ANALOGIC CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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

FOR THE FISCAL YEAR ENDED: JULY 31, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER 0-6715
ANALOGIC CORPORATION
(Exact name of registrant as specified in its charter)

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

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

(978) 977-3000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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. [X]

The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the registrant at August 31, 2002 was approximately
$389,375,000.

Number of shares of Common Stock outstanding at August 31, 2002: 13,272,873

DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I

ITEM 1. BUSINESS

(A) DEVELOPMENTS DURING FISCAL 2002

Total revenues of Analogic Corporation (hereinafter, together with its
subsidiaries, referred to as "Analogic" or the "Company") for the fiscal year
ended July 31, 2002, were $313.6 million as compared to $360.6 million for
fiscal 2001, a decrease of 13%. Net income for fiscal 2002 was $3.3 million, or
$.25 per diluted share as compared to $15.2 million or $1.17 per diluted share
for fiscal 2001. Net income for fiscal 2002 includes pre-tax write-downs of $3.6
million of certain assets of Anatel Communications Corporation, a wholly owned
subsidiary, and $5.3 million of certain assets related to the Company's
semi-conductor test equipment related business.

The Company's Danish subsidiary B-K Medical Systems A/S (B-K) completed the
construction of a new 132,000 square foot facility in Herlev, north of
Copenhagen, for the manufacture of specialized diagnostic ultrasound equipment
at a cost of approximately $15.5 million. The new facility hosts manufacturing,
research and development, service, marketing, sales and administrative
functions. The new facility was financed by internally generated cash.

In September 2001, the Company 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 guaranteed the debt owed
by Cedara to its bank lender through the provision of a credit facility with
Analogic's principal bank for approximately $6.3 million. Subsequent to July 31,
2002, Analogic agreed to increase the credit facility from approximately $6.3
million to $9.5 million based upon Cedara's funding requirements. Analogic has
two of the seats on Cedara's seven person board of directors. As part of the
Company's original investment agreement, Cedara agreed to grant the Company
preemptive rights whereby it has the right to maintain a 19% equity interest in
the event of certain future issuances of stock by Cedara. On May 3, 2002 the
Company acquired an additional 580,641 shares of common stock of Cedara for
approximately $.9 million to maintain the Company's equity interest at 19%.

During the first quarter of fiscal 2002, the Company's subsidiary,
Camtronics Medical Systems, Ltd entered into an agreement to purchase a 15%
interest in CardioWorks, Inc. for $2.0 million. CardioWorks specializes in
developing knowledge databases for electronic medical records. Camtronics plans
to integrate CardioWorks knowledge database in a digital charting product to be
offered as part of the Company's VERICIS(TM) product line. In connection with
the execution of this agreement, the Company recorded $1.9 million as an
investment and $.1 million as intangible assets related to intellectual
property.

The Company announced in April 2002 that it had entered into an agreement
to supply up to 1,000 of its Explosive Assessment Computed Tomography ("EXACT")
Systems to L-3 Communications' Security and Detection System division ("L-3").
The EXACT is the "heart" of L-3's Examiner 3DX6000 certified Explosive Detection
System (EDS) that is being purchased by the United States Transportation
Security Administration (TSA) and installed at major airports across the United
States. This agreement has the potential value to the Company of approximately
$500 million, including spare parts, associated services, and infrastructure
enhancements.

During the third and fourth quarters of fiscal 2002, L-3 placed a firm
purchase order for 180 systems of which the Company shipped 54 systems. During
fiscal 2002, L-3 also provided the Company with $20.7 million for ramp-up
funding and $50.6 million for the purchase of long-lead-time inventory
components. During the first quarter of fiscal 2003, the Company received firm
orders from L-3 for 245 additional systems. These orders brought the total
number of systems that had been ordered by L-3 for delivery to the TSA to 425.
The Company expects to be able to ship all 425 EXACT systems by December 31,
2002. In addition, the

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Company received an order to purchase long-lead-time components for an
additional 17 EXACT systems from L-3. The Company will commence the manufacture
of these systems as soon as it receives an order from L-3.

Although the Company expects that it will receive additional orders for
systems from L-3 for the TSA after December 31, 2002, it cannot reasonably
predict when and how many systems will be ordered.

Upon receipt of the ramp-up funding, the Company, to significantly increase
its capacity to satisfy the needs of L-3 and the TSA, leased a 200,000 square
foot building in Haverhill, Massachusetts. The new facility was designed and
made ready for production in under four months and was largely paid for with the
ramp-up funds. In late July 2002, production of these systems was transferred
from the Company's Peabody facility to this new, state-of-the-art Computed
Tomography (CT) facility in Haverhill. This facility was designed specifically
for the manufacture, repair, and refurbishment of security imaging equipment.

In September 2002, the remaining $1.3 million of ramp-up funds were
received from L-3 bringing the total amount received to $22 million. In addition
to the $22 million of ramp-up funds already provided by L-3 on behalf of the
TSA, the Company anticipates spending an additional $6 million for manufacturing
and office equipment to meet the production and volume requirements of the
agreement.

In July 2002, the Company and Philips Medical Systems (Philips) agreed to a
major new business pact. The Company had been the sole supplier of mid-range
Computed Tomography (CT) systems to Philips. In July 2001, however, Philips
acquired Marconi Medical Systems, which supplies CT systems as well as other
medical imaging equipment. In light of that acquisition, Philips and Analogic
agreed to renegotiate the existing CT contract and develop a new agreement to
continue a long and valued business relationship. The two companies have signed
a multi-year, multi-million dollar agreement whereby Analogic will provide
Philips with advanced engineering and manufacturing services for the development
and manufacture of new and innovative subassemblies and components. Analogic
will also continue to supply data acquisition systems, spare parts and
engineering services for the Analogic-supplied CT systems that Philips has
installed around the world. In addition, Analogic, now designated as a preferred
supplier to Philips, will continue to supply a growing range of patient
monitoring equipment.

In February 2002, Mr. Thomas J. Miller, President and Chief Executive
Officer resigned from the Company. Mr. Bernard M. Gordon, Founder and Chairman
of the Board, has assumed the position of President and Chief Executive Officer
until a successor is selected.

Analogic was incorporated in the Commonwealth of Massachusetts in November
1967.

(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENT

The Company's operations are primarily within three segments within the
electronics industry: Medical Instrumentation Technology Products, Security
Imaging Technology Products and Signal Processing 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 sale to the advanced health and security markets. See Note 16 of Notes to
Consolidated Financial Statements for more information regarding the Company's
segments.

(C) NARRATIVE DESCRIPTION OF BUSINESS

Analogic is a leading custom designer and manufacturer of advanced health
and security systems and subsystems sold to Original Equipment Manufacturers
(OEMs). The Company is recognized worldwide for advancing state-of-the-art
technology in the areas of Computed Tomography (CT), Digital Radiography (DR),
Ultrasound, Magnetic Resonance Imaging (MRI), Patient Monitoring, Cardiovascular
Information Management, and Embedded Multiprocessing.

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.

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Analogic's principal customers are OEMs 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-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 segments as described below.

Medical Instrumentation Technology Products, consisting primarily of
electronic systems and subsystems for medical imaging equipment, accounted for
approximately 80% of product and engineering revenue in fiscal 2002.

Analogic's medical imaging data acquisition systems and related computing
equipment are incorporated by North American, 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 which substantially increases the
resolution of the image, reduces the time necessary to acquire the image, and
reduces 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 Magnetic Resonance Imaging (MRI)
scanners. The Company also designs and manufactures for OEM customers advanced
Radio Frequency (RF) amplifiers, gradient coil amplifiers and spectrometers for
use in 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 monitoring instruments that 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, sub-acute 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-

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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. B-K also
manufactures key subsystems on an OEM basis for ultrasound equipment
manufacturers.

Camtronics, a 100% owned subsidiary, 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 applications.

Security Imaging Technology Products, consisting of advanced explosive
detection systems, accounted for 11% of fiscal 2002 product and engineering
revenues. Analogic designs and manufactures the Explosive Assessment Computed
Tomography ("EXACT") scanner.

The EXACT is the world's first dual-energy, helical-cone-beam, 24-slice CT
scanner. It is the only security detection system in the world capable of
generating data for full three-dimensional (3D) images of every object contained
within a piece of luggage. The EXACT is the "heart" of L-3 Communications'
examiner 3DX6000, the first second-generation Explosive Detection System (EDS)
certified by the Federal Aviation Administration (FAA). The examiner is being
purchased by the government for installation at major U.S. airports to scan
checked luggage.

Analogic has designed and developed low cost "ARGUS" explosive detection
systems to meet the needs of smaller regional airports.

Analogic designs and manufactures a key digital front-end component, the
Data Acquisition System (DAS), for two EDS systems manufactured by the only
other supplier of FAA certified Explosive Detection Systems.

Analogic is also designing a high-speed, low-cost carry-on baggage CT
scanning system to detect explosives, drugs and other contraband, and EDS
systems for building entrances, cruise ships, postal activity and freight.

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 9% of
fiscal 2002 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.

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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.

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 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 RAW MATERIALS AND COMPONENTS

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 materials and components in an effort to assure its ability to
make timely delivery to its customers.

PATENTS AND LICENSES

The Company holds approximately 110 patents of varying duration issued in
the United States, which cover 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
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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.

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 5 of Notes to Consolidated Financial Statements.)

MATERIAL CUSTOMERS

The Company's three largest customers in fiscal 2002, each of which is a
significant and valued customer, were Philips, General Electric and L-3
Communications, which accounted for approximately 17.7%, 12.0%, and 9.3%,
respectively, of product and engineering revenue. Loss of any one of these
customers would have a material adverse effect upon the Company's business.
During fiscal 2002, the Company renegotiated its existing agreement with Philips
and entered into a major supply agreement with L-3 Communications. (See Part I
Item 1(a) for more detail information).

BACKLOG

The backlog of firm orders at July 31, 2002 was approximately $104.6
million compared with approximately $74.8 million at July 31, 2001. This
increase is principally due to orders the Company received for its EXACT
Systems. 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, 2002 backlog during fiscal 2003.

GOVERNMENT CONTRACTS

The amount of the Company's business that may be subject to renegotiation
of profits 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

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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 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 $39.1 million in fiscal 2002,
$39.6 million in fiscal 2001, and $36.5 million in fiscal 2000. Analogic intends
to continue its emphasis on new product development. As of July 31, 2002,
Analogic had approximately 475 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 2002, the Company capitalized $2.4 million of computer
software testing and coding costs incurred after technological feasibility was
established. These costs are amortized on a straight-line method over the
estimated economic life of the related products, generally three years, and are
included in product cost of sales.

ENVIRONMENT

Our manufacturing facilities are subject to numerous environmental laws and
regulations, particularly with respect to industrial waste and emissions.
Compliance with these laws and regulations has not had a material impact on our
capital expenditures, earnings or competitive position.

EMPLOYEES

As of July 31, 2002, the Company had approximately 1,860 employees.

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

The Company's operations are primarily within three segments within the
electronics industry: Medical Instrumentation Technology Products, Security
Imaging Technology Products and Signal Processing Technology Products. These
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 sale to the advanced health and security markets. See Note 16 of Notes to
Consolidated Financial Statements for more information regarding the Company's
segments.

Domestic and foreign revenues were $278.9 million and $34.7 million
respectively for fiscal 2002 compared to $ 330.5 million and $30.0 million in
fiscal 2001 and $260.6 million and $31.0 million in fiscal 2000.

Export revenue, from sales of products and engineering services from the
United States to companies in Europe and Asia, amounted to approximately $99.4
million (33% of product and engineering revenue) in fiscal 2002 as compared to
approximately $110.6 million (32%) in fiscal 2001, and approximately $93.9
million (34%) in fiscal 2000. Management believes that the Company's export
revenue is at least as profitable as its domestic revenue. The Company's export
revenue is 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.

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ITEM 2. PROPERTIES

Analogic's principal executive offices and major manufacturing facility are
located in Peabody, Massachusetts on land owned by the Company. 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 can accommodate future 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.

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 9 of Notes to Consolidated Financial
Statements for further information concerning certain leases.

ITEM 3. LEGAL PROCEEDINGS

There are no legal proceedings pending against the Company or its
subsidiaries or of which any of their property is the subject of the nature
required to be described in this Item.

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:

As of August 31, 2002, there were approximately 909 holders of record of
the Common Stock.

Dividends of $.07 per share were declared for each of the first three
quarters and $.08 per share for the fourth quarter of fiscal 2002. Dividends of
$.07 per share were declared for each of the quarters of fiscal 2001. The policy
of the Company is to retain sufficient earnings to provide funds for the
operation and expansion of its business.

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ITEM 6. SELECTED FINANCIAL DATA

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(A) The Company recorded asset impairment losses on a pre-tax basis of $8,883 in
the first quarter of fiscal 2002 related to Anatel, the Company's
telecommunications subsidiary, and certain old and unprofitable product
lines within its semi-conductor test equipment business. The Company
recorded asset impairment losses on a pre-tax basis of $3,200 in the fourth
quarter of fiscal 2001 related to Anatel. These charges have been recorded
in the cost of sales section of the Company's Consolidated Statements of
Income for fiscal years 2002 and 2001. (See Note 6 of Notes to Consolidated
Financial Statements)

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 Exchange Act of
1934. All statements, other than statements of historical fact, the Company
makes in this document or in any document incorporated by reference are
forward-looking. Such forward-looking statements involve known and unknown
risks, uncertainties, and other factors, which may cause the actual results,
performance, or achievements of Analogic Corporation to differ from the
projected results. See "Business Environment and Risk Factors" on page 17.

CRITICAL ACCOUNTING POLICIES

The U. S. Securities and Exchange Commission ("SEC") has issued Financial
Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical
Accounting Policies" ("FRR 60"), suggesting companies provide additional
disclosure and commentary on their most critical accounting policies. In FRR 60,
the SEC defined the most critical accounting policies as the ones that are most
important to the portrayal of a company's financial condition and operating
results, and require management to make its most difficult and subjective
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. These judgments are based on our historical experience,
terms of existing contracts, our

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observance of trends in the industry, information provided by our customers and
information available from other outside sources, as appropriate. Our critical
accounting policies include:

REVENUE RECOGNITION

We recognize revenue in accordance with SEC Staff Accounting Bulletin No.
101 "Revenue Recognition in Financial Statements" ("SAB 101"). 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 provided all other revenue recognition criteria have been
met. Hardware and software maintenance revenues are recognized ratably over the
life of the contracts. Service revenues are recognized at the time the services
are rendered. The Company provides engineering services to some of its customers
on a contractual basis and recognizes revenue using the percentage of completion
method. Revenue related to the hotel operations is recognized as services are
performed.

