists of the following:

Principal maturities in each of the next five fiscal years and thereafter
on the above notes are as follows: 2002, $369; 2003, $376; 2004, $383; 2005,
$390; 2006, $397 and $3,350 thereafter.

Total interest incurred amounted to $348, $472 and $518 in fiscal 2001,
2000 and 1999, respectively, of which $108, $171 and $154 was capitalized.

The Company currently has approximately $10.0 million in revolving credit
facilities with various banks available for direct borrowings. There were no
direct borrowings in fiscal 2001 or in fiscal 2000.

8. LEASE AND OTHER COMMITMENTS WITH RELATED AND NON-RELATED THIRD PARTIES:

The Company leased three operating facilities from a partnership in which
the Chairman and the former Vice Chairman are partners under leases that have
been accounted for as capital leases. As of July 31, 2001 two of these leases
expired and were not renewed. The leases contain rent escalation clauses based
upon cost-of-living adjustments. The rent adjustments were not significant in
fiscal 2001, 2000 and 1999.

38

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property under capital leases is included in property, plant and equipment,
as follows:

The Company's Danish subsidiary B-K announced in May 2001 the construction
of a new 135,000 square foot facility in Herlev, north of Copenhagen, for the
manufacture of specialized diagnostic ultrasound equipment at an estimated cost
of $15,500. The new facility, scheduled for completion in May 2002, will host
manufacturing, research and development, service, marketing, sales and
administrative functions. The new facility is expected to be financed by a
combination of internally generated cash and borrowings.

Certain of the Company's subsidiaries lease manufacturing and office space
under non-cancelable operating leases. These leases contain renewal options. The
Company leases certain other real property and equipment under operating leases
which, in the aggregate, are not significant.

Rent expense approximated $1,423, $989 and $764 (net of sublease income of
$872, $1,143 and $1,108) in fiscal 2001, 2000 and 1999, respectively.

The following is a schedule by year of future minimum lease payments at
July 31, 2001:

9. STOCK OPTION AND STOCK BONUS PLANS:

At July 31, 2001, the Company had four key employee stock option plans two
of which have lapsed as to the granting of options. In addition, the Company has
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 four key employee stock option plans generally
become exercisable in installments commencing no earlier than two years from the
date of grant and 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. Tax benefits from early disposition of the stock by optionees
under incentive stock options, and from exercise of non-qualified options are
credited to capital in excess of par value.

39

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Options granted under the two non-employee director stock option plans
become exercisable in equal installments over three years commencing one year
from the date of grant and remain exercisable for ten years from the date of
grant. Options issued under the plans are non-qualified options and are issued
at prices of 100% of the fair market value of the common stock at the date of
grant.

Under the Company's key employee stock bonus plans, 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 vest in four equal installments beginning in the
third year from the date of grant. Upon issuance of stock under the plans,
unearned compensation equivalent to the market value at the date of grant is
charged to stockholders' equity and subsequently amortized over the periods
during which the restrictions lapse (up to six years). Shares granted under the
Company's key employee stock bonus plan were 89,000 at a weighted average fair
market value of $41.61 per share in fiscal 2001; 87,000 shares at a weighted
average fair market value of $27.89 per share in fiscal 2000; 22,000 shares at a
weighted average fair market value of $33.16 per share in fiscal 1999.
Amortization of unearned compensation of $976, $644 and $527 was recorded in
fiscal 2001, 2000 and 1999, respectively.

Under the employee stock purchase plan, eligible participants are granted
options to purchase the Company's 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 $25,000
during each calendar year. The number of shares issued pursuant to this plan
totaled 7,864 in 2001, 11,940 in 2000 and 12,389 in 1999.

At July 31, 2001, 758,523 shares were reserved for grant under the above
stock option, bonus and purchase plans.

The following table sets forth the stock option transactions for the years
ended July 31, 2001, 2000, and 1999:

40

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
at July 31, 2001:

The fair value of the Company's stock options was estimated using the
Black-Scholes option-pricing model. This model was developed for use in
estimating fair value of traded options that have no vesting restrictions and
are fully transferable. This model requires the input of highly subjective
assumptions including the expected stock price volatility. Because the Company's
stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing model does
not necessarily provide a reliable single measure of the fair value of its stock
options. The fair value of the Company's stock options was estimated using the
following weighted-average assumptions:

The weighted-average estimated fair value of stock options granted during
fiscal 2001, 2000 and 1999, was $18.45, $19.11 and $19.13 per share,
respectively. For pro forma purposes, the estimated fair value of the Company's
stock options is amortized over the options' vesting period. The Company's pro
forma information is as follows:

41

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. RETIREMENT PLANS:

The Company has a qualified Profit Sharing Retirement Plan ("Retirement
Plan") for the benefit of eligible employees. The Retirement Plan provides that
the Company shall make contributions from current or accumulated earnings as
determined by the Board of Directors. The contribution each year shall in no
event exceed the maximum allowable under applicable provisions of the Internal
Revenue Code. Profit sharing expense amounted to $1,000 in fiscal years 2000 and
1999. The Company did not contribute to the Retirement Plan in fiscal 2001.

