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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended: JULY 31, 1997 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ____________________ to ____________________
Commission file number: 0-6715
ANALOGIC CORPORATION
(Exact name of registrant as specified in its charter
Massachusetts 04-2454372
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8 Centennial Drive, Peabody, Massachusetts 01960
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 977-3000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.05 PAR VALUE
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(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant at August 29, 1997 was approximately
$292,747,211.
Number of shares of Common Stock outstanding at August 29, 1997: 12,600,836
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
ITEM 1. BUSINESS
(a) Developments During Fiscal 1997
Total revenues of Analogic Corporation (hereinafter, together with its
subsidiaries, referred to as "Analogic" or the "Company") for the fiscal year
ended July 31, 1997, were $256,729,000 as compared to $230,460,000 for fiscal
year 1996, an increase of 11%. Net income was $20,090,000, or $1.58 per share as
compared to $13,065,000, or $1.04 per share for fiscal year 1996, an increase of
54%.
The Company currently owns 5,715,384 shares (approximately 14% of the
outstanding shares) of Park Meditech, Inc.. On July 3, 1997 one of Park Meditech
Inc.'s subsidiaries, Park Medical Systems, filed for assignment in bankruptcy. A
trustee was appointed to sell the assets of Park Medical Systems, which includes
patents on exclusive imaging technology. During July 1997, the Company
recognized the impairment of its investment in Park Meditech, Inc. and wrote off
its investment totaling $1,742,000 which had been included in Marketable
Securities. (See Note 5 of Notes to Consolidated Financial Statements).
On February 22, 1996, the Company invested $2,000,000 for a 33% interest
in a privately held company which designs and will manufacture medical imaging
equipment. Effective May 1, 1997, the Company increased its interest from 33% to
50% with an investment of $340,000. During June 1997, the Company and the other
investor each invested an additional $1,000,000. Transactions with this
privately held company for fiscal years 1997 and 1996 consisted of revenues of
approximately $5,406,000 and $2,667,000, respectively.
The Company is designing an innovative computed tomography (CT) scanner
to be incorporated into a high performance Explosive Detection System (EDS) to
scan checked luggage at airports. During the year, Analogic entered into a
development and supply contract with Lockheed Martin Specialty Components of
Largo, Florida, to provide a new class of CT explosives detection scanner for
Lockheed Martin's eXaminer 3DX 6000 System. This effort is jointly funded by an
FAA grant and by Lockheed Martin Specialty Components.
The new CT explosives detection scanner will apply certain technologies
developed by Analogic during the past several years in its mobile CT scanner
program and will also incorporate new high speed, dual-energy, multi-ray, x-ray
techniques that the Company had conceived and for which patents are pending. The
dual- energy feature is expected to enhance the ability to discriminate between
explosives and non-explosives.
(b) Financial Information About Industry Segment
The Company's operations are within a single segment within the
electronics industry: the design, manufacture and sale of high-technology,
high-performance, high-precision, data acquisition, conversion (analog/digital)
and signal processing instruments and systems.
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(c) Narrative Description of Business
Analogic designs, manufactures and sells standard and customized
high-precision data acquisition, conversion and signal processing equipment.
Analogic's principal customers are original equipment manufacturers who
incorporate Analogic's state-of-the-art products into systems used in medical,
industrial and scientific applications.
Analogic is a leader in precision analog-to-digital (A/D) and
digital-to-analog (D/A) conversion technology, which involves the conversion of
continuously varying (i.e., "analog") electrical signals, such as those
representing temperature, pressure, voltage, weight, velocity, ultrasound and
x-ray intensity into and from the numeric (or "digital") form required by
computers, medical imaging equipment and other data processing equipment and in
subsystems and systems based on such technology.
In addition to their A/D and D/A conversion capabilities, most of
Analogic's products perform 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 which
interpret or utilize this information.
Analogic's products may be divided for discussion purposes into three
groupings as described below. These products are classified by product
technology and not by application.
SIGNAL PROCESSING TECHNOLOGY PRODUCTS, consisting of A/D and D/A
converters and supporting modules, high-speed digital signal processors such as
Array Processors, and image processing equipment, accounted for approximately
20% of fiscal 1997 product, service, engineering, and licensing revenue.