INVENTORIES

The Company values inventory at the lower of cost or market using the
first-in, first-out (FIFO) method. Management assesses the recoverability of
inventory based on types and levels of inventory held, forecasted demand and
changes in technology. These assessments require management judgments and
estimates, and valuation adjustments for excess and obsolete inventory may be
recorded based on these assessments.

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, performs ongoing
credit evaluations and adjusts credit limits based upon payment history and the
customer's current creditworthiness. The Company continuously monitors
collections and payments from its customers and maintains a provision for
estimated credit losses based upon historical experience and any specific
customer collections issues that have been identified. While such credit losses
have historically been within expectations and provisions established, there is
no guarantee that the Company will continue to experience the same credit loss
rates as in the past. Since the accounts receivable are concentrated in a
relatively few number of customers, a significant change in liquidity or
financial position of any one of these customers could have a material adverse
impact on the collectability of accounts receivables and future operating
results.

INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES

The Company has several investments in affiliated companies related to
areas of the Company's strategic focus. The Company accounts for these
investments using the equity method of accounting. In assessing the
recoverability of these investments, the Company must make certain assumptions
and judgments based on changes in the Company's overall business strategy, the
financial condition of the affiliated companies, market conditions and the
industry and economic environment in which the entity operates. Adverse changes
in market conditions or poor operating results of affiliated companies could
result in losses or an inability to recover the carrying value of the
investments, thereby requiring an impairment charge in the future.

INTANGIBLE AND OTHER LONG-LIVED ASSETS

The Company has intangible and other long-lived assets primarily related to
technology, licenses, capitalized software and property, plant and equipment. In
assessing the recoverability of these assets, the Company must make assumptions
regarding estimated future cash flows, the expected period in which the

11

asset is to be utilized, changes in technology and customer demand. If these
estimates or their related assumptions change in the future, the Company may be
required to record impairment charges for these assets not previously recorded.

RESULTS OF OPERATIONS

FISCAL 2002 COMPARED TO FISCAL 2001

Product revenue for fiscal 2002 was $277.5 million as compared with $320.1
million in fiscal 2001, a decrease of $42.6 million or 13%. The decrease was
primarily due to a reduction in the sale of Medical Instrumentation Technology
Products of $32.0 million or 13%, attributed to lower demand for the Company's
cardiovascular, patient monitoring systems and medical imaging equipment; and a
decrease in the sale for its Signal Processing Technology Products of $40.7
million, or 60%, due primarily to the decline in the demand for its
semi-conductor Automatic Test Equipment (ATE) boards. These reductions in
product revenue were offset by an increase in sales of Security Imaging
Technology Products of $30.0 million, from $1.5 million sales in the prior year,
due to shipments of the Company's EXACT systems, spare parts and components.

Engineering revenue for fiscal 2002 was $26.5 million compared to $27.7
million in fiscal 2001, a decrease of 4%. The change was primarily due to a
decrease in the demand for these services.

Other revenues of $9.6 million and $12.8 million for fiscal 2002 and 2001,
respectively, represent revenue from the Company's Hotel operation. The decrease
in revenues is mostly attributable to the current economic decline in the travel
and lodging industries.

Product cost of sales was $174.8 million in fiscal 2002 compared to $206.4
million in fiscal 2001. Product cost of sales as a percentage of product revenue
was 63% in fiscal 2002, compared to 64% in fiscal 2001. The percentage decrease
of product cost of sales was primarily due to product mix.

Engineering cost of sales was $23.2 million in fiscal 2002 and fiscal 2001.
Engineering cost of sales as a percentage of engineering revenue increased to
88% in fiscal 2002 from 84% in fiscal 2001. This percentage increase was
primarily attributable to the unanticipated costs associated with the
development of health and security imaging systems on contracted projects.

Other costs of sales were $5.2 million and $6.4 million from the Company's
Hotel operation for fiscal 2002 and 2001, respectively.

During fiscal year 2002, the Company recorded asset impairment charges
totaling $8.9 million on a pre-tax basis. As a result of the continued decline
in the economic and business conditions in the telecommunications industry,
Analogic decided to terminate activities related to Anatel, the Company's
wholly-owned telecommunications subsidiary. The Company recorded a pre-tax
charge of $1.9 million related to the impairment of purchased intangibles and
other long-lived assets. The impairment charge is equal to the amount by which
the assets' carrying value exceeded the present value of their estimated
discounted cash flows. Additionally, a pre-tax charge of $.6 million related to
obsolete inventory, as well as a pre-tax charge of $1.1 million related to
capitalized software, has been recorded as those assets have been deemed to be
unrecoverable. During fiscal 2001, the Company made the decision to reorganize
Anatel and focus on a limited number of products. In connection with this
decision, the Company recognized asset impairment charges of $3.2 million in
fiscal 2001 attributable to certain assets of Anatel. The Company also decided
to discontinue the sales of certain of its older and unprofitable product lines
within its semi-conductor test equipment business in order to focus its
resources on potential growth areas within this business. As a result, the
Company recorded a pre-tax charge of $.9 million in fiscal 2002 related to the
impairment of purchased intangibles and other long-lived assets. The impairment
charge is equal to the amount by which the assets' carrying value exceeded the
present value of their estimated discounted cash flows. Additionally, a pre-tax
charge of $3.6 million related to excess and obsolete test equipment inventory,
as well as a pre-tax charge of $.8 million related to capitalized software, were
recorded in fiscal 2002 as those assets were deemed to be unrecoverable. The
Company also incurred immaterial costs related to involuntary terminations and
other related activities. The entire amount of each charge has been recorded
within the cost of sales section of the Company's Consolidated Statements of
Income. The inventory reserve established in fiscal year 2002 and in
12

fiscal year 2001, as part of the activities noted above, totaled $5.7 million. A
total of $1.3 million of this inventory was scrapped and charged to the reserve
during fiscal 2002.

Research and development expenses were $39.1 million in fiscal 2002, or 12%
of total revenue, compared to $39.6 million or 11% of total revenue in fiscal
2001. Research and development expenses remained unchanged in fiscal 2002 even
though revenue decreased for the period, as the Company continues the
development of health and security imaging systems.

Selling and marketing expenses were $33.1 million in both fiscal 2002 and
2001. Although selling and marketing expenses remained unchanged while revenue
declined, the Company continues to expand its activities in the end user market
primarily through the Company's subsidiaries Camtronics and B-K Medical. The
percentage of selling and marketing expenses to total revenue increased to 11%
in fiscal 2002 from 9% in fiscal 2001, due to lower revenue for the period.

General and administrative expenses were $29.3 million in fiscal 2002,
compared to $32.8 million in fiscal 2001. The decrease of $3.5 million was
primarily due to the Company's cost reduction and containment initiatives,
including reductions in staff and discretionary expenditures. As a percentage of
total revenues, general and administrative expenses were 9% in both fiscal 2002
and 2001.

Computer software costs of $2.4 million and $3.6 million were capitalized
in fiscal 2002 and 2001, respectively. Amortization of capitalized software
costs amounted to $1.8 million and $1.6 million in fiscal 2002 and 2001,
respectively, and is included in the product cost of sales.

Interest income, net for fiscal 2002 was $4.1 million compared to $5.4
million for fiscal 2001. The decrease of $1.3 million was primarily the result
of lower interest rates on short-term investments.

The Company recorded income related to equity in unconsolidated affiliates
of $.6 million in fiscal 2002 compared to income of $1.9 million in fiscal 2001.
The decrease of $1.3 million was due to a loss recognized from its investment in
Shenzen Anke High-Tech Co., Ltd in fiscal 2002.

The effective tax rate for fiscal 2002 was 21% compared to 30% in fiscal
2001. The decrease was due primarily to the higher percentage impact related to
the benefit realized from tax exempt interest on a lower dollar base of pretax
income, when compared to 2001.

Net income for fiscal 2002 was $3.3 million compared to $15.2 million in
fiscal 2001. Net income for fiscal 2002 included an asset impairment pre-tax
charge of $8.9 million related to the Company's telecommunications subsidiary
Anatel, and certain assets of the Company's Test and Measurement Division. Net
income in fiscal 2001 included an asset impairment pre-tax charge of $3.2
million related to Anatel. Basic earnings per share were $0.25 in fiscal 2002
compared to $1.18 for fiscal 2001. Diluted earnings per share were $0.25 in
fiscal 2002 compared to $1.17 for fiscal 2001.

FISCAL 2001 COMPARED TO FISCAL 2000

Product revenue for fiscal 2001 was $320.1 million as compared with $255.3
million in fiscal 2000, an increase of $64.9 million or 25%. The increase was
principally due to the increase in sales of Medical Instrumentation Technology
Products of $61.6 million or 38%, 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 $12.5 million or 22%, in Signal
Processing Technology Products due to demand for the Company's high frequency
Automatic Test Equipment (ATE) boards and embedded multiprocessing equipment.
This increase in product revenue was partially offset by a decrease in sales of
Security Imaging Technology Products of $9.2 million or 86%, due to lower demand
for its Explosive Assessment Computed Tomography (EXACT) systems.

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 an increase in funding for projects for developing imaging
equipment.

13

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

Product cost of sales was $206.4 million in fiscal 2001 compared to $161.0
million in fiscal 2000. Product cost of sales as a percentage of product revenue
was 64% in fiscal 2001, compared to 63% 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 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 $39.6 million in fiscal 2001, or 11% of total revenue,
compared to $36.5 million or 13% of total revenue in fiscal 2000. The increase
of $3.1 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 compared
to $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
costs amounted to $1.6 million and $1.8 million in fiscal 2001 and 2000,
respectively, and is included in product cost of sales.

Interest income, net for fiscal 2001 was $5.4 million 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 from its investment in Shenzhen
Anke High-Tech Co., Ltd. as compared to a gain in fiscal 2000 of $0.9 million.
(See Note 7 of Notes to Consolidated Financial Statements).

Other expense was $0.6 million in fiscal 2001, 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

14

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 compared to $14.1 million for
fiscal 2000. Net income for fiscal 2001 includes an asset impairment pre-tax
charge of $3.2 million related to Anatel. Basic earnings per share were $1.18
compared to $1.10 for fiscal 2000. Diluted earnings per share were $1.17
compared to $1.09 for fiscal 2000.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and marketable securities totaled $181.8 million
and $122.9 million at July 31, 2002 and 2001, respectively. The increase of
$58.9 million is primarily due to $50.6 million of cash advance received for the
purchase of long-lead-time components and $7.9 million remaining of ramp-up
funds for infrastructure enhancements, as part of the EXACT agreement. Working
capital was $213.5 million and $224.5 million at July 31, 2002 and 2001,
respectively. The Company's balance sheet reflects a current ratio of 2.9 to 1
at July 31, 2002 compared to 6.1 to 1 at July 31, 2001. Excluding the cash
impact from the EXACT agreement noted above, 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 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, 2002 due to the short maturities of these instruments.

The Company maintains a bond investment portfolio of various issuers,
types, and maturities. This portfolio is classified on the balance sheet as
either cash and cash equivalents or marketable securities, depending on the
lengths of time to maturity from original purchase. Cash equivalents include all
highly liquid investments with maturities of three months or less from the time
of purchase. Investments having maturities from the time of purchase in excess
of three months are stated at amortized cost, which approximates fair value, and
are classified as available for sale. A rise in interest rates could have an
adverse impact on the fair value of the Company's investment portfolio. The
Company does not currently hedge these interest rate exposures.

Cash flow provided from operations was $94.0 million in fiscal 2002, $27.5
million in fiscal 2001 and $14.9 million in fiscal 2000. The increase in cash
flows from operations in fiscal 2002 over fiscal 2001 primarily resulted from an
increase in advance payments and deferred revenues consisting primarily of a
$50.6 million advance received for the purchase of certain long-lead-time
components and $7.9 million of ramp-up monies remaining for infrastructure
enhancements to ramp-up production and increase manufacturing capacity related
to the Company's EXACT contract, a decrease in accounts receivable of $10.2
million due to increased collections efforts partially offset by an increase in
inventory of $7.5 million primarily for raw materials. The increase in cash flow
from operations in fiscal 2001 over 2000 was primarily due to 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 $15.0 million in fiscal 2002,
compared to $8.0 million in fiscal 2001, and $12.8 million in fiscal 2000. The
increase in fiscal 2002 was primarily due to investments in Cedara of $8.4
million, the Company's investment in CardioWorks of $2.0 million, increased
level of additions to property, plant and equipment primarily for the
construction of a new facility by the Company's Danish subsidiary B-K Medical,
which totaled $15.5 million, partially offset by return on investment from an
affiliated company and maturities of marketable securities.
15

Net cash used by financing activities was $3.1 million in fiscal 2002, $2.8
million in fiscal 2001 and $2.8 million in fiscal 2000, primarily from dividends
paid to shareholders.

The Company's contractual obligations at July 31, 2002, and the effect such
obligations are expected to have on liquidity and cash flows in future periods
are as follows:

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

(1) Mortgage and capital lease contractual obligations include both principal
and associated interest costs.

(2) Lease costs associated with the Haverhill facility will be funded by ramp-up
monies received by the Company in connection with the EXACT system order.

(3) Other commitments represent commitments to suppliers for the production of
raw materials and inventory components related to the EXACT system order.

The Company currently has approximately $30.0 million in revolving credit
facilities with various banks available for direct borrowings. There were no
direct borrowings in fiscal 2002 or in fiscal 2001. However, the Company has
guaranteed through a provision of a credit facility with its principal bank the
debt owed by Cedara to its bank lender through a provision of a credit facility
for approximately $6,300.

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.
The Company has adopted SFAS No. 141 in the fiscal year ended July 31, 2002.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" ("SFAS No. 142"), which requires that 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 was adopted by the Company, as required, on August 1, 2002. The
adoption of this standard is not expected to have a material effect on the
Company's financial position and results from operations.

16

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS No. 143"), which addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated retirement costs. The standard applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or normal use of the
asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002.
The adoption of this standard is not expected to have a material effect on the
Company's financial position and results from operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144
supersedes FASB 121, "Accounting for the Impairment of Long-Lived Assets and for
Long Lived Assets to Be Disposed of." SFAS No. 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 No. 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and thus the Company has adopted this
requirement beginning August 1, 2002. The adoption of this standard is not
expected to have a material effect on the Company's financial position and
results from operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit of Disposal Activities" ("SFAS No. 146"). SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring)." The principal difference between SFAS No. 146 and EITF 94-3
relates to its requirements for recognition of a liability for a cost associated
with an exit or disposal activity. SFAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF 94-3, a liability for an exit cost as defined
in EITF 94-3 was recognized at the date of an entity's commitment to an exit
plan. Therefore, SFAS No. 146 eliminates the definition and requirements for
recognition of exit costs in EITF 94-3. SFAS No. 146 also establishes that fair
value is the objective for initial measurement of the liability. The provisions
of SFAS No. 146 are effective for exit or disposal activities that are initiated
after December 31, 2002 and, therefore, will be adopted by the Company on
January 1, 2003. The adoption of this standard is not expected to have a
material effect on the Company's financial position and results from operations.

BUSINESS ENVIRONMENT AND RISK FACTORS

FORWARD-LOOKING STATEMENTS

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

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION WITH RESPECT TO ANALOGIC COMMON STOCK. ADDITIONAL RISKS NOT
PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR
BUSINESS. ANY OF THESE RISKS COULD HAVE A MATERIAL AND NEGATIVE EFFECT ON OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

17

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 net product and
engineering revenue 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.

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

18

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 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

19

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.

ANALOGIC'S BUSINESS STRATEGY INVOLVES THE PURSUIT OF ACQUISITIONS OR BUSINESS
COMBINATIONS, WHICH MAY BE DIFFICULT TO INTEGRATE, DISRUPT ITS BUSINESS, DILUTE
STOCKHOLDER VALUE OR DIVERT MANAGEMENT ATTENTION.

As part of its business strategy, Analogic or its subsidiaries may
consummate additional acquisitions or business combinations. Acquisitions are
typically accompanied by a number of risks, including the difficulty of
integrating the operations and personnel of the acquired companies, the
potential disruption of Analogic's ongoing business and distraction of
management, expenses related to the acquisition and potential unknown
liabilities associated with acquired businesses.

If Analogic is not successful in completing acquisitions that it may pursue
in the future, Analogic may have incurred substantial expenses and devoted
significant management time and resources in seeking to complete proposed
acquisitions that will not generate benefits for it. In addition, with future
acquisitions, Analogic could use substantial portions of its available cash as
consideration for these acquisitions.

OUR ANNUAL AND QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS, WHICH
COULD AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

Our annual and quarterly results may vary significantly depending on
various factors, many of which are beyond our control, and may not meet the
expectations of securities analysts or investors. If this occurs, the price of
our Common Stock would likely decline.

These factors include:

- variations in the timing and volume of customer orders relative to our
manufacturing capacity;

- introduction and market acceptance of our customers' new products;

- changes in demand for our customers' existing products;

- the timing of our expenditures in anticipation of future orders;

- effectiveness in managing our manufacturing processes;

- 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.

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.

20

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.

ONE STOCKHOLDER HAS A SUBSTANTIAL INTEREST IN ANALOGIC.

As of August 31, 2002, the Bernard M. Gordon Charitable Remainder Unitrust
owned approximately 31% of Analogic's outstanding Common Stock. Bernard M.
Gordon, Chairman and Chief Executive Officer of Analogic, and Julian Soshnick,
Vice President and General Counsel of Analogic, serve as trustees of this trust
and have full power to vote or dispose of the shares held by the trust. The
trust, based on its ownership interest in Analogic, has the ability to exert
substantial influence over the actions of Analogic.

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 Total interest
income, net for fiscal 2002 was $4,060. An interest rate change of 10% would not
have a material impact to the fair value of the portfolio or to future earnings.

The Company's three largest customers in fiscal 2002, each of which is a
significant and valued customer, were Philips, General Electric and L-3
Communications, which accounted for approximately 17.7%, 12.0%, and 9.3%,
respectively, of product and engineering revenue for the fiscal year ended July
31, 2002. Loss of any one of these customers would have a material adverse
effect upon the Company's business.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data are listed under PART IV,
Item 15 in this Report.

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

None

21

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table lists the directors of the Company:

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

* 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:

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

(1) Mr. Gordon assumed the title of Chief Executive Officer in February 2002.

(2) Mr. Soshnick was reappointed Vice President, General Counsel and Clerk 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 assumed the
title of Executive Chairman, President and Chief Executive Officer in February
2002. Mr. Gordon also is Chairman of the Board of Directors of the Lahey Clinic.
Mr. Gordon is a director of Cedara Software Corporation.

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.

22

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. Wilson Greatbatch Technologies is a
developer and manufacturer of power sources, wet tantalum capacitors and
precision engineered components and sub-assemblies used in implantable medical
devices.

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.

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, General Counsel and Clerk in October
2001.

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 Ohio State University since 1993.

Lothar Koob joined Analogic as Executive Vice President in January 2001.
From 1998 to 2001 Mr. Koob was President of Humphrey Systems, a developer of
ophthalmic diagnostic instrumentation and a subsidiary of Carl Zeiss, Inc. Prior
to that time, Mr. Koob was employed by Siemens Medical Engineering Group, a
supplier of healthcare services and medical device equipment, 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., a
manufacturer of computer technology and peripherals, from 1996 to 1999. Prior to
CalComp Technology Inc., Mr. Millerick was Vice President-Finance of the
Personal Computer Unit from of Digital Equipment Corporation, a computer
manufacturer, 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. Mr. Millerick is a director of Cedara Software Corporation.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Upon review of the forms and representations furnished to the Company
pursuant to Item 405 of Regulation S-K, the Company is unaware of any "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 since
the beginning of fiscal 2002.

23

ITEM 11. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain compensation information for each
person who served as Chief Executive Officer during fiscal 2002 and each of the
next four most highly compensated executive officers of the Company fiscal 2002
("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 and resigned in February 2002.

(2) Mr. Millerick joined the Company in January 2000.

(3) Mr. Koob joined the Company in January 2001.

(4) Mr. Soshnick retired in January 2001 and returned to the Company as an
officer in October 2001.

24

NOTES TO COMPENSATION TABLE (continued)

(A) Represents car allowances for all executive officers plus relocation
assistance for Mr. Koob in fiscal 2002 and 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) The following table reflects stock bonus awards for which transfer
restrictions had not yet lapsed as of July 31, 2002.

(D) Represents options granted pursuant to the Key Employee Incentive Stock
Option Plan dated June 11, 1998, as amended on October 12, 2000 and
November 16, 2001.

(E) Represents profit sharing distribution and 401(k) match.

25

STOCK OPTION GRANTS IN LAST FISCAL YEAR

There were no stock options granted to the Named Officers in fiscal 2002.

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, 2002. No Named Officer exercised any stock
options during fiscal 2002.

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

(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, 2002. "In-the-money" options are options whose
exercise price was less than $40.70, the closing price of the Common Stock
at July 31, 2002.

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 meeting 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 the 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 employees of the Company
or 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. The 1997 Plan is administered by members of the
Company's Board of Directors.

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. There were no options
granted under this plan in fiscal 2002.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee of the Company's Board of
Directors during fiscal 2002 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.

26

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table sets forth information as to all persons (including any
"group", as defined in section 13(d)(3) of the Securities Exchange Act of 1934)
known by the Company to have owned beneficially 5% or more of its Common Stock,
as of August 31, 2002:

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

(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.

(2) The Company has been advised informally by T. Rowe Price and Lord Abbett &
Co. that in their capacity as investment advisors they may be deemed a
beneficial owner on August 31, 2002, of 1,606,150 shares, or 12.1% of the
Company's Common Stock and 1,051,855 shares, or 7.9% of the Company's Common
Stock, respectively.

27

The following table sets forth information as to ownership of the Company's
Common Stock, by its Directors by each of its Named Officers and by all current
executive officers as a group, as of August 31 2002:

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

* 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 SEC
Rule 13d-3(d)(1).

The following table provides information about the shares of common stock
authorized for issuance under the Company's equity compensation plans as of July
31, 2002:

EQUITY COMPENSATION PLAN INFORMATION

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

(1) Consists of 537,278 shares issuable under the Company's Employee Stock
Purchase Plan in connection with current and future offering periods under
this plan.

28

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), owns a 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. The Company has no further obligations to Audubon Realty in
connection with the leased facilities in Danvers.

Mr. Gordon owns a 48% interest and Mr. Friedman owns 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 $357,000 to $398,000 effective May 1, 2002, 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 Consumer Price Index. At the present time, the rent that the Company is
paying under the Wakefield, Massachusetts lease reflects fair rental value for
the property.

See Note 9 of Notes to Consolidated Financial Statements for further
information as to the leases.

ITEM 14. CONTROLS AND PROCEDURES

Not applicable.

29

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

30

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

By: /s/ BERNARD M. GORDON
------------------------------------
Bernard M. Gordon
Chairman of the Board of Directors

Date: October 25, 2002

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.

31

CERTIFICATIONS

I, Bernard M. Gordon, certify that:

1. I have reviewed this annual report on Form 10-K of Analogic
Corporation;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report; and

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report.

/s/ BERNARD M. GORDON
--------------------------------------
Bernard M. Gordon
Chairman of the Board of Directors,
Executive Chairman, President and
Chief Executive Officer (Principal
Executive Officer)

Date: October 25, 2002

I, John J. Millerick, certify that:

1. I have reviewed this annual report on Form 10-K of Analogic
Corporation;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report; and

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of , and for, the periods presented in this
annual report.

/s/ JOHN J. MILLERICK
--------------------------------------
John J. Millerick
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)

Date: October 25, 2002

32

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 15(a)(1) on page 30 present fairly, in all material
respects, the financial position of Analogic Corporation and its subsidiaries at
July 31, 2002 and 2001, and the results of their operations and their cash flows
for each of the three years in the period ended July 31, 2002, 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 15(a)(2) on page 30, 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
September 18, 2002

33

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.
34

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of these financial statements.
35

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 31, 2002, 2001 AND 2000

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

36

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.
37

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 19 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) BASIS OF PRESENTATION

Certain prior years' financial statement items have been reclassified to
conform to the current year's presentation and accounting principles generally
accepted in the United States.

(c) 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.

(d) 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................................ 5 to 22 years
Manufacturing equipment..................................... 4 to 7 years
Furniture, fixtures and computer equipment.................. 4 to 8 years
Leasehold and capital lease improvements.................... life of lease
Motor vehicles.............................................. 3 years

38

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

(e) 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 provided all other revenue recognition
criteria have been met. Hardware and software maintenance revenues are
recognized over the life of the contracts. 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. Revenues related to the hotel operations are
recognized as services are performed. Occasionally and at the request of
customers, revenue is recognized on a bill and hold basis after completion of
manufacture. All bill and hold transactions meet specified revenue recognition
criteria which include normal billing, credit and payment terms, firm commitment
and transfer to the customers of all risks and rewards of ownership. There were
no bill and hold transactions in fiscal 2002. Accounts receivable related to
bill and hold transactions were $1,151 and $1,806 at July 31, 2001, and 2000
respectively.

(f) CAPITALIZED SOFTWARE COSTS

Software development costs incurred subsequent to establishing
technological feasibility through general release of the software products are
capitalized. Capitalized costs are amortized on a straight-line basis over the
economic lives of the related products, generally three years. Amortization
expense was $1,772, $1,647 and $1,778 in fiscal 2002, 2001 and 2000,
respectively and is included in product cost of sales. The unamortized balance
of capitalized software was $4,333 and $5,488 at July 31, 2002 and 2001,
respectively.

(g) WARRANTY COSTS

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

(h) RESEARCH AND PRODUCT DEVELOPMENT COSTS

Research and product development costs are expensed as incurred and include
primarily engineering salaries, overhead and materials used in connection with
research and development projects.

(i) INCOME TAXES

The Company accounts for income taxes under the asset and 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.

The Company does not provide for U.S. Federal income taxes on undistributed
earnings of consolidated foreign subsidiaries as such earnings are intended to
be indefinitely reinvested in those operations. Determination of the potential
deferred income tax liability on these undistributed earnings is not practicable
because such liability, if any, is dependent on circumstances existing if and
when remittance occurs.

39

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(j) NET INCOME PER SHARE

Basic net income per share is computed using the weighted average number of
common shares outstanding during the period. Diluted net income per share is
computed using the weighted average number of common and diluted common
equivalent shares outstanding during the period. Dilutive common equivalent
shares consists of stock options and restricted stock.

(k) CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less at acquisition date to be cash equivalents. Cash
equivalents amounted to approximately $122,000 and $46,000 at July 31, 2002 and
2001, respectively.

(l) CONCENTRATION OF 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.

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. One export customer accounted for approximately $54,000 and $78,000 or
18% and 22% of total product and engineering revenue in fiscal 2002 and 2001,
respectively. Of the total product and engineering revenue, one domestic
customer accounted for approximately $37,000 in fiscal 2002 and 2001, or 12% and
10%, respectively. The Company's ten largest customers, including Philips,
General Electric and L-3 Communications, accounted for approximately 65% of
product and engineering revenue during fiscal 2002.

(m) 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
under the caption of accumulated other comprehensive income within the statement
of stockholders' equity. Realized gains and losses are recorded within the
statement of income under the caption other income or expenses. For the purpose
of computing realized gains and losses, cost is identified on a specific
identification basis.

(n) 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.
The Company has adopted SFAS No. 141 in the fiscal year ended July 31, 2002.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" ("SFAS No. 142"), which requires that 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
40

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of SFAS No. 142 will be effective for fiscal years beginning after December 15,
2001, and was adopted by the Company, as required, on August 1, 2002. The
adoption of this standard is not expected to have a material effect on the
Company's financial position and results from operations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS No. 143"), which addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated retirement costs. The standard applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or normal use of the
asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002.
The adoption of this standard is not expected to have a material effect on the
Company's financial position and results from operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144
supersedes FASB 121, "Accounting for the Impairment of Long-Lived Assets and for
Long Lived Assets to Be Disposed of." SFAS No. 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 No. 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and thus the Company has adopted this
requirement beginning August 1, 2002. The adoption of this standard is not
expected to have a material effect on the Company's financial position and
results from operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit of Disposal Activities" ("SFAS No. 146"). SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring)." The principal difference between SFAS No. 146 and EITF 94-3
relates to its requirements for recognition of a liability for a cost associated
with an exit or disposal activity. SFAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF 94-3, a liability for an exit cost as defined
in EITF 94-3 was recognized at the date of an entity's commitment to an exit
plan. Therefore, SFAS No. 146 eliminates the definition and requirements for
recognition of exit costs in EITF 94-3. SFAS No. 146 also establishes that fair
value is the objective for initial measurement of the liability. The provisions
of SFAS No. 146 are effective for exit or disposal activities that are initiated
after December 31, 2002 and, therefore, will be adopted by the Company on
January 1, 2003. The adoption of this standard is not expected to have a
material effect on the Company's financial position and results from operations.

(o) 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, inventory and accruals
of liabilities. Actual results could differ from those estimates.

(p) 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.
41

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(q) 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.

(r) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash, cash equivalents, receivables, mortgages and
other notes payable approximate fair value. The fair values of marketable
securities are estimated based on quoted market price for these securities.

(s) 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 No. 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.

(t) 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 accumulated other comprehensive income 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.

2. BUSINESS COMBINATIONS

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 remaining 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.

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ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. MARKETABLE SECURITIES

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

The cost and estimated fair value of current debt securities at July 31,
2002, 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.

There are no realized gains or losses on marketable securities as the
Company has not sold any marketable securities during the periods presented and
cost has approximated fair value at the maturity dates.

4. EXPLOSIVE ASSESSMENT COMPUTED TOMOGRAPHY ("EXACT") SYSTEMS AGREEMENT:

The Company announced in April 2002 that it had entered into an agreement
to supply up to 1,000 of its EXACT Systems to L-3 Communications' Security and
Detection System division ("L-3"). The EXACT is the core system of L-3's
Examiner 3DX6000 certified Explosive Detection System (EDS) that is being
purchased by the United States Transportation Security Administration (TSA) and
installed at major airports across the United States.

Under the terms of the EXACT contract with L-3, the Company recognizes
product revenue upon shipment of EXACT systems and spare parts to L-3, at which
time all revenue recognition criteria have been met. As of July 31, 2002, the
Company has shipped 54 completed units and certain spare parts related to the
contract.

The Company recorded cash received from L-3 for the purchase of
long-lead-time inventory components as advance payments within the liabilities
section of the balance sheet. These payments are not recognized as revenue until
the systems for which the inventory components relate to have been shipped. As
of July 31, 2002, the Company had $50,550 recorded within advance payments
related to long-lead purchases.

The agreement also provides for the Company to receive $22,000 of ramp-up
funds for the purpose of leasing and fitting up a facility and ensuring the
availability of key critical raw material and inventory components form
suppliers to meet the production and volume requirements of this contract. These
costs incurred and assets purchased are fully reimbursed by L-3. Due to the
conditions of the contract, the Company has not recorded any revenues, costs or
assets related to these funds or ramp-up activity. All cash received for ramp-up
activity is recorded within advance payments within the liability section of the
balance

43

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

sheet and reduced as the cash is spent on these activities. As of July 31, 2002,
the Company had a balance of $7,943 of unexpended funds recorded within advance
payments related to ramp-up funds.

5. BALANCE SHEET INFORMATION

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

The increase in land and land improvements and building and improvements
was primarily due to the construction of a new facility in Herlev, Denmark, by
the Company's Danish subsidiary B-K Medical A/S.

Depreciation expense was $14,380, $14,148 and $12,642 for fiscal years
2002, 2001 and 2000, respectively.

44

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. ASSET IMPAIRMENT CHARGES

During fiscal year 2002, the Company recorded asset impairment charges
totaling $8,883 on a pre-tax basis.

As a result of the continued decline in the economic and business
conditions in the telecommunications industry, Analogic decided to terminate
activities related to Anatel, the Company's wholly-owned telecommunications
subsidiary. The Company recorded a pre-tax charge of $1,901 related to the
impairment of purchased intangibles and other long-lived assets. The impairment
charge is equal to the amount by which the assets' carrying value exceeded the
present value of their estimated discounted cash flows. Additionally, a pre-tax
charge of $557 related to obsolete inventory, as well as a pre-tax charge of
$1,120 related to capitalized software, has been recorded as those assets have
been deemed to be unrecoverable.

The Company also decided to discontinue the sales of certain of its older
and unprofitable product lines within its semi-conductor test equipment business
in order to focus its resources on potential growth areas within this business.
As a result, the Company recorded a pre-tax charge of $902 in fiscal 2002
related to the impairment of purchased intangibles and other long-lived assets.
The impairment charge is equal to the amount by which the assets' carrying value
exceeded the present value of their estimated discounted cash flows.
Additionally, a pre-tax charge of $3,600 related to excess and obsolete test
equipment inventory, as well as a pre-tax charge of $803 million related to
capitalized software, was recorded in fiscal 2002 as those assets were deemed to
be unrecoverable. The Company also incurred immaterial costs related to
involuntary terminations and other related activities.

During fiscal 2001, the Company made the decision to reorganize Anatel and
focus on a limited number of products. In connection with this decision, the
Company recognized asset impairment charges on a pre-tax basis of $3,200 in
fiscal 2001 attributable to certain assets of Anatel.

The entire balance of each charge has been recorded within the cost of
sales section of the Company's Consolidated Statements of Income. The inventory
reserve established in fiscal year 2002 and in fiscal year 2001, as part of the
activities noted above, totaled $5,657 million. A total of $1,284 million of
this inventory was scrapped and charged to the reserve during fiscal 2002.

7. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES

In fiscal 2002, the Company acquired a 19% interest in Cedara Software
Corporation of Mississauga, Ontario, Canada, in exchange for cash of $7,500 and
other considerations. As part of the Company's investment agreement, Cedara
agreed to grant the Company preemptive rights whereby it has the right to
maintain a 19% equity interest in the event of certain future issuances of stock
by Cedara. Cedara subsequently issued additional stock and on May 3, 2002 the
Company acquired an additional 580,641 of common shares of Cedara for
approximately $872 to maintain the Company's interest of approximately 19%. The
Company recorded an investment of $3,341 and a premium in excess of book value
of $5,031, which was

45

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

applied to intangible assets related to acquired technologies and is being
amortized over the estimated useful life of five years. The Company accounts for
this investment using the equity method of accounting because the Company has
the ability to exercise significant influence over Cedara's operating and
financial policies and has two of the seven seats on Cedara's board of
directors. During fiscal 2002, the Company recorded a gain of $647 from its
share of profit in Cedara, with a carrying value of this investment at July 31,
2002 of $3,987. The Company also recognized amortization of the intangible asset
of $840 during fiscal 2002, with a carrying value of the intangible asset at
July 31, 2002 of $4,191, which is classified as Other Assets in the Consolidated
Balance Sheets. The Company has also guaranteed the debt owed by Cedara to its
bank lender through the provision of a credit facility with Analogic's principal
bank for approximately $6,300. Subsequent to July 31, 2002, Analogic agreed to
further guarantee an increase in the credit facility from approximately $6.3
million to $9.5 million based upon funding requirements.

In fiscal 2002, the Company's subsidiary, Camtronics Medical Systems, Ltd
acquired a 15% interest in CardioWorks, Inc. for $2,000. CardioWorks specializes
in knowledge databases for electronic medical records. Camtronics plans to
integrate CardioWorks' knowledge database in a digital charting product to be
offered as part of the Company's VERICIS product line. The Company recorded
$1,900 as an investment and $100 as intangible assets related to intellectual
property. The Company also recorded its share of the 15% equity loss in
CardioWorks in the amount of $126 representing CardioWorks cumulative losses.

The Company has a 44.6% equity ownership interest in Shenzhen Anke
High-Tech Co., Ltd (SAHCO) located in The People's Republic of China. During
fiscal 2002 the Company recorded $1,320 as its share of losses in SAHCO, as
compared to $51 in fiscal 2001. The carrying value of this investment was $1,965
at July 31, 2002, and $3,285 at July 31, 2001. Sales to SAHCO for fiscal years
2002, 2001 and 2000 were approximately $4,037, $3,237 and $5,575, respectively.
At July 31, 2002 and 2001, net accounts receivable from this affiliate were
$4,092 and $2,350, respectively.

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 the form of a license to a newly formed limited
liability 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 profit in the newly formed limited
partnership was $1,429 in fiscal 2002 and $1,789 in fiscal 2001. In addition,
ECTT made a cash distribution in the form of return on investment to its owners
of $2,302 and $1,000 in fiscal 2002 and 2001, respectively. The carrying value
of the Company's investment in ECTT at July 31, 2002 was $357 and $1,230 at July
31, 2001.

Summarized financial information for these four partially-owned equity
affiliates at July 31 and for the years then ended is as follows:

46

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The carrying amount of the investments approximates the underlying
ownership in the net assets of the investee.

The Company owns 1,771,802 shares of Norland Medical Systems, Inc., which
were received in fiscal 2000 from a limited partnership (Norland Partners). 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, 2002 the Company recognized a loss
of approximately $142 and reduced the value of the Norland shares to its market
value of $35 because it believed an other than temporary decline of value had
occurred. During fiscal 2001, the Company recorded a loss of $487 and reduced
the value of the shares to their market value of $177 at July 31, 2001. On April
11, 2002 , Norland Medical Systems, Inc. changed its name to Orthometric, Inc.

8. 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: 2003, $226; 2004, $233; 2005, $240; 2006,
$247; 2007, $254 and $3,095 thereafter.

Total interest incurred amounted to $359, $348 and $472 in fiscal 2002,
2001 and 2000, respectively, of which $0, $108 and $171 was capitalized.

The Company currently has approximately $30.0 million in revolving credit
facilities with various banks available for direct borrowings.

9. 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 2002, 2001 and 2000.

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ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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 associated with the
Company's operating leases was approximately $1,986, $1,423 and $989 (net of
sublease income of $0, $872 and $1,143) in fiscal 2002, 2001 and 2000,
respectively.

The following is a schedule by year of future minimum lease payments at
July 31, 2002:

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

(1) Lease costs associated with the Haverhill facility will be funded by ramp-up
monies received by the Company in connection with the EXACT system order.

(2) Other commitments represent commitments to suppliers for the production of
raw materials and inventory components related to the EXACT system order.

10. STOCK OPTION AND STOCK BONUS PLANS

At July 31, 2002, the Company has two key employee stock option plans, two
key employee stock bonus plans, two non-employee director stock option plans
(one of which has lapsed as to the granting of options), and one employee stock
purchase plan.

Options granted under the two key employee stock option plans generally
become exercisable in installments commencing no earlier than two years from the
date of grant and 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.

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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 generally 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 56,500 at a weighted
average fair market value of $41.57 per share in fiscal 2002; 89,000 shares 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. Amortization of unearned compensation of $1,054, $976 and $644 was
recorded in fiscal 2002, 2001 and 2000, 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 8,654 in 2002, 7,864 in 2001 and 11,940 in 2000.

At July 31, 2002, 1,152,969 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, 2002, 2001, and 2000:

49

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
at July 31, 2002:

As permitted under current accounting standards, no compensation cost was
recognized in the Consolidated Statements of Income for the Company's stock
option plans. Had compensation cost for the Company's stock-based compensation
plans been recorded and applied in accordance with FAS No. 123, accounting for
Stock-Based Compensation, and recognized ratably over the options' vesting
periods, the Company's proforma information would have been as follows:

The weighted-average estimated fair value of stock options granted during
fiscal 2002, 2001 and 2000, was $18.12, $18.45 and $19.11 per share,
respectively.

The fair value of the Company's stock options was estimated using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:

11. 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

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ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 contribution expense
amounted to $1,000 in fiscal year 2000. The Company did not contribute to the
Retirement Plan in fiscal 2002 and 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 $916 and $2,009 in fiscal 2002 and 2001, respectively. The Plan
was discontinued effective January 2002.

12. 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:

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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:

52

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, 2002 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.

13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of unaudited quarterly results of operations for
the years ended July 31, 2002 and 2001:

During fiscal years 2002, 2001 and 2000 interest paid amounted to $ 334,
$420 and $431, respectively.

Income taxes paid during fiscal years 2002, 2001 and 2000 amounted to $
2,159, $8,308 and $6,044, respectively.

Supplemental information regarding noncash investing and financing
activities:

Capital lease obligations incurred for the purchase of new equipment
was $0 in fiscal 2002, and $565 in fiscal 2001.

The Company Issued 190,255 shares of common stock, with a market value
of $7,584, for the remaining interest in Camtronics in fiscal 2001.

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, 2002,
2001 and 2000 are as follows:

Stock options to purchase approximately 73,800, 90,000 and 199,000 shares
of common stock were outstanding during the years ended July 31, 2002, 2001, and
2000, respectively, but were not included in the calculation of diluted net
income per share because the options' exercise prices were greater than the
average

54

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

market price of the Company's common stock during those years. Although these
stock options were antidilutive in fiscal 2002, 2001, and 2000, they may be
dilutive in future years' calculations.

16. SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates primarily within three segments within the electronics
industry: Medical Instrumentation Technology Products, Security Imaging
Technology Products and Signal Processing Technology Products. Medical
Instrumentation Technology Products consist primarily of electronic systems and
subsystems for medical imaging equipment. Security Imaging Technology Products
consist of advanced explosive detection systems. Signal Processing Technology
Products consist of A/D converters and supporting modules, high-speed digital
signal processors and image processing equipment. The Company's Corporate and
other represents the Company's hotel business and net interest income. Assets of
Corporate and other consist primarily of the Company's cash equivalents,
marketable securities, fixed and other assets, not specifically identifiable.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The segment information for prior
years has been restated to conform with the provision of Statement of Financial
Standards No. 131, "Disclosures About Segment of an Enterprise and Related
Information."

The table below presents information about the Company's reportable
segments:

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

(A) Includes asset impairment losses on a pre-tax basis of $8,883 in fiscal
2002, and $3,200 in fiscal 2001. (See Note 6 of Notes to Consolidated
Financial Statements)

(B) Includes cash equivalents and marketable securities of $174,336, $114,208,
$105,751 in fiscal years 2002, 2001 and 2000, respectively.

55

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information regarding geographic areas for the years ended July 31, 2002,
2001 and 2000 are as follows:

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

56

ANALOGIC CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

57

INDEX TO EXHIBITS