The Company sponsors a 401(k) Plan (the "Plan") to provide retirement
benefits for its employee. As allowed under Section 401(k) of the Internal
Revenue Code, the Plan provides tax-deferred salary deductions for eligible
employees. Employees may contribute from 1% to 15% of their annual compensation
to the Plan, limited to a maximum annual amount as set periodically by the
Internal Revenue Service. Beginning in fiscal 2001, the Company matched employee
contributions dollar for dollar up to 3% of eligible earning per year per
person. All contributions vest immediately. The Company contributions to the
Plans totaled $2,009 in fiscal 2001.

11. INCOME TAXES:

The components of the provision for income taxes are as follows:

The tax effects of the principal temporary differences resulting in
deferred tax expense (benefit) are as follows:

42

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income (loss) before income taxes from domestic and foreign operations is
as follows:

The components of the deferred tax assets and liabilities are as follows:

43

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of income taxes at the United States statutory rate to the
effective tax rate follows:

At July 31, 2001 the Company had capital loss carryforwards of $1,970.
These carryforwards will expire in 2003 in the amount of $1,617 and 2005 in the
amount of $353.

Two of the Company's subsidiaries have elected to be taxed as Foreign Sales
Corporations (FSC).

12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):

The following is a summary of unaudited quarterly results of operations for
the years ended July 31, 2001 and 2000.

---------------

(A) The Company recorded asset impairment losses of $3,200 in the fourth quarter
of fiscal 2001 related to Anatel, the Company's telecommunications
subsidiary. (Note 5)

13. TRANSACTIONS WITH MAJOR CUSTOMERS AND INDUSTRIES:

One export customer accounted for approximately $78,000 and $44,000 or 22%
and 16% of total product and engineering revenue in fiscal 2001 and 2000,
respectively. Of the total product and engineering revenue,

44

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

one domestic customer accounted for approximately $37,000 or 10% and $28,000 or
10% in fiscal 2001 and 2000, respectively.

The Company's ten largest customers accounted for approximately 62% of
product and engineering revenue during fiscal 2001.

Medical Technology Products, consisting primarily of electronic systems and
subsystems for medical imaging equipment, accounted for approximately 79% of
product and engineering revenue in fiscal 2001.

14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Changes in operating assets and liabilities are as follows for the years
ended:

During fiscal years 2001, 2000 and 1999 interest paid amounted to $420,
$431 and $505, respectively.

Income tax paid during fiscal years 2001, 2000 and 1999 amounted to $8,308,
$6,044 and $9,092, respectively.

Supplemental information regarding noncash investing and financing
activities:

Capital lease obligations incurred for the purchase of new equipment was
$565 in fiscal 2001.

Issued 190,255 shares of common stock for remaining interest in subsidiary
for $7,584. (Note 2).

45

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. NET INCOME PER SHARE:

The Company's reported net income and the number of shares utilized in the
net income per share calculations for the fiscal years ending July 31, 2001,
2000 and 1999 are as follows:

Stock options to purchase approximately 90,000, 199,000 and 150,000 shares
of common stock were outstanding during the years ended July 31, 2001, 2000, and
1999, respectively, but were not included in the calculation of diluted net
income per share because the options' exercise prices were greater than the
average market price of the Company's common stock during those years. Although
these stock options were antidilutive in fiscal 2001, 2000, and 1999, they may
be dilutive in future years' calculations.

16. SEGMENT INFORMATION:

The Company's operations are primarily within a single segment within the
electronics industry (Medical Instrumentation Technology Products). These
operations encompass the design, manufacture and sale of high technology,
high-performance, high precision data acquisition, conversion (analog/digital)
and signal processing instruments and systems to customers that manufacture
products for medical and industrial use. The other segment represents the
Company's hotel operation and other Company's operations which do not meet the
materiality requirements for separate disclosure. The accounting policies of the
segments are the same as

46

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

those described in the summary of significant accounting policies. The table
below presents information about the Company's reportable segments:

The significant amount of identifiable assets categorized in other relates
mainly to the Company's cash equivalents and marketable securities.

Information regarding geographic areas for the years ended July 31, 2001,
2000 and 1999 are as follows:

Revenues are attributed to countries based on the location of the
customers.

47

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. FOREIGN OPERATIONS:

Financial information relating to the Company's foreign and domestic
operations for fiscal years 2001, 2000 and 1999 are as follows:

18. SUBSEQUENT EVENT:

In September 2001, the Corporation announced that it acquired a 19%
interest in Cedara Software Corporation of Mississauga, Ontario, Canada, in
return for an equity investment of $7.5 million and other considerations. Cedara
is a premier independent provider of imaging software technology and custom
imaging software development to leading Original Equipment Manufacturers (OEMs)
in the healthcare industry. Cedara enables healthcare solution providers to
integrate better imaging software into their systems and hardware in such fields
a Computed Tomography (CT) and Magnetic Resonance Imaging (MRI). Analogic has
agreed to refinance the debt owed by Cedara to its bank lender through the
provision of a credit facility with Analogic's principal bank or by refinancing
the debt directly. Analogic will have two of the seats on Cedara's seven person
board of directors. The Company will account for this investment as an equity
method investment due to the Company's ability to exercise influence over
operating and financial policies.

48

ANALOGIC CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

49

INDEX TO EXHIBITS

53

EXHIBIT