The technology developed by Analogic and incorporated within these
products is fundamental to all of the Company's other products.
A/D converters convert continuously varying "analog" signals into the
numerical "digital" form required by microprocessors and other data processing
equipment. D/A converters transform computer output in digital form into the
analog form required by process control equipment. Analogic manufactures a wide
variety of interconnecting and supporting modules relating to its A/D and D/A
converters. These include signal conditioning devices, which amplify, isolate
and filter physical analog signals; multiplexing devices, which permit
simultaneous processing of a number of analog signals; and sample and hold
devices, which sample rapidly varying phenomena.
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.
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The Company also manufactures a line of PC/AT-class high performance data
acquisition cards. These plug-in cards provide personal computer users with data
throughput and flexibility. The series of cards has a library of high level
software applications supported by third-party software houses and proprietary
set-up and diagnostic software.
The Company also manufactures a line of high performance data acquisition
products for the PC 104 market. Designed for embedded processor applications
normally used in OEM products, these cards provide precision measurement
capability between real world signals and the measuring instrument while meeting
all of the requirements of the PC 104 form factor and bus structure.
Analogic manufactures application accelerator and array processors
(special purpose computers) which generally receive information from a host
computer or data source, rapidly perform the desired calculations, and return
the processed data or results to the host computer. The cost per calculation of
array processors, which can compute and/or manipulate data at the rate of
hundreds of millions of operations per second, is less than that of general
purpose computers. Analogic believes its accelerators and array processors have
generally been cost effective when compared with competitive products.
The Company is marketing its array processors for applications such as
speech processing, speech compression, voice over internet, X-ray imaging,
manufacturing testing, radar and sonar, geophysical exploration, and other
technical and scientific areas. In addition, the Company sells array processors
used for image construction in Magnetic Resonance Imaging (MRI) medical
diagnostic systems. The Company also manufactures Digital Signal Processing
(DSP) floating point products which are used in the above mentioned markets.
MEDICAL TECHNOLOGY PRODUCTS, consisting primarily of electronic
subsystems for medical imaging equipment, accounted for approximately 73% of
product, service, engineering, and licensing revenue in fiscal 1997.
Analogic's medical imaging data acquisition systems and related computing
equipment are incorporated by U.S., European and Asian manufacturers into
advanced X-ray equipment known as computer assisted tomography (CAT) 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 CAT scanner technology by substantially
increasing resolution of the image, by reducing the time necessary to acquire
the image, and by reducing the computing time required to produce the image.
Analogic supplies to its medical imaging customers A/D and D/A conversion
equipment and complete data acquisition systems. The Company has completed the
design of a complete low cost CAT scanner, incorporating proprietary technology.
The Company commenced manufacturing this scanner in January, 1996.
In addition, the Company manufactures phased array ultrasound systems,
key subsystems, and a family of transducers on an OEM basis for ultrasound
equipment manufacturers. The Company also designs and manufactures radiology,
surgical, and urology ultrasound equipment for the end-user market.
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The Company manufactures electronics for a family of hard copy laser
printers in single and multi-user configurations that address the diagnostic
image market. These printers are used in hospitals world wide to print
diagnostic quality images on film from the electronic data collected by medical
imaging equipment such as CAT scanners and MRI scanners. The Company also
designs and manufactures for OEM customers advanced RF amplifiers, gradient coil
amplifiers, and spectrometers for use in MRI equipment. These MRI scanners are
used primarily to create diagnostic medical images.
The Company manufactures fetal monitoring products for conversion and
display of biomedical signals. These monitors designed for use in both
antepartum and intrapartum applications have the capability to measure, compute,
display and print fetal and maternal heart rates, maternal contraction frequency
and relative intensity and other maternal vital sign parameters to determine
both maternal and fetal well being.
The Company also manufactures a lightweight portable multi-functional
custom patient monitor instrument that acquires, calculates and displays the
five most common vital sign parameters.
The Company also manufactures a broad line of medical connectivity
products that allows medical equipment such as CAT Scanners and MRI and
ultrasound equipment to attach to local DICOM, PACS and wide area networks.
The products manufactured by Camtronics, a 68% owned subsidiary, are
included herein as medical technology products. They design and manufacture
state-of-the-art image processing products for diagnostic and interventional
applications in cardiac catheterization laboratories and for other radiology
procedures. They also manufacture the ArchiumTM Cardiac Digital Archive System
that stores and displays in real time images from cardiac labs at multiple
locations.
INDUSTRIAL TECHNOLOGY PRODUCTS, consisting of digital panel instruments,
industrial data acquisition and conversion systems, and test and measurement
devices and automation systems, accounted for approximately 7% of fiscal 1997
product, service, engineering, and licensing revenue.
Digital panel instruments measure analog inputs and visually display the
result in numerical (digital) form. They are sold to original equipment
manufacturers to be incorporated in products such as precision thermometers,
blood analyzers, and automatic test equipment. Certain of Analogic's digital
panel instruments incorporate specialized signal conditioning and computing
capabilities, and can transmit the measured value in digital form to remote
displays or to computers. The Company's Monitroller line of products extends
this capability still further by functioning as single loop process controllers.
Industrial digitizing systems condition analog signals, translate them to
digital form with a high degree of precision, and perform subsequent
computations and calculations. These instruments are available as complete
standard instruments or are customized to particular applications for
incorporation into customers' products. Typical applications for these systems
are in static and dynamic weighing, measurement of pressure, force or
temperature, and engine power measurement as well as factory-wide Distributed
Control Systems.
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Analogic's products also include a large number of standard and
customized A/D and D/A systems which can accept up to several thousand channels
of signals, perform precise signal conditioning, translate the data into digital
format and process the information via computer. Certain of the customized
subsystems include computing or computer-interfacing sub-units.
The Company manufactures complete data acquisition and conversion systems
used in a wide variety of industrial applications from process control to
emergency recording systems used in nuclear power plants. Also, a family of high
speed, 16-bit, multichannel data acquisition boards has been designed to meet
the stringent demands of fast and accurate measurements in precision
instrumentation environments.
Incorporating much of the same technology as the Company's medical
equipment, our sophisticated test instruments include general purpose digital
multimeters, which measure the basic parameters as voltage, current and
resistance, as well as temperature and frequency. The Company's universal
waveform analyzer line combines the features of a digital storage oscilloscope,
spectrum analyzer, array processor, and computer. The Company is also a supplier
of power supply test systems, static and dynamic loads, and AC sources used for
testing power supplies and other power devices.
The Company manufactures telecommunications products for use in network
monitoring and fault reporting. In addition, original equipment manufacturers
(OEM) purchase the Company's standard A/D, D/A and digital signal processing
products for specific production testing of telecommunications equipment. The
Company also manufactures a line of high performance digital signal processor
(DSP) boards used in the telephony industry.
HOTEL OPERATION
The Company owns a hotel which is located adjacent to the Company's
principal executive offices and manufacturing facility in Peabody,
Massachusetts. The hotel is strategically situated in an industrial park, is in
close proximity to the historic and tourist attracted area of Boston's North
Shore and is approximately 18 miles from Boston. The hotel has 256 rooms, a
ballroom and several other function rooms and appropriate recreational
facilities. The hotel is managed for the Company under a contract with Marriott
Corporation. The hotel operation does not meet the criteria for disclosure as a
separate business segment, but is being presented here only for information
purposes.
Marketing and Distribution
The Company sells its products domestically and abroad directly through
the efforts of its officers and employees and through a network of independent
sales representatives and distributors located in principal cities around the
world. In addition, Analogic subsidiaries act as its distributors in England and
Denmark. Domestically, Analogic has several regional sales offices staffed by
salespeople who sell the Company's products in the surrounding areas and
supervise independent sales representatives and distributors in their regions.
Some of Analogic's distributors also represent manufacturers of competing
products.
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Sources of Components/Raw Materials
In general, Analogic's products are composed of company-designed
proprietary integrated circuits, printed circuit boards, and precision resistor
networks, all manufactured by others in accordance with Analogic's
specifications, as well as standard electronic integrated circuits, transistors,
displays and other components. Most items procured are believed to be available
from more than one source. However, it may be necessary, if a given component
ceases to be available, for Analogic to incur additional expense in order 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. Also, from time
to time the availability of certain electronic components has been disrupted.
Accordingly, Analogic carries a substantial inventory of raw material components
in an effort to assure its ability to make timely delivery to its customers.
Patents and Licenses
The Company owns, or is licensee of, a number of patents of varying
durations. In the opinion of management, Analogic's present position and its
future prospects are a function of the level of excellence and creativity of its
engineers; patent protection is useful but of secondary importance. Management
is of the opinion that the loss of patent protection would not have a material
effect on the Company's competitive position.
Seasonal Aspect of Business
There is no material seasonal element to the Company's business, although
plant closings in the summer, particularly in Europe, tend to decrease the
activity of certain buying sources during the first quarter of the Company's
fiscal year.
Working Capital Matters
The Company does not carry a substantial inventory of finished goods but
does carry a substantial inventory of raw material components and
work-in-process to enable it to meet its customers' delivery requirements. (See
Note 4 of Notes to Consolidated Financial Statements.)
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Material Customers
The Company's three largest customers, each of which is a significant and
valued customer, were Phillips, General Electric, and Siemens, which accounted
for approximately 17.1%, 8.4%, and 7.8%, respectively, of product, service,
engineering, and licensing revenue for the fiscal year ended July 31, 1997. Loss
of any one of these customers would have a material adverse effect upon the
Company's business. The Company does business with Phillips in several of the
Company's Product Groups and Subsidiaries principally through normal OEM
contacts. In addition, the Company and Phillips are shareholders in a privately
held company. No other individual customer accounted for as much as 7.8% of the
Company's product, service, engineering, and licensing revenue during fiscal
1997. The Company's ten largest customers, including Phillips, General Electric
and Siemens, accounted for approximately 57% of product, service, engineering,
and licensing revenue during fiscal 1997.
Backlog
The backlog of orders believed to be firm at July 31, 1997 was
approximately $74.3 million compared with approximately $58.3 million at July
31, 1996. This increase is principally related to Medical Technology Products.
Many of the orders in the Company's backlog permit cancellation by the customer
under certain circumstances. To date, Analogic has not experienced material
cancellation of orders. The Company reasonably expects to ship most of its July
31, 1997 backlog during fiscal 1998.
Government Contracts
The amount of the Company's business that may be subject to renegotiation
of profits or termination of contracts or subcontracts at the election of the
Government is insignificant.
Competition
Analogic is subject to competition based upon product design,
performance, pricing, quality and service. Analogic believes that its innovative
engineering and product reliability have been important factors in its growth.
While the Company tries to maintain competitive pricing on those products which
are directly comparable to products manufactured by others, in many instances
Analogic's products will conform to more exacting specifications and carry a
higher price than analogous products manufactured by others.
Analogic's medical X-ray imaging systems are sufficiently specialized so
that Analogic is not aware of products marketed by others which may be deemed
directly competitive. The Company considers its selection by its OEM customers
for design and manufacture of these products and its other medical products to
be much less a function of other competitors in the field than it is of the
"make-or-buy" decision of the individual customers. Many OEM customers and
potential OEM customers of the Company have the capacity to design and
manufacture these products for themselves. In the Company's area of expertise,
the continued signing of new contracts indicates continued strength in the
Company's relationship with its major customers, although some of these
customers continue to commit to shorter term contracts.
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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,
measured by total sales dollars, it is a leading manufacturer of CAT scanner and
MRI electronic sub-systems, industrial digitizing systems for the weighing
industry and high-precision (14 bits or greater) A/D and D/A converters. Other
companies sell substantially more converters than Analogic, but only a small
portion of their products can be used for the high-precision applications for
which Analogic's products are sold.
Research and Product Development
Research and product development is a significant factor in Analogic's
business. The Company maintains a constant and comprehensive research and
development program directed toward the creation of new products as well as
toward the improvement and refinement of its present products and the expansion
of their uses and applications.
Company funds expended for research and product development amounted to
approximately $33,948,000 in fiscal 1997, $29,017,000 in fiscal 1996, and
$29,890,000 in fiscal 1995. Analogic intends to continue its emphasis on new
product development. As of July 31, 1997, Analogic had approximately 405
employees, including electronic development engineers, software engineers,
physicists, mathematicians, and technicians engaged in research and product
development activities. These individuals, in conjunction with the Company's
salespeople, also devote a portion of their time assisting customers in
utilizing the Company's products, developing new uses for these products, and
anticipating customer requirements for new products.
During fiscal 1997, the Company capitalized $1,480,000 of computer
software testing and coding costs incurred after technological feasibility was
established. These costs will be amortized by the straight line method over the
estimated economic life of the related products, not to exceed three years.
Amortization of capitalized software amounted to $3,115,000 in fiscal 1997.
Environmental Protection
The Company does not anticipate any material effect upon its capital
expenditures, earnings or competitive position resulting from compliance by it
and its subsidiaries with presently enacted or adopted Federal, State and local
provisions regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment.
Employees
As of July 31, 1997, the Company had approximately 1,500 employees.
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Financial Information About Foreign and Domestic Operations and Export
Revenue
Product, service, engineering, and licensing export revenue from
companies, primarily in Europe and Asia, amounted to approximately $81,395,000
(34%) in fiscal 1997 as compared to approximately $77,600,000 (36%) in fiscal
1996, and approximately $65,200,000 (34%) in fiscal 1995. Management believes
that the Company's export revenue is at least as profitable as its domestic
revenue. Most of the Company's foreign revenue is export revenue denominated in
U.S. dollars. Management does not believe the Company's foreign export revenue
is subject to significantly greater risks than its domestic revenue. See Note 16
of Notes to Consolidated Financial Statements for further information regarding
foreign and domestic operations.
ITEM 2. PROPERTIES
Analogic's principal executive offices and major manufacturing facility
are located in a building, owned by the Company, which it constructed on its
site in Peabody, Massachusetts (a suburb of Boston). This facility consists of
approximately 404,000 square feet of manufacturing, engineering, and office
space. The Company owns approximately 65 acres of land at this location, which
will accommodate future consolidation and expansion as required. The Company
uses approximately 7 1/2 acres of this land for the Peabody Marriott Hotel which
is owned by a wholly-owned subsidiary of the Company and managed by the Marriott
Corporation.
The Company's 68% owned subsidiary, Camtronics, owns a 40,000 square foot
manufacturing and office building located in Hartland, Wisconsin. Camtronics
owns approximately eleven acres of land at this location which should
accommodate any future expansion requirements.
The Company leases a modern one-story brick building containing
approximately 41,000 square feet of manufacturing, engineering and office space
located in Wakefield, Massachusetts. This building is leased for a term expiring
on July 31, 2003.
The Company leases two modern adjacent brick and concrete block buildings
in Danvers, Massachusetts. These two buildings total approximately 170,000
square feet of manufacturing, engineering and office space and are leased for a
term expiring on July 31, 2001. Both of these buildings have been sublet on a
triple net basis on a self renewing lease to Siemens Medical Electronics, Inc.
for a term, which as presently extended will end on December 1, 1999.
The Company leases approximately 30,200 square feet of manufacturing,
engineering, and office space in Chelmsford, Massachusetts which is occupied by
its wholly owned subsidiary, SKY Computers, Inc. The space is leased for a
ten-year term expiring June 1, 1999.
The Company's 100% owned subsidiary, B&K, leases a modern two-story
building containing a total of approximately 41,000 square feet of
manufacturing, engineering, and office space. The building is located in
Gentofte, Denmark (a suburb of Copenhagen). The building is leased for a term of
ten years commencing in January 1993. The lease may be cancelled by B&K after
five years.
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On August 25, 1993 the Company purchased a modern two-story building
containing approximately 49,000 square feet of manufacturing and office space in
Peabody, Massachusetts, adjacent to the Company's principal executive offices.
This building is presently leased to an unrelated party for a term of five years
expiring September 30, 2002.
See Item 13 of this Report and Note 7 of Notes to Consolidated Financial
Statements for further information concerning certain of the aforesaid leases.
Analogic and its subsidiaries lease various other facilities used for
sales and service purposes. The Company does not consider any of these leases to
be material.
Analogic owns substantially all of the machinery and equipment used in
its business. Management considers that the Company's plant and equipment are in
good condition and are adequate for its current needs.
ITEM 3. LEGAL PROCEEDINGS
The Internal Revenue Service has notified the Company that it proposes to
adjust the Company's tax returns for the years 1990 through 1992. (See Note 11
of Notes to Consolidated Financial Statements.)
There are no other material legal proceedings pending against the Company
or its subsidiaries or of which any of their property is the subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock trades on the NASDAQ Stock Market under the
symbol: ALOG. The following table sets forth the range of high and low prices
for the Common Stock, as reported by NASDAQ during the quarterly periods
indicated:
Fiscal Year High Low
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1997 First Quarter $29.75 $22.75
Second Quarter 34.50 26.00
Third Quarter 36.75 28.12
Fourth Quarter 40.12 29.25
1996 First Quarter $21.00 $18.50
Second Quarter 21.75 16.75
Third Quarter 20.50 17.75
Fourth Quarter 30.25 19.75
As of August 29, 1997, there were approximately 930 holders of record of
the Common Stock.
Dividends of $.04 per share were declared for the first quarter of fiscal
1996 and $.05 per share for the second, third and fourth quarters of fiscal
1996. Dividends of $.05 per share were declared for each quarter of fiscal 1997.
The policy of the Company is to retain sufficient earnings to provide funds for
the operation and expansion of its business.
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ITEM 6. SELECTED FINANCIAL DATA
(Thousands of dollars, except share data)
YEAR ENDED JULY 31
---------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Total Revenues $256,729 $230,460 $208,827 $193,745 $177,876
Income from
operations 32,107 16,981 15,155 18,205 18,256
Net Income 20,090 13,065 12,706 14,657 12,445
Earnings per
common and common
equivalent share $1.58 $1.04 $1.02 $1.18 $1.01
Dividends paid per
common share $0.20 $0.18 $0.08 None None
Number of shares
used in computation
of per share data 12,702 12,562 12,475 12,434 12,301
Working Capital $186,131 $168,515 $165,799 $150,571 $139,587
Total Assets 282,359 265,162 260,198 239,620 223,423
Long-term debt
(including
capitalized
leases) 8,614 9,455 10,236 10,993 13,205
Stockholders'
Equity 228,216 211,800 200,893 184,391 168,907
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Product, service, engineering, and licensing revenues for fiscal 1997 were
$239,550,000 as compared to $213,781,000 for fiscal 1996, an increase of 12%.
The increase of $25,769,000 was principally due to an increase in sales of
Medical Technology Products of $24,101,000 (primarily due to sales of the new
Computed Tomography (CT) Scanner and the Archium Cardiac Digital Archive
System), and Signal Processing Technology Products of $4,099,000 offset by a
reduction in Industrial Technology Products of $2,431,000. Other operating
revenue of $11,591,000 and $10,528,000 represents revenue from the Hotel
operation for fiscal 1997 and 1996, respectively.
Interest and dividend income decreased primarily due to a dividend distribution
received from a limited partnership in fiscal 1996 and no dividend distribution
was received in fiscal 1997 from the limited partnership.
(See Note 5 of Notes to Consolidated Financial Statements.)
The percentage of total cost of sales to total net sales for fiscal 1997 and
1996 was 59% and 62%, respectively. The decrease was primarily due to an 12%
increase in sales, diminished start up manufacturing costs associated with the
new CT scanner and a favorable product mix. Operating costs associated with the
Hotel for fiscal years 1997 and 1996 were $5,959,000 and $5,627,000,
respectively.
General and administrative and selling expenses decreased $2,137,000, primarily
due to a cost reduction program in the Company's Danish subsidiary along with
lower staffing requirements within the Company's domestic operations. Research
and product development expenses increased $4,931,000 primarily due to the
expanding effort applicable to developing complex medical imaging systems and
increased amortization of capitalized computer software costs.
Computer software costs of $1,480,000 and $1,985,000 were capitalized in fiscal
1997 and 1996 respectively. Amortization of capitalized software amounted to
$3,115,000 and $2,325,000 in fiscal 1997 and 1996, respectively.
Gain on foreign exchange for fiscal 1997 amounted to $1,045,000, compared to
$524,000 for fiscal 1996, primarily from the Company's subsidiary in Denmark.
The amortization of the excess of cost over fair value of net assets acquired
from Camtronics was $85,000 and $127,000 in fiscal 1997 and 1996, respectively.
The amortization of the excess of cost over fair value of net assets acquired
from SKY was $119,000 and $179,000 in fiscal 1997 and 1996, respectively.
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FISCAL 1997 COMPARED TO FISCAL 1996 (CONTINUED)
The amortization of excess of fair value of net assets over cost acquired from
B&K was $645,000 and $542,000 in fiscal 1997 and 1996, respectively.
The Company's share of losses of a privately held company amounted to $1,949,000
and $821,000 in fiscal 1997 and fiscal 1996, respectively. (See Note 5 of Notes
to Consolidated Financial Statements.)
During fiscal 1997, the Company's investment in Analogic Scientific was
decreased by $425,000 reflecting the Company's share of Analogic Scientific's
loss. (See Note 5 of Notes to Consolidated Financial Statements).
Fiscal 1997 includes a $1,742,000 charge resulting from the write off of the
Company's investment in Park Meditech, Inc. (See Note 5 of Notes to Consolidated
Financial Statements).
Minority interest in the net income of the Company's consolidated subsidiary,
Camtronics, in fiscal 1997 and 1996 amounted to $1,270,000 and $224,000,
respectively.
Minority interest in the net loss of the Company's consolidated foreign
subsidiary, B&K, in fiscal 1996 was $1,370,000. As of July 1, 1996 the Company
purchased the remaining 41% of minority interest in B&K.
The effective tax rate for fiscal 1997 was 24% vs. 26% for fiscal 1996. This
change was primarily a result of the increase in the utilization of tax credits.
Net income for fiscal 1997 was $20,090,000, or $1.58 per share as compared with
$13,065,000, or $1.04 per share for fiscal 1996. The results of operations
include a charge of $1,742,000 for the write-off of a marketable security. If
this charge were excluded, earnings per share would have been $1.66 for fiscal
1997.
FISCAL 1996 COMPARED TO FISCAL 1995
Product, service, engineering, and licensing revenues for fiscal 1996 were
$213,781,000 as compared to $194,034,000 for fiscal 1995. The increase of
$19,747,000 was principally due to an increase in sales of Medical Technology
Products of $12,141,000 and Signal Processing Technology Products of $4,464,000
and Industrial Technology Products of $3,142,000. During fiscal 1996 the Company
began shipments of the lightweight Computed Tomography (CT) scanner which was
primarily responsible for the increase in sales of Medical Technology Products.
Other operating revenue of $10,528,000 and $9,720,000 represents revenue from
the Hotel operation for fiscal 1996 and 1995, respectively.
Interest and dividend income increased primarily due to a distribution from a
limited partnership in which the Company has invested. (See Note 5 of Notes to
Consolidated Financial Statements).
15
16
FISCAL 1996 COMPARED TO FISCAL 1995 (CONTINUED)
The percentage of total cost of sales to total net sales for fiscal 1996 and
1995 was 62% and 57%, respectively. The increase was primarily due to higher
direct material costs, less than favorable product mix, lower selling prices
caused by competitive pressures in certain medical technology products, and
additional manufacturing costs associated with the introduction of the Company's
unique, light weight, low-power CT Scanner. Operating costs associated with the
Hotel for fiscal years 1996 and 1995 were $5,627,000 and $5,294,000,
respectively.
General and administrative and selling expenses decreased $596,000, a result of
lower selling expenses primarily in the areas of advertising and staff expenses,
offset by higher general and administrative expenses relating to staffing.
Research and product development expenses decreased $873,000 primarily due to a
reduction in the engineering effort applicable to the development of the mobile
CT Scanner.
Gain on foreign exchange for fiscal 1996 amounted to $524,000, compared to a
loss of $666,000 for fiscal 1995, primarily from the Company's subsidiary in
Denmark.
Computer software costs of $1,985,000 and $3,524,000 were capitalized in fiscal
1996 and 1995, respectively. Amortization of capitalized software amounted to
$2,325,000 and $2,355,000 in fiscal 1996 and 1995, respectively.
The amortization of the excess of cost over fair value of net assets acquired
from Camtronics was $127,000 and $138,000 in fiscal 1996 and 1995, respectively.
The amortization of the excess of cost over fair value of net assets acquired
from SKY was $179,000 in fiscal 1996 and 1995.
The amortization of excess of fair value of net assets over cost acquired from
B&K was $542,000 and $533,000 in fiscal 1996 and 1995, respectively.
The Company's share of losses of a newly formed privately held company amounted
to $821,000 in fiscal 1996. (See Note 5 of notes to Consolidated Financial
Statements).
During July 1995 the Company sold 2,300,000 common shares of Park Meditech for a
net price of $1.00 per share, resulting in a gain of $1,736,000. (See Note 5 of
Notes to Consolidated Financial Statements.)
Minority interest in the net income of the Company's consolidated subsidiary,
Camtronics, in fiscal 1996 and 1995 amounted to $224,000 and $765,000,
respectively.
Minority interest in the net loss of the Company's consolidated foreign
subsidiary, B&K, in fiscal 1996 and 1995 was $1,370,000 and $247,000,
respectively.
16
17
The effective tax rate for fiscal 1996 was 26% vs. 22% for fiscal 1995. This
increase was primarily a result of losses of a foreign subsidiary for which
there was no tax benefit offset in part by the utilization of alternative
minimum tax credits.
Net income for fiscal 1996 was $13,065,000, or $1.04 per share as compared with
$12,706,000, or $1.02 per share for fiscal 1995.
Financial Position
The Company's balance sheet at July 31, 1997, reflects a current ratio of 6.2 to
1, compared to 6.0 to 1 at July 31, 1996. Cash, cash equivalents and marketable
securities, along with accounts and notes receivable, constitute approximately
75% of current assets at July 31, 1997. 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 places its cash investments in high credit quality financial instruments
and, by policy, limits the amount of credit exposure to any one financial
institution. Management does not anticipate any difficulties in financing
operations at anticipated levels. The Company's debt to equity ratio was .24 to
1 at July 31, 1997 compared to .25 to 1 at July 31, 1996.
In fiscal 1997 funds provided from operations amounted to $33,404,000. Net
income of $20,090,000 and depreciation & amortization of $8,920,000 were the
major contributors. Increases in Accounts and Notes Receivable of $5,766,000 was
a major use of operating cash.
The following investing activities resulted in a decrease of cash of
$18,162,000. During 1997 the Company invested $1,340,000 for an additional
interest in a privately held company which designs and manufactures medical
imaging equipment. Capital expenditures for fiscal 1997 amounted to $6,301,000
and capitalized computer software cost were approximately $1,500,000. The
Company also made an additional investment of $9,108,000 in marketable
securities net of maturities.
The following finances activities resulted in a net reduction of cash in the
amount of $5,172,000. Dividends paid to shareholders during the fiscal year
amounted to $2,508,000. Cash flows from financing activities were decreased by
the payment of an uncollateralized foreign bank overdraft facility in the amount
of $3,305,000 which was offset by the proceeds from stock options exercised in
the amount of $1,421,000.
Total investments in and advances to affiliated companies decreased $1,034,000.
This decrease is due to the Company's share of equity losses from a privately
held company in the amount of $1,949,000 and Analogic Scientific of $425,000
offset by an additional investment of $1,340,000 in the privately held company.
Notes Payable decreased by $3,644,000 to $6,677,000 at end of fiscal 1997
primarily due to payment of an uncollateralized foreign bank overdraft facility.
Minority Interest in Consolidated Subsidiaries increased $1,270,000. This
represