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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)

Commission file number 0-6715

(978) 977-3000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     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 o          No þ

     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.     þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes o          No þ

     The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the registrant at January 30, 2004 was approximately $502,626,000.

     Number of shares of Common Stock outstanding at December 31, 2004: 13,688,954

DOCUMENTS INCORPORATED BY REFERENCE:

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PART I

      The Company is restating its financial statements for the fiscal years ended July 31, 2002 and July 31, 2003 (the “Restatement”). All financial information reported for those fiscal years in this Annual Report on Form 10-K reflects the Restatement. The Company’s Annual Reports on Form 10-K for fiscal 2002 and 2003 have not been revised to reflect the Restatement, and the financial statements for fiscal 2002 and 2003 contained in those reports should not be relied upon. Instead, the financial statements included in this Annual Report on Form 10-K should be relied upon for those fiscal years. Please see Note 1 of Notes to Consolidated Financial Statements for more information regarding the Restatement.

      Total revenues of Analogic Corporation (hereinafter, together with its subsidiaries, referred to as “Analogic” or the “Company”) for the fiscal year ended July 31, 2004, were $355.6 million as compared to $471.7 million for fiscal 2003, a decrease of 25%. Net income for fiscal 2004 was $8.4 million or $0.62 per diluted share as compared to $49.5 million or $3.70 per diluted share for fiscal 2003.

      In November 2003, the Company established ANEXA Corporation (“Anexa”), 100% owned subsidiary, to market complete advanced digital medical imaging solutions directly to select end-user markets in the United States. Anexa is a provider of complete integrated digital imaging solutions incorporating innovative digital radiography systems, advanced application software, desktop computed radiography systems, and other key products from industry leading Original Equipment Manufacturers (“OEMs”).

      In April 2004, the Company completed the construction of a 100,000 square foot addition to its headquarters building in Peabody, Massachusetts. This two-story addition has enabled the Company to further consolidate its existing Massachusetts operations and to expand production capacity for its medical and security systems businesses. The cost of the building, including fit-up, was approximately $13.0 million and was financed by internally generated cash.

      In August 2003, Mr. John W. Wood Jr., the Company President, was appointed Chief Executive Officer, succeeding Mr. Bernard M. Gordon.

      In May 2004, Mr. John A. Tarello was elected Chairman of the Board of Directors, succeeding Mr. Bernard M. Gordon.

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

      The Company operates primarily within two major markets within the electronics industry: Medical Technology Products and Security Technology Products. Medical Technology Products consist of three reporting segments: Medical Imaging Products which consist primarily of electronic systems and subsystems for medical imaging equipment and patient monitoring; Camtronics Medical Systems Ltd. for information management systems for the cardiology market; and B-K Medical Systems ApS for ultrasound systems and probes in the urology, surgery and radiology markets. Security Technology Products consist of advanced weapon and threat detection systems and subsystems. See Note 19 of Notes to Consolidated Financial Statements for more information.

      Analogic is a leading designer and manufacturer of advanced health and security systems and subsystems sold primarily to 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’s principal customers are OEMs that incorporate Analogic’s state-of-the-art products

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      Analogic conceives, designs, manufactures, and sells standard and customized high-precision data acquisition, and signal and image-processing-based medical and security systems and subsystems. Analogic has been a leader in the application of precision analog-to-digital (“A/ D”) and digital-to-analog (“D/ A”) conversion technology. This involves the conversion of continuously varying (i.e., “analog”) electrical signals, such as those representing temperature, pressure, voltage, weight, velocity, and ultrasound and X-ray intensity, into and from the digital form required by medical and security imaging and monitoring equipment, other data processing equipment, and in subsystems and systems based on such technology.

      In addition to their precision measurement capabilities, many Analogic 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 are sold primarily within two major markets within the electronics industry: Medical Technology Products and Security Technology Products.

      Medical Imaging Products, which accounted for 49% of product and engineering revenue in fiscal 2004, consists primarily of electronic systems and subsystems for medical imaging equipment and patient monitoring.

      A number of Analogic’s medical imaging data acquisition systems and related computing equipment are incorporated by manufacturers in North America, Europe, and Asia into advanced X-ray equipment known as 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 that 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 some of its medical imaging customers with A/ D and D/ A conversion equipment and complete data acquisition systems. The Company also manufactures complete CT systems incorporating proprietary technology. Some of these CT systems are integrated with other technologies, such as Single Photon Emission Tomography Systems (SPECT) and radiotherapy systems.

      The Company also designs and manufactures for OEM customers advanced Radio Frequency (RF) amplifiers, gradient coil amplifiers, and spectrometers for use in MRI scanners. These MRI scanners are used primarily to create diagnostic medical images.

      Direct Digital Radiography (DDR) systems are also designed, developed, and manufactured by Analogic. DDR uses a solid-state, flat-panel, digital-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. Systems are developed and manufactured for an OEM customer and for direct sale to select markets by Anexa.

      The Company manufactures a variety of multi-functional, custom patient monitoring instruments. Several families of monitors acquire, calculate, and display combinations of the most common vital sign parameters, such as 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, and general care and surgical centers, where ease-of-use, portability, flexibility, and costs are important considerations, as well as in physicians’ offices.

      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.

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      Anexa markets and sells complete advanced digital medical imaging solutions directly to end users in select markets. Anexa’s specialty is DR systems for such applications as orthopedics, emergency medicine, pediatrics, and general radiology in small-to-mid-size hospitals.

      Anrad Corporation (“Anrad”), a 100% owned subsidiary, designs and manufactures state-of-the-art, direct conversion amorphous-selenium-based, X-ray, digital, flat-panel detectors for diagnostic and interventional applications in mammography and a number of other DR applications.

      Sound Technology, Inc. (“STI”), a 100% owned subsidiary, produces linear and tightly curved array ultrasound transducers and probes for a broad range of clinical applications that are supplied to medical equipment companies. These products are supplied to a global customer base of ultrasound systems manufacturers on an original equipment manufacturing basis.

      Camtronics Medical Systems Ltd. (“Camtronics”), a 100% owned subsidiary, designs and manufactures multi-modality image and information management systems for cardiology. These systems can integrate all cardiac patient data into an enterprise-wide information system. Camtronics, an industry leader in cardiac workstation technology also designs and manufactures state-of-the-art digital imaging systems for cardiology and radiology. Camtronics accounted for 14% of product and engineering revenue in fiscal 2004.

      B-K Medical Systems ApS (“B-K Medical”), a 100% owned subsidiary, designs and manufactures ultrasound systems and probes for end-user markets in urology, surgery, and radiology. Its scanners generate real-time images of the internal anatomy that are used for medical diagnosis and interventional procedures. B-K Medical also manufactures key subsystems on an OEM basis for ultrasound equipment manufacturers. B-K Medical accounted for 18% of product and engineering revenue in fiscal 2004.

      Security Technology Products, consisting of advanced threat and weapon detection systems and subsystems, accounted for approximately 9% of product and engineering revenue in fiscal 2004.

      Analogic designs and manufactures the Explosive Assessment Computed Tomography (EXACT^TM) 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 core system of L-3 Communications’ Security and Detection System division (“L-3”) eXaminer 3DX® 6000 (“The eXaminer”), the first second-generation Explosive Detection System (EDS) certified by the Federal Aviation Administration (FAA). The eXaminer is being purchased by the US federal government for installation at major U.S. airports to scan checked luggage.

      Analogic also 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 has also designed and developed prototypes of a high-speed, low-cost, carry-on-baggage CT scanning system, the COBRA, to detect explosives, drugs, and other contraband. This system is designed to automatically detect threats and weapons in carry-on luggage at passenger portals in airports and carry-on luggage items at portals for cruise ships, rail stations, courthouses, embassies and other public buildings, as well as to scan mail and small parcels.

      Corporate and Other, consisting of a hotel; high-speed signal processing equipment consisting of A/ D converters and supporting modules; high-speed digital signal processors such as Array Processors; and embedded multi-computing platforms; accounted for approximately 10% of total revenue in fiscal 2004.

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

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      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.

      Sky Computers, Inc. (“Sky”), a 100% owned subsidiary, designs and manufactures high performance embedded multicomputing platforms used in advanced medical, military, and industrial imaging applications.

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 Europe, Canada, and the United States act as distributors. The majority of distributors order from the Company as they receive orders from their customers and do not stock inventory for resale. Generally, 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 from third party suppliers 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 116 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 U.S. patent applications and, where appropriate, foreign patent applications. The Company also files continuations to cover both new and improved methods, apparatus, processes, designs and products. At present, approximately 127 U.S. and foreign patent applications are in process.

      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 and copyright 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 the Company’s engineers in developing products which satisfy customer needs, and the innovative skills, competence and marketing and managerial skills of the Company’s personnel in selling those products. Moreover, the Company believes that market positioning and rapid market entry are equally important to the success of its products. Management is of the opinion that the loss of patent protection would not have a material effect on the Company’s competitive position.

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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 procurement activities of certain customers 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 6 of Notes to Consolidated Financial Statements.)

Material Customers

      The Company’s three largest customers in fiscal 2004, each of which is a significant and valued customer, were Toshiba, General Electric and Siemens, which accounted for approximately 12.2%, 9.8%, and 8.5%, respectively, of product and engineering revenue. Loss of any one of these customers would have a material adverse effect on the Company’s business.

Backlog

      The backlog of firm orders at July 31, 2004 was approximately $113.0 million compared with approximately $105.6 million at July 31, 2003. The increase is principally due to an increase in orders for CT medical scanners and EXACT systems, partially offset by a reduction due to recognition of deferred revenue by Camtronics. 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 substantially all of its July 31, 2004 backlog during fiscal 2005.

Government Contracts

      The amount of the Company’s business that may be subject to renegotiation of profits at the election of the U.S. federal 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 that 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 the design and manufacture of these products and its other medical products to be due more to the “make-or-buy” decision of its individual OEM customers than a function of other competitors in the field. Many OEM customers and potential OEM customers of the Company have the capacity to design and manufacture these products for themselves. In the Company’s area of expertise, the continued signing of new contracts indicates continued strength in the Company’s relationship with its major customers, although some of these customers continue to commit to shorter-term contracts.

      Analogic’s competitors include divisions of some larger, more diversified organizations, as well as several specialized companies. Some of them have greater resources and larger staffs than Analogic. The Company believes that it is a leading manufacturer of CT and MRI subsystems for 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

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      Company funds expended for R&D amounted to $58.7 million in fiscal 2004, $55.1 million in fiscal 2003, and $39.1 million in fiscal 2002. Analogic intends to continue its emphasis on new product development. As of July 31, 2004, Analogic had approximately 510 employees engaged in research and product development activities, including electronic development engineers, software engineers, physicists, mathematicians, and technicians. 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.

      The Company capitalized $4.8 million and $3.5 million in fiscal 2004 and 2003, respectively, of computer software testing and coding costs incurred after technological feasibility was established. These costs are amortized using 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, 2004, the Company had approximately 1,700 employees.

Financial Information about Segments, Foreign and Domestic Operations and Export Revenue

      The Company operates primarily within two major markets within the electronics industry: Medical Technology Products and Security Technology Products. Medical Technology Products consist of three reporting segments: Medical Imaging Products which consist primarily of electronic systems and subsystems for medical imaging equipment and patient monitoring; Camtronics for information management systems for the cardiology market; and B-K Medical for ultrasound systems and probes in the urology, surgery and radiology markets. Security Technology Products consist of advanced weapon and threat detection systems and subsystems. See Note 19 of Notes to Consolidated Financial Statements for more information regarding the Company’s segments.

      Domestic and foreign revenues were $300.6 million and $55.0 million respectively for fiscal 2004 compared to $429.9 million and $41.8 million in fiscal 2003 and $270.2 million and $34.7 million in fiscal 2002.

      Export revenue, from sales of products and engineering services from the United States primarily to companies in Europe and Asia, amounted to approximately $105.0 million (30%) of product and engineering revenue in fiscal 2004 as compared to approximately $91.9 million (20%) in fiscal 2003, and approximately $99.4 million (34%) in fiscal 2002. 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.

Available Information

      The Company’s website address is www.analogic.com. The information on the Company’s website is not incorporated by reference into this document and should not be considered to be a part of this document. The Company’s website address is included in this document as an inactive textual reference only.

      The Company makes available free of charge through its website its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to the reports, as soon

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      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 504,000 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.

      In April 2004, the Company completed the construction of a 100,000 square foot addition to its headquarters building in Peabody, Massachusetts. This two-story addition has enabled the Company to further consolidate its existing Massachusetts operations and to expand production capacity for its medical and security systems business. The cost of the building, including fit-up, was approximately $13.0 million and was financed by internally generated cash.

      In July 2003, the Company sold a building located in Peabody, Massachusetts for $3.15 million to 6 Centennial LLC, a Massachusetts limited liability company wholly-owned by the Bernard Gordon Charitable Remainder Unitrust, of which Bernard M. Gordon, a member of the Board of Directors of the Company, is a trustee. An independent appraisal obtained by the Company prior to the sale established the fair market value of the property at $3.2 million. The Company did not pay a broker’s fee in connection with the sale. The Company realized a gain of $1.6 million on the sale of this property.

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

      On June 16, 2004, L-3 Communications Corporation and L-3 Communication Security Systems Corporation filed a complaint against the Company in the Court of Chancery of the State of Delaware. The complaint asserted that an agreement between L-3 Communications Corporation and the Company (the “Teaming Agreement”) requires the Company to team exclusively with L-3 Communications Corporation in the development and sale of automatic explosives detection systems (“EDSs”) used in airports to detect explosives and other dangerous materials in checked baggage. The complaint alleged that the Company breached the Teaming Agreement by, among other things, developing and submitting to the US Transportation Security Administration (the “TSA”) research and development proposals relating to EDSs for checked baggage on it own, with a third party, and without L-3 Communications Corporation. The Company denied all material allegations set forth in the complaint. The Company, L-3 Communications Corporation and L-3 Communications Security Systems Corporation agreed to a settlement of the litigation, and on November 8, 2004, the Court of Chancery of the State of Delaware dismissed the complaint without prejudice with respect to certain claims and with prejudice with respect to the remaining claims. The settlement does not entail payment by either party.

      None

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PART II

      Since November 4 2004, the Company’s Common Stock has traded on the NASDAQ National Market under the symbol: ALOGE. Prior to November 4, 2004, the Company’s Common Stock traded on the NASDAQ National Market under the symbol: ALOG. The following table sets forth the high and low sales prices per share of the Common Stock, as reported by the NASDAQ National Market for each quarterly period indicated in the table below:

      As of August 31, 2004, there were approximately 1,175 holders of record of the Common Stock.

      Dividends of $0.08 per share were declared for each of the quarters of fiscal 2004 and fiscal 2003. 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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	(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 Communications Corporation (“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 2002 and 2001.

      The Company has restated its financial statements for the fiscal years ended July 31, 2002 and July 31, 2003 (the “Restatement”). All financial information reported for those fiscal years in this Annual Report on Form 10-K reflects the Restatement. Please see Note 1 of Notes to Consolidated Financial Statements for more information regarding the Restatement.

      The following discussion provides an analysis of the Company’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 the Company to differ from the projected results. See “Risk Factors” below.

Critical Accounting Policies, Judgments, and Estimates

      The SEC considers critical accounting policies to be the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and

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Revenue Recognition and Accounts Receivable

      The Company recognizes the majority of its revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”. Revenue related to product sales is recognized upon shipment provided that title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, the sales price is fixed or determinable, collection of the related receivable is reasonably assured and customer acceptance criteria, if any, have been successfully demonstrated. For product sales with acceptance criteria that are not successfully demonstrated prior to shipment, revenue is recognized upon customer acceptance provided all other revenue recognition criteria have been met. Our sales contracts generally provide for the customer to accept title and risk of loss when the product leaves our facilities. When shipping terms or local laws do not allow for passage of title and risk of loss at shipping point, we defer recognizing revenue until title and risk of loss transfer to the customer.

      The Company’s transactions sometimes involve multiple elements (i.e., systems and services). Revenue under multiple element arrangements is recognized in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. Under this method, if an element is determined to be a separate unit of accounting, the revenue for the element is based on fair value and determined by verifiable objective evidence, and recognized at the time of delivery. Maintenance or service revenues are recognized ratably over the life of the contracts.

      For business units that sell software licenses, the Company recognizes revenue in accordance with the American Institute of Certified Public Accountants (“AICPA”)’s Statement of Position 97-2, “Software Revenue Recognition” (“SOP 97-2”). The application of SOP 97-2 requires judgment, including whether a software arrangement includes multiple elements, and if so, whether vendor-specific objective evidence (VSOE) of fair value exists for those elements. License revenue is recognized upon delivery, provided that persuasive evidence of an arrangement exists, no significant obligations with regards to installation or implementation remain, fees are fixed or determinable, collectibility is reasonably assured and customer acceptance, when applicable, is obtained. Hardware and software maintenance is marketed under annual and multi-year arrangements and revenue is recognized ratably over the contracted maintenance term. Service revenues are recognized ratably over the life of the contracts.

      The Company provides engineering services to some of its customers on a contractual basis and recognizes revenue using the percentage of completion method. The Company estimates the percentage of completion on contracts with fixed fees on a monthly basis utilizing hours incurred to date as a percentage of total estimated hours to complete the project. If the Company does not have a sufficient basis to measure progress towards completion, revenue is recognized upon completion of the contract. When total cost estimates exceed revenues, the Company accrues for the estimated losses immediately.

      Revenue related to the hotel operations is recognized as services are performed.

      Inherent in the revenue recognition process are significant management estimates and judgments, which influence the timing and the amount of revenue recognition. Camtronics, one of the Company’s subsidiaries, provides several models for the procurement of its digital cardiac information systems and for each model, its management must make significant estimates and judgments regarding revenue recognition. The predominant model includes a perpetual software license agreement, project-related installation services, professional consulting services, computer hardware and sub-licensed software and software support.

      Camtronics provides installation services, which include project-scoping services, conducting pre-installation audits, detailed installation plans, actual installation of hardware components, and testing of all hardware and software installed at the customer site. Because installation services are deemed to be essential

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      Camtronics also provides professional consulting services, which include consulting activities that fall outside of the scope of the standard installation services. These services vary depending on the scope and complexity requested by the client. Examples of such services include additional database consulting, system configuration, project management, interfacing to existing systems, and network consulting. Professional consulting services generally are not deemed to be essential to the functionality of the software. If Camtronics has VSOE for the consulting services, the timing of the software license revenue is not impacted. However, Camtronics commonly performs consulting services for which the Company does not have VSOE; accordingly, the software license revenue is deferred until the services are completed. If VSOE does exist professional consulting service revenue is recognized as the services are performed.

      Deferred revenue is comprised of 1) license fee, maintenance and other service revenues for which payment has been received and for which services have not yet been performed and 2) revenues related to delivered components of a multiple-element arrangement for which vendor specific objective evidence of fair value has not been determined for components not yet delivered or accepted by the customer. Deferred costs represent costs related to these revenues; for example, costs of goods sold and services provided and sales commission expenses.

      The Company grants credit to domestic and foreign original equipment manufacturers, distributors and end users, and performs ongoing credit evaluations on its customer’s financial condition. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collections issues that have been identified.

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. As of July 31, 2004 and 2003, the Company had valuation reserve balances equal to $10.8 million and $10.4 million, respectively.

Concentration of Credit Risk

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

Warranty Reserve

      The Company provides for the estimated cost of product warranties at the time products are shipped. Although the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates and service delivery costs incurred to correct a product failure. Should actual

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Investments in and Advances to Affiliated Companies

      The Company has 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 upon 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 entities operate. Adverse changes in market conditions or poor operating results of affiliated companies could result in losses or an inability to recover the carrying value of the investments, thereby requiring an impairment charge in the future.

Goodwill, Intangible Assets, and Other Long-Lived Assets

      Intangible assets consist of: goodwill, intellectual property, licenses, and capitalized software. Other long-lived assets consist primarily of property, plant, and equipment. Intangible assets and property, plant, and equipment, excluding goodwill, are amortized using the straight-line method over their estimated useful life. The carrying value of goodwill and other intangible assets is reviewed on a quarterly basis for the existence of facts and circumstances both internally and externally that may suggest impairment. Factors which the Company considers important and that could trigger an impairment review, include significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. The Company determines whether an impairment has occurred based on gross expected future cash flows, and measures the amount of the impairment based on the related future discounted cash flows. The cash flow estimates used to determine impairment, if any, contain management’s best estimates, using appropriate and customary assumptions and projections at the time. Beginning in fiscal 2003, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” As a result, the Company discontinued amortizing goodwill as of August 1, 2002 and adopted a policy to evaluate goodwill on an annual basis for potential impairment during the first quarter of each fiscal year, or at any time that events or changes in circumstances suggest that the carrying amount may not be recoverable from the estimated future cash flows.

Income Taxes

      The Company is required to estimate its income taxes in each of the jurisdictions within which it operates. This process involves assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. The Company must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent that recovery is not more than likely, a valuation allowance must be established. To the extent a valuation allowance is established, the Company must include an expense within the tax provision in the statement of operations. In the event that actual results differ from these estimates, the provision for income taxes and results of operations could be materially impacted. The Company does not provide for US Federal income taxes on undistributed earnings of consolidated foreign subsidiaries as such earnings are intended to be indefinitely reinvested in those operations. Determination of the potential deferred income tax liability on these undistributed earnings is not practicable because such liability, if any, is dependent on circumstances existing if and when remittance occurs.

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Results of Operations

Fiscal 2004 Compared to Fiscal 2003

      Product revenue for fiscal 2004 was $327.1 million as compared with $442.4 million in fiscal 2003, a decrease of $115.3 million or 26%. The decrease in product revenue was primarily due to a reduction in sales of Security Technology Products of $175.8 million resulting from reduced sales of the EXACT systems and spare parts which the Company supplies to L-3 Communications. The reduced sales of security products were partially offset by increased sales of $60.5 million; $51.9 million of Medical Technology Products, a 23% increase over prior year’s revenue, and $8.6 million primarily related to embedded signal-processing products. The increase in Medical Technology Products revenue was due to an increase in revenues of Medical Imaging Products of $35.0 million, primarily due to increased sales of CT systems, DR systems and patient monitors. The increase was also attributable to approximately $2.5 million of revenue resulting from a payment received related to a multi-year, multi-million dollar OEM agreement that involves an annual minimum purchase commitment from the customer which had not been met in 2004; increased Camtronics revenues of $11.3 million, primarily due to the recognition in fiscal 2004 of prior period deferred revenue; and increased B-K Medical revenues of $5.6 million resulting from increased demand for ultrasound systems.

      Engineering revenue for fiscal 2004 was $20.1 million compared to $20.9 million in fiscal 2003, a decrease of $0.8 million or 4%. The decrease in engineering revenue was primarily due to a reduction in a customer funded project for digital X-ray systems, partially offset by a license of intellectual property of $1.8 million sold to the Company’s affiliate Shenzhen Anke High-Tech Co., Ltd. (“SAHCO”).

      Other revenue of $8.3 million and $8.4 million for fiscal 2004 and 2003, respectively, represents revenue from the Company’s hotel operation.

      Product gross margin was $131.2 million in fiscal 2004 compared to $186.1 million for the same period last year. Product gross margin as a percentage of product revenue was 40% and 42% for fiscal 2004 and 2003, respectively. The decrease in product gross margin percentage over the prior year was primarily attributable to lower sales of security technology products, which have higher margins than most of the Company’s other products. This decrease was partially offset by the benefit of approximately $2.5 million of margin guaranteed by an OEM customer.

      Engineering gross margin was $6.6 million in fiscal 2004 compared to $6.0 million in fiscal 2003. Engineering gross margin as a percentage of engineering revenue was 33% and 29% for the fiscal 2004 and 2003, respectively. The increase in engineering gross margin as a percentage of engineering revenue over the prior fiscal year was primarily due to the sale of a license of intellectual property to the Company’s affiliate SAHCO for $1.8 million with no corresponding cost, partially offset by additional costs incurred by the Company in connection with work currently being done on behalf of the Transportation Security Administration.

      Research and product development expenses were $58.7 million in fiscal 2004, or 17% of total revenue, compared to $55.1 million in fiscal 2003, or 12% of total revenue. The increase in research and product development expenses of $3.6 million was due to the Company continuing to focus resources on developing new generations of medical imaging equipment, including innovative CT systems for niche markets, advanced digital x-ray systems and subsystems for general radiography and mammography, and an extended family of multi-slice CT Data Acquisition Systems for both medical and security markets. The Company is testing prototypes of an automated, CT-based portal screening system that can scan carry-on baggage at airports, carry-in baggage at public buildings, and parcels for corporations and delivery services. In addition, the Company continues to increase its investment in a number of other development projects for security systems to meet diverse, evolving security needs in the United States and abroad.

      Selling and marketing expenses were $37.0 million in fiscal 2004, or 10% of total revenue, as compared to $34.9 million in fiscal 2003, or 7% of total revenue. The increase in selling and marketing expenses of $2.1 million was mainly attributable to salaries and related expenses of the Company’s newly established subsidiary, Anexa, and increased commission expenses attributable to the year over year increase in

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      General and administrative expenses were $39.2 million in fiscal 2004 or 11% of total revenue, compared to $35.0 million in fiscal 2003, or 7% of total revenue. The increase of $4.2 million was primarily attributable to incentive bonus and related payroll expenses of approximately $1.0 million, amortization of acquired intangible assets of $0.9 million, incremental cost of approximately $0.4 million related to acquired subsidiaries STI, and VMI Medical Inc., which were not included in the same period last year. The increase was also due to approximately $0.7 million related to programs initiated by the Company to comply with the Sarbanes-Oxley Act of 2002, approximately $0.8 million in accounting and legal expenses related to the restatement of the Company’s financial statements for fiscal years 2001, 2002, and the first three quarters of fiscal 2003, and approximately $1.1 million in additional facilities operating costs.

      Computer software costs of $4.8 million and $3.5 million were capitalized in fiscal 2004 and 2003, respectively. Amortization of capitalized software costs amounted to $1.8 million in both fiscal years 2004 and 2003, and is included in product cost of sales.

      Interest income for fiscal 2004 was $3.7 million compared to $5.0 million for fiscal 2003. The decrease of $1.3 million was primarily the result of a lower effective interest rate on short term investments and to a lesser extent to lower invested cash balances resulting primarily from the Company internally funding its new addition to its headquarters facility.

      The Company recorded equity income of $0.6 million related to equity in unconsolidated affiliates in fiscal 2004 compared to an equity loss of $3.5 million for fiscal 2003. The equity gain in fiscal 2004 consists of a gain of $1.2 million for the Company’s share of profit in Cedara Software Corporation, offset by a loss of $0.6 million for the Company’s share of losses in SAHCO. The equity loss of $3.5 million in fiscal 2003 consists primarily of losses of $2.5 million and $1.1 million reflecting the Company’s share of losses in Cedara Software Corporation and SAHCO, respectively.

      Other expense, consisting primarily of foreign currency exchange gains and losses, was $0.2 million in fiscal 2004 compared to other income of $5.8 million in fiscal 2003. Other income in fiscal 2003 included $3.9 million of currency exchange gain resulting from the weakening U.S. dollar, primarily due to a $1.8 million gain on U.S. dollar loans to the Company’s Danish subsidiary and a $2.1 million gain on U.S. dollar loans to Anrad, the Company’s Canadian subsidiary, and a $1.6 million gain from the sale of a building the Company owned in Peabody, Massachusetts to a related party.

      The effective tax rate for fiscal 2004 was 17% as compared to 36% for fiscal 2003. The decrease of 19% was primarily due to a relative increase in the estimated benefits from tax exempt interest, the extraterritorial income exclusion and research and development credits as a result of a lower dollar base of pre-tax income for fiscal 2004 when compared to fiscal 2003. In addition, the effective tax rate reflects a benefit resulting from the release of the German valuation allowance reflecting net operating loss carryforwards which management has determined are more likely than not to be realized.

      Net income for fiscal 2004 was $8.4 million compared to $49.5 million in fiscal 2003. Basic earnings per share were $0.62 in fiscal 2004 compared to $3.74 in fiscal 2003. Diluted earnings per share were $0.62 in fiscal 2004 compared to $3.70 in fiscal 2003. The decrease in net income over the prior year was primarily the result of decreased revenue and profit derived from the sale of the EXACT systems, partially offset by increased revenue and profit of Medical Technology Products, including the deferred revenue and profit recognized in fiscal 2004 by Camtronics.

Fiscal 2003 Compared to Fiscal 2002

      Product revenue for fiscal 2003 was $442.4 million as compared with $268.8 million in fiscal 2002, an increase of $173.6 million or 65%. The increase was primarily due to an increase of $171.6 million in sales of Security Technology Products for sales of EXACT systems and spare parts, primarily to L-3. The increase in Medical Technology Products revenues of $12.5 million was primarily offset by a decrease in revenues of $10.5 million attributable to reduced demand for embedded multiprocessing equipment. The increase in Medical Technology Product revenue was the result of $8.6 million of increased sales by Camtronics of

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      Engineering revenue for fiscal 2003 was $20.9 million compared to $26.5 million in fiscal 2002, a decrease of 21%. The decrease in engineering revenue was primarily due to a decrease in customer funded projects for developing medical and security equipment.

      Other revenue of $8.4 million and $9.6 million for fiscal 2003 and 2002, respectively represent revenue from the Company’s hotel operation. The decrease in revenues is mostly the result of lower occupancy.

      Cost of product sales was $256.3 million in fiscal 2003 compared to $169.0 in fiscal 2002. Cost of product sales as a percentage of revenue was 58% in fiscal 2003, compared to 63% in fiscal 2002. The decrease in cost of product sales percentage over prior year was primarily attributable to the increase sales of security technology products, which have lower cost of sales then most of the Company’s other products.

      Cost of engineering sales was $14.9 million in fiscal 2003 compared with $23.2 million in fiscal 2002. The total cost of engineering sales as a percentage of engineering revenue decreased to 71% in fiscal 2003, 88% in fiscal 2002. This percentage decrease was primarily attributable to license revenue recognized in fiscal 2003 for which there was no associated cost.

      Other costs of sales were $4.7 million and $5.2 million from the Company’s hotel operation for fiscal 2003 and 2002, respectively.

      Research and product development expenses were $55.1 million in fiscal 2003, or 12% of total revenue, compared to $39.1 million in fiscal 2002, or 13% of total revenue. The increase in research and product development expenses of $16.0 million was due to the Company continuing to focus substantial resources in developing new generations of medical imaging equipment, including innovative CT systems for niche markets, and advanced digital x-ray systems and subsystems for general radiography and mammography, and an extended family of multi-slice CT Data Acquisition Systems for both medical and security markets. In addition, the Company is developing security systems for a variety of applications. The Company is in the initial stages of testing prototypes of automated, CT-based portal screening system that can scan carry-on baggage at airports, “carry-in” baggage at public buildings, and parcels for corporations and delivery services. In addition, the Company continues to increase its investment in a number of other development projects to meet diverse, evolving security need in the United States and abroad.

      Selling and marketing expenses were $34.9 million in fiscal 2003, or 7% of total revenue, as compared to $32.4 million in fiscal 2002, or 11% of total revenue. The increase in selling and marketing expense of $2.5 million was mainly attributable to exchange rate differential for our B-K Medical subsidiary in Denmark.

      General and administration expenses were $35.0 million in fiscal 2003, or 7% of total revenue, compared to $28.4 million in fiscal 2002 or 9% of total revenue. The increase of $6.6 million was primarily attributable to increased salaries and related payroll expenses of approximately $1.3 million, amortization of approximately $2.1 million related to acquired intangible assets, and approximately $1.3 million related to incremental costs due the acquisition of Sound Technology Inc. and VMI Medical, Inc. Also, included in general and administrative expenses was a provision for bad debt of approximately $2.4 million, of which $1.6 million related to certain old invoices of SAHCO, and approximately $0.7 million for an unsecured note, all of which the Company deemed uncollectible.

      Computer software costs of $3.5 million and $2.4 million were capitalized in fiscal 2003 and 2002 respectively. Amortization of capitalized software costs amounted to $1.8 million in both fiscal 2003 and 2002, and is included in the product cost of sales.

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      Interest income for fiscal 2003 was $5.0 million compared to $4.4 million for fiscal 2002. The increase of $0.6 million was primarily the result of higher invested cash balances partially offset by lower effective interest rate on short term investments.

      The Company recorded a loss of $3.5 million relates to equity in unconsolidated affiliates in fiscal 2003 compared to a loss of $0.2 million for fiscal 2002. The equity loss in fiscal 2003 consists primarily of losses of $1.1 million and $2.5 million reflecting the Company’s share of losses in SAHCO and Cedara Software Corporation, respectively. The equity loss in fiscal 2002 consists of a gain of $1.4 million reflecting the Company’s share of gains in Enhanced CT Technology LLC, partially offset by equity losses of $1.3 million and $0.2 million reflecting the Company’s share of losses in SAHCO and Cedara Software Corporation, respectively.

      Other income was $5.8 million in fiscal 2003, compared with $0.8 in fiscal 2002. Other income in fiscal 2003 includes $3.9 million of currency exchange gain resulting from the weakening U.S. dollars, primarily due to $1.8 million gain on U.S. dollar loans to the Company’s Danish subsidiary, and a $2.1 million gain on U.S. dollar loans to Anrad, the Company’s Canadian subsidiary, and $1.6 million gain from the sale of a building the Company owned in Peabody, Massachusetts to a related party.

      The effective tax rate for fiscal 2003 was 36% compared to 19% in fiscal 2002. The increase was due primarily to the lower impact related to the benefit realized from tax exempt interest and extraterritorial income benefit on a higher pre-tax income when compared to 2002.

      Net income for fiscal 2003 was $49.5 million compared to $2.7 million in fiscal 2002. Basic earnings per share were $3.74 compared to $0.20 in fiscal 2002. Diluted earnings per share were $3.70 in fiscal 2003 compared to $0.20 in fiscal 2002. The increase in net income over the prior year’s period was primarily the result of increased revenue and profit derived from the sale of EXACT systems. The prior year’s income included a pre-tax asset impairment charge of $8.9 million related to the write down of certain assets of the Company’s telecommunications subsidiary, Anatel, and the Company’s Test and Measurement Division.

Liquidity and Capital Resources

      Cash and cash equivalents and marketable securities totaled $176.6 million and $178.0 million at July 31, 2004 and 2003, respectively. Working capital was $245.9 million and $246.3 million at July 31, 2004 and 2003, respectively. The Company’s balance sheet reflects a current ratio of 4.0 to 1 at July 31, 2004 compared to 3.7 to 1 at July 31, 2003. 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 Canada and 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, 2004 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.

      Net cash provided by operating activities was $33.2 million in fiscal 2004, $35.4 million in fiscal 2003 and $94.8 million in fiscal 2002. The decrease in cash flows from operations in fiscal 2004 over fiscal 2003 of

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      Net cash used for investing activities was $15.2 million in fiscal 2004, compared to $18.1 million in fiscal 2003 and $15.0 million in fiscal 2002. The decrease in net cash used for investment activities of $2.9 million was primarily due to lower funds used in the acquisition of businesses and assets, partially offset by an increase in capital expenditures, primarily for the Company’s new addition to its headquarters facility.

      Net cash used for financing activities was $5.5 million and $3.1 million in fiscal years 2004 and 2002, respectively. Net cash provided by financing activities was $0.8 million in fiscal 2003. The net cash used for financing activities in fiscal 2004 consisted primarily of the pay-off of a long term mortgage loan of $3.9 million, and dividend payments of $4.3 million, partially offset by cash received from the issuance of stock pursuant to exercise of stock options and employee stock purchase plan of $3.9 million.

      The Company’s contractual obligations at July 31, 2004, and the effect such obligations are expected to have on liquidity and cash flows in future periods are as follows:

      The Company currently has approximately $23.5 million in revolving credit facilities with various banks available for direct borrowings. There were no direct borrowings in fiscal 2004 or in fiscal 2003.

      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 for at least 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 November 2002, the EITF reached a consensus on issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). EITF 00-21 addresses revenue recognition on arrangements encompassing multiple elements that are delivered at different points in time, defining criteria that must be met for elements to be considered to be a separate unit of accounting. If an element is determined to be a separate unit of accounting, the revenue for the element is recognized at the time of delivery. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 did not have a material effect on the Company’s financial position or results of operations.

      In January 2003, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities”, and amended it by issuing FIN 46R in December 2003. FIN 46R requires that if an entity has a controlling financial interest in a variable interest entity, the assets, liabilities and results of activities of the variable interest entity should be included in the consolidated financial statements of the entity. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. The Company did not create or acquire any variable interest entities after this date. The adoption of the provisions of FIN 46R in the third quarter of fiscal 2004 did not have a material effect on its financial position or results of operations.

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      In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition.” SAB 104 was effective upon issuance and supersedes Staff Accounting Bulletin No. 101 (“SAB 101”), “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind the accounting guidance in SAB 101 related to multiple-element arrangements as the guidance has been superseded with the issuance of EITF 00-21. The adoption of SAB 104 did not have a material effect on the Company’s financial position or results of operations.

      In December 2004, FASB issued a revision to Financial Accounting Standards No. 123 (“FAS 123R”). FAS 123R is focused primarily on the accounting for transactions in which a company obtains employee services in exchange for stock options or share-based payments. Currently, the Company grants stock options to their employees and discloses the pro forma effect of compensation expense for these stock options. Under FAS 123R, the Company will be required to record this compensation expense in the Company’s results of operations. FAS 123R is effective for the beginning of the first fiscal reporting period that begins after June 15, 2005. The adoption of FAS 123R will have a material effect on the Company’s financial position and results of operations.

      In December 2004, FASB issued Financial Accounting Standards No. 151 (“FAS 151”). FAS 151 clarifies the accounting for inventory when there are abnormal amounts of idle facility expense, freight, handling costs, and wasted materials. Under existing GAAP, items such as idle facility expense, excessive spoilage, double freight, and re-handling costs may be “so abnormal” as to require treatment as current period charges rather than recorded as adjustments to the value of the inventory. FAS 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement shall be effective for inventory costs incurred during fiscal years beginning after June  15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after the date this Statement is issued. The adoption of FAS 151 is not expected to have a material effect on the Company’s financial position or results of operations.

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.

Risk Factors

      You should carefully consider the risks described below before making an investment decision with respect to Analogic common stock. Additional risks not presently known to us, or that we currently deem immaterial, may also impair our business. Any of these could have a material and negative effect on our business, financial condition or results of operations.

Because a significant portion of our revenue currently comes from a small number of customers, any decrease in revenue from these customers could harm our operating results.

      We depend on a small number of customers for a large portion of our business, and changes in our customers’ orders may have a significant impact on our operating results. If a major customer significantly reduces the amount of business it does with us, there would be an adverse impact on our operating results. The following table sets forth the percentages of our net product and engineering revenue from our four largest

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      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 and security imaging technology industry could cause us to experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and the loss of market share.

      We operate in a highly competitive industry. We are subject to competition based upon product design, performance, pricing, quality and services and we believe our innovative engineering and product reliability have been important factors in our growth. While we try to maintain competitive pricing on those products which are directly comparable to products manufactured by others, in many instances our products will conform to more exacting specifications and carry a higher price than analogous products manufactured by others.

      Our competitors include divisions of some larger, more diversified organizations as well as several specialized companies. Some of them have greater resources and larger staffs than we have. Many of our OEM customers and potential OEM customers have the capacity to design and manufacture internally the products we manufacture for them. We face competition from research and product development groups and the manufacturing operations of our current and potential customers, who continually evaluate the benefits of internal research and product development and manufacturing versus outsourcing.

We depend on our suppliers, some of which are the sole source for our components, and our production would be substantially curtailed if these suppliers are not able to meet our demands and alternative sources are not available.

      We order raw materials and components to complete our customers’ orders, and some of these raw materials and components are ordered from sole-source suppliers. Although we work with our customers and suppliers to minimize the impact of shortages in raw materials and components, we sometimes experience short-term adverse effects due to price fluctuations and delayed shipments. In the past, there have been industry-wide shortages of electronics components. If a significant shortage of raw materials or components were to occur, we might have to delay shipments or pay premium pricing, which could adversely affect our operating results. In some cases, supply shortages of particular components will substantially curtail production of products using these components. We are not always able to pass on price increases to our customers. Accordingly, some raw material and component price increases could adversely affect our operating results. We also depend on a small number of suppliers, some of which are affiliated with customers

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If we are left with excess inventory, our operating results will be adversely affected.

      Because of long lead times and specialized product designs, we typically purchase components and manufacture products in anticipation of customer orders based on customer forecasts. For a variety of reasons, such as decreased end-user demand for the products we are manufacturing, our customers might not purchase all the products we have manufactured or for which we have purchased components. In either event, we would attempt to recoup our materials and manufacturing costs by means such as returning components to our vendors, disposing of excess inventory through other channels or requiring our OEM customers to purchase or otherwise compensate us for such excess inventory. Some of our significant customer agreements do not give us the ability to require our OEM customers to do this. To the extent we are unsuccessful in recouping our material and manufacturing costs, not only would our net sales be adversely affected, but also our operating results would be disproportionately adversely affected. Moreover, carrying excess inventory would reduce the working capital we have available to continue to operate and grow our business.

Uncertainties and adverse trends affecting our industry or any of our major customers may adversely affect our operating results.

      Our business depends primarily on two segments within the electronics industry, medical and security technology products, which are subject to rapid technological change and pricing and margin pressure. These segments have historically been cyclical and subject to significant downturns characterized by diminished product demand, rapid declines in average selling prices and production over-capacity. In addition, changes in government policy relating to reimbursement for the purchase and use of medical and security related capital equipment could also affect our sales. Our customers’ markets are also subject to economic cycles and are likely to experience recessionary periods in the future. The economic conditions affecting our industry in general, or any of our major customers in particular, might adversely affect our operating results. Our businesses outside the medical instrumentation and security technology product sectors are subject to the same or greater technological and cyclical pressures.

Our customers’ delay or inability to obtain any necessary United States or foreign regulatory clearances or approvals for their products could have a material adverse effect on our business.

      Our products are used by a number of our customers in the production of medical devices that are subject to a high level of regulatory oversight. A delay or inability to obtain any necessary United States or foreign regulatory clearances or approvals for products could have a material adverse effect on our business. The process of obtaining clearances and approvals can be costly and time-consuming. There is a further risk that any approvals or clearances, once obtained, 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 rules and regulations, which regulate the design, manufacture, packing, storage and installation of medical devices. Moreover, medical devices are required to comply with FDA regulations relating to investigational research and labeling. States may also regulate the manufacture, sale and use of medical devices. Medical device products are also subject to approval and regulation by foreign regulatory and safety agencies.

Our business strategy involves the pursuit of acquisitions or business combinations, which may be difficult to integrate, disrupt our business, dilute stockholder value or divert management attention.

      As part of our business strategy, we may consummate acquisitions or business combinations. Acquisitions are typically accompanied by a number of risks, including the difficulty of integrating the operations and personnel of the acquired companies, the potential disruption of our ongoing business and distraction of

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      If we do not successfully complete acquisitions that we pursue in the future, we may incur substantial expenses and devote significant management time and resources in seeking to complete proposed acquisitions that will not generate benefits for us. In addition, substantial portions of our available cash might be utilized as consideration for these acquisitions.

Our annual and quarterly operating results are subject to fluctuations, which could affect the market price of our common stock.

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

	•	variations in the timing and volume of customer orders relative to our manufacturing capacity;
	•	introduction and market acceptance of our customers’ new products;
	•	changes in demand for our customers’ existing products;
	•	the timing of our expenditures in anticipation of future orders;
	•	effectiveness in managing our manufacturing processes;
	•	changes in competitive and economic conditions generally or in our customers’ markets;
	•	changes in the cost or availability of components or skilled labor;
	•	foreign currency exposure; and
	•	investor and analyst perceptions of events affecting the Company, our competitors and/or our industry.

      As is the case with many technology companies, we typically ship a significant portion of our products in the last month of a quarter. As a result, any delay in anticipated sales is likely to result in the deferral of the associated revenue beyond the end of a particular quarter, which would have a significant effect on our operating results for that quarter. In addition, most of our operating expenses do not vary directly with net sales and are difficult to adjust in the short term. As a result, if net sales for a particular quarter were below our expectations, we could not proportionately reduce operating expenses for that quarter, and, therefore, that revenue shortfall would have a disproportionate adverse effect on our operating results for that quarter.

Loss of any of our key personnel could hurt our business because of their industry experience and their technological expertise.

      We operate in a highly competitive industry and depend on the services of our key senior executives and our technological experts. The loss of the services of one or several of our key employees or an inability to attract, train and retain qualified and skilled employees, specifically engineering and operations personnel, could result in the loss of customers or otherwise inhibit our ability to operate and grow our business successfully.

If we are unable to maintain our technological expertise in research and product development and manufacturing processes, we will not be able to successfully compete.

      We believe that our future success will depend upon our ability to provide research and product development and manufacturing services that meet the changing needs of our customers. This requires that we successfully anticipate and respond to technological changes in design and manufacturing processes in a cost-effective and timely manner. As a result, we continually evaluate the advantages and feasibility of new product design and manufacturing processes. We cannot, however, be certain that our development efforts will be successful.

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      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 Canada and 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 for fiscal 2004 was $3.7 million. An interest rate change of 10% would not have a material impact on the fair value of the portfolio or on future earnings.

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

      Not applicable

      The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of July 31, 2004. The Company’s chief executive officer and chief financial officer believe that the Company’s disclosure controls and procedures were designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared.

      However, in the course of preparing this Annual Report on Form 10-K, the Company further evaluated certain information leading it to question whether appropriate software revenue recognition procedures had been followed in all cases by its Camtronics Medical Systems Ltd. subsidiary. The Company conducted a review of Camtronics transactions and the revenue recognition procedures followed, which has led the Company to restate its financial statements for the first three quarters of the fiscal year ended July 31, 2004 and for the fiscal years ended July 31, 2002 and 2003 and each of the interim periods within those years (see Note 1 of Notes to Consolidated Financial Statements). Based upon the evaluation of the effectiveness of the Company’s disclosure controls and procedures performed by management, as well as the information learned as a result of its review of Camtronics transactions, the Company’s chief executive officer and chief financial officer have concluded that, as of July 31, 2004, there were a number of significant deficiencies in the controls and procedures relating to the Company’s Camtronics subsidiary that together constitute a material weakness in the Company’s internal control over financial reporting. Accordingly, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were not operating effectively as of July 31, 2004.

      The principal internal control issues identified by the Company’s management are:

	•	the software revenue recognition expertise of Company personnel needs to be improved;
	•	the Company needs to enhance its written accounting policies and procedures related to software revenue recognition;
	•	the Company needs to enhance the training provided to employees with respect to software revenue recognition; and

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	•	the business processes and procedures of Camtronics need to be improved to ensure that they do not have unintended consequences with respect to software revenue recognition.

      Since identifying these issues, the Company has taken the following steps to improve its disclosure controls and procedures and internal control over financial reporting:

	•	Appointment of an interim President of Camtronics, succeeding the former President who left the employ of the Company, until such time that a full time President has been appointed.
	•	Appointment of an interim Controller, replacing Camtronics’ Vice President and Controller who left the employ of the Company, until such time that a full time Controller has been appointed.
	•	All subsidiary Controllers, who formerly reported to subsidiary General Managers, also now report directly to the Company’s Corporate finance organization.
	•	Detailed quarterly review of all software revenue transactions by the Company’s Corporate finance organization

      In addition, the Company plans to take the following additional actions to further improve its disclosure controls and procedures and internal control over financial reporting:

	•	Review and revise, as required, Camtronics software revenue recognition policies, procedures and processes to ensure compliance with SOP 97-2.
	•	Conduct periodic internal audit reviews of Camtronic’s business practices and software revenue recognition policies and procedures.
	•	Conduct software revenue recognition training for all Camtronics personnel who have responsibility for generating, administering, and recording software revenues.

      The Company believes that the above steps taken and the planned additional actions will address and resolve the material weaknesses in the Company’s internal controls over financial reporting at its Camtronics subsidiary. With respect to planned additional actions, the Company will initiate and, where practicable, complete these actions on or before the end of its third quarter ending April 30, 2005.

      While there have been significant changes (described above) in the Company’s internal control over financial reporting since July 31, 2004, no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended July 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

      The certifications of the Company’s chief executive officer and chief financial officer attached as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K include, in paragraph 4 of such certifications, information concerning the Company’s disclosure controls and procedures and internal control over financial reporting. Such certifications should be read in conjunction with the information contained in this Item 9A for a more complete understanding of the matters covered by such certifications.

      Not applicable.

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PART III

      The following table lists the directors of the Company as of August 31, 2004:

	(1)	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.
	(2)	Dr. Wilson did not stand for re-election as a director at the January 16, 2004 Annual Meeting. He was re-elected a director by the Board on March 11, 2004.

      The following table lists the executive officers of the Company as of August 31, 2004:

	(1)	Mr. Wood was appointed President in April 2003 and Chief Executive Officer in August 2003.
	(2)	Mr. Van Adzin joined the Company in October 2003.

      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 Secretary, 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 was the Chairman of the Board of Directors of the Company from 1969 to April 2004 and was President from 1980 to 1995 and from February 2002 to April 2003. Mr. Gordon was Executive Chairman from February 2002 to April 2004 and Chief Executive Officer from February 2002 to August 2003. Mr. Gordon is Chairman of the Board of Directors of the Lahey Clinic. Mr. Gordon is currently the President of Neurologica Corporation. Neurologica develops and manufactures imaging equipment for neurological scanning applications.

      John A. Tarello retired from Analogic in November 1999. Mr. Tarello has been the Chairman of the Board of Directors of the Company since April 2004. 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 from 1980 to 1999; and Treasurer from 1985 to 1999.

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

      Edward F. Voboril has been President and CEO of Wilson Greatbatch Technologies of Clarence, New York since December 1990. He was elected Chairman of the Board of that company in 1997. 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, (“MIT”), and the Vannevar Bush Professor of Engineering at MIT. Dr. Wilson has served on MIT’s faculty since 1965 and currently serves as a Professor of Electrical and Mechanical Engineering. He is a trustee of NSTAR Corporation and a director of SATCON Corporation.

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

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

      John W. Wood Jr. joined the Company as President in April 2003, was appointed Chief Executive Officer in August 2003 and elected a director of the Company in January 2004. He served as President of Peek Ltd., a developer and supplier of electronics for traffic and transport and a division of Thermo Electron Corporation, from 1998 to 2001, and as a Senior Vice President of Thermo Electron Corporation, a developer and manufacturer of high-tech instruments in the life sciences and other industries, from 1995 to 1998. Prior to that he served for a number of years as President and Chief Executive Officer of Thermedics, a manufacturer of detection instruments for security and quality assurance applications and biomedical materials and products and a subsidiary of Thermo Electron Corporation.

      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 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.

      Alex A. Van Adzin joined the Company as Vice President, General Counsel, and Secretary in October 2003. Mr. Van Adzin was previously Senior Vice President, General Counsel, and Secretary at ManagedComp, Inc., a managed care workers’ compensation company, from 2001 to 2002. Prior to that, he was Corporate Counsel at the Liberty Mutual Group, a diversified financial services company, from 1996 to 2001. Before joining Liberty Mutual Group, Mr. Van Adzin was Vice President and Corporate Counsel at Abex Inc., a diversified aerospace and automotive products company, from 1990 to 1995.

      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 identifies Dr. Bruce W. Steinhauer, a director, as the only “reporting person” (as defined in said Item 405) who failed to file on a timely basis a report required by Section 16(a) of the Securities Exchange Act of 1934 (“the Exchange Act”) during fiscal 2004. Dr. Steinhauer was four business days late in filing a Form 4.

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Audit Committee

      The Company has an audit committee that was established in accordance with Section 3(a) (58)(A) of the Exchange Act (15 U.S.C. 78c (a) (58)(A). The members of the Company’s Audit Committee are Edward F. Voboril, Chairman, Bruce W. Steinhauer, and Gerald L. Wilson.

Audit Committee Financial Expert

      The Company has determined that it has at least one “audit committee financial expert” (as defined in Item 401(h)(2) of Regulation S-K) on the Audit Committee of the Board of Directors, Edward F. Voboril. Mr. Voboril is “independent” from management, as “independent” is defined in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

Code of Ethics

      The Company has adopted a code of ethics. A copy of the Company’s Code of Ethics may be obtained without charge upon written request to: Analogic Corporation, 8 Centennial Drive, Peabody, Massachusetts 01960, Attn: Secretary.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

      The following table sets forth certain compensation information for each person who served as Chief Executive Officer during fiscal 2004 and each of the executive officers of the Company in fiscal 2004 (collectively the “Named Executive Officers”) for services rendered in all capacities for the last three fiscal years.

      Notes to Compensation Table

	(1)	Mr. Gordon resigned as Chairman of the Board and Executive Chairman in April 2004. Mr. Gordon remains a director of the Company.
	(2)	Mr. Wood Jr. joined the Company as President in April 2003 and was appointed Chief Executive Officer in August 2003.
	(3)	Mr. Soshnick retired in January 2001 and returned to the Company as an officer in October 2001. He resigned as General Counsel and Clerk on October 27, 2003, and resigned as Vice President of

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		the Company in February 2004. Mr. Soshnick was a director of the Company until his death in August 2004.

	(4)	Mr. Van Adzin joined the Company in October 2003.
	(5)	Includes payment of $300,000 for recognition of career achievements and previous uncompensated service to the Company.
	(6)	Includes payment of $120,000 for recognition of career service to the Company.

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Stock Option Grants in Last Fiscal Year

      The following table sets forth information concerning individual grants of options to purchase the Company’s Common Stock made during fiscal year 2004 to the Named Executive Officers. Amounts described in the following table under the heading “Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term” represent hypothetical gains that could be achieved for the options if exercised at the end of the option term. These gains are based on assumed rates of stock appreciation of 5% and 10% compounded annually from the date the options were granted to their expiration date. Actual gains, if any, on stock option exercises will depend upon the future performance of Common Stock and the date on which the options are exercised.

	(1)	These options will become exercisable in four equal (25%) installments with the first installment becoming exercisable two years from the date of the grant which was October 27, 2003. Unexercised options expire seven years from the date of the grant.

Stock Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

      The following table sets forth certain information regarding stock options exercised during fiscal year 2004 and held by Named Officers as of July 31, 2004.

	(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, 2004. “In-the-money” options are options whose exercise price was less than $41.54, the closing price of the Common Stock on July 30, 2004, the last day the Common Stock traded in fiscal 2004.
	(2)	These options were not “in-the-money” as of July 31, 2004.

Compensation of Directors

      The Chairman of the Board is entitled to receive a monthly fee of $5,000. Each of the other directors who is not an employee of the Company is entitled to an annual fee of $15,000. Each of the directors who is not an employee of the Company is entitled to a fee of $1,500 per meeting for each meeting of the board or any board committee attended in person, a fee of $1,000 per meeting for each meeting of the Board or any board committee attended by telephone, together with reimbursement of travel expenses under certain circum-

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      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, amended by the Board on December  8, 2003 and as amended was approved by the Stockholders at the January 2004 Annual Meeting (the “1997 Plan”). Pursuant to the 1997 Plan, options to purchase 150,000 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.

      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 35,000 options granted under this plan in fiscal 2004 with a weighted average exercise price of $44.74.

      The 1997 Plan is administered by members of the Company’s Board of Directors.

Compensation Committee Interlocks and Insider Participation

      The members of the Compensation Committee of the Company’s Board of Directors during fiscal 2004 were Dr. Wilson, Chairman, Dr. Steinhauer and Mr. Voboril. 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.

      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, 2004:

	(1)	The Company has been advised by T. Rowe Price Associates, Inc. and Lord Abbett & Co. LLC, that in their capacity as investment advisors, each is a deemed beneficial owner of the Company’s Common Stock on August 31, 2004, in the amount indicated next to each name, respectively.
	(2)	Mr. Gordon serves as Co-Trustee of the Bernard Gordon Charitable Remainder Unitrust (the “Trust”). The Trustees 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 under the United States Internal Revenue Code formed by

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		Mr. Gordon with its principal office located at 14 Electronics Ave., Danvers, Massachusetts. The total shares reported above as of August 31, 2004 include 15,623 shares owned by the Gordon Foundation.

      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 Directors and current executive officers as a group, as of August 31, 2004:

	*	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 Co-Trustee of the Bernard Gordon Charitable Remainder Unitrust (the “Trust”). The Trustees 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 14 Electronics Ave., Danvers, Massachusetts. The total shares reported above include 15,623 shares owned by The Gordon Foundation.
	(3)	Included 40,000 shares of restricted stock.
	(4)	Includes 5,000 shares issuable upon exercise of options excisable within 60 days of August 31, 2004.
	(5)	Includes 10,000 shares issuable upon exercise of options excisable within 60 days of August 31, 2004.
	(6)	Includes 10,000 shares issuable upon exercise of options excisable within 60 days of August 31, 2004.
	(7)	Includes 5,000 shares issuable upon exercise of options excisable within 60 days of August 31, 2004.
	(8)	Includes 10,002 shares issuable upon exercise of options excisable within 60 days of August 31, 2004.
	(9)	Consists of 5,000 shares of restricted stock.

	(10)	Includes 40,002 shares issuable upon exercise of options excisable within 60 days of August 31, 2004.

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      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, 2004:

Equity Compensation Plan Information

	(1)	Includes 512,771 shares issuable under the Company’s Employee Stock Purchase Plan in connection with current and future offering periods under that plan.

      Mr. Bernard M. Gordon owns a 100% interest in a limited partnership (Audubon Realty), which owns a facility located at 360 Audubon Road, Wakefield, Massachusetts, which was leased by the Company for a term which expired on January 31, 2004. This facility was utilized by the Company for manufacturing and office space from May 1, 1981 until the lease terminated. The annual rent for this facility was $398,000. The Wakefield facility was leased on a net lease basis, and accordingly the Company paid, in addition to the above rental payments, all taxes, maintenance, insurance, and other costs relating to the leased premises. The terms of the lease agreement, at the time it was executed, were at least as favorable as those that could have been obtained from unaffiliated third parties. Prior to execution of 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 lease incorporated periodic rent escalation clauses, based upon the Consumer Price Index.

      See Note 12 of Notes to Consolidated Financial Statements for further information as to the leases.

      The following table summarizes the appropriate fees billed to the Company by the independent auditor:

	(a)	Fees for audit services billed related to fiscal 2004 consisted substantially of the following:

	•	Audit of the Company’s July 31, 2004 annual financial statements
	•	Reviews of the Company’s quarterly financial statements in fiscal 2004
	•	Initial planning of internal control attestation procedures as required by the Sarbanes-Oxley Act of 2002, Section 404 prior to the delay in effective date for the Company

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	Fees for audit services billed related to fiscal 2003 consisted substantially of the following:

	•	Audit of the Company’s July 31, 2003 annual financial statements
	•	Reviews of the Company’s quarterly financial statements in fiscal 2003
	•	Services for the restatement of the Company’s financial statements

	(b)	Fees for audit-related services billed related to fiscal 2004 and 2003 consisted of the following:

	•	Filing of SEC Form S-8
	•	Pension and benefit plans
	•	Consultation concerning accounting and financial reporting standards

	(c)	Fees for tax services billed in fiscal 2004 and 2003 consisted substantially of tax compliance and tax planning and advice in relation to:

	•	U.S. and foreign tax compliance.
	•	Tax planning and advice services relating to an international restructuring plan.

	(d)	The Company did not pay any other fees in fiscal 2003 and 2004 to PricewaterhouseCoopers LLP.

      The fees related to the services above were approved by the Audit Committee.

      The Audit Committee has adopted a policy in its charter to pre-approve all services (audit and non-audit) to be provided to the Company by the independent auditor, except that de minimis non-audit services may be approved in accordance with applicable SEC rules, including paragraph (c) (7)  (i) (C) of Rule 2-01 of Regulation S-X. In considering the nature of the services provided by the independent auditor, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with Company management and the independent auditor to determine that they were permitted under the rules and regulations concerning auditor independence promulgated by of the SEC and the American Institute of Certified Public Accountants. None of the services above were approved by the Audit Committee pursuant to paragraph (c) (7) (i) (C) of Rule 2-01 of Regulation S-X.

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PART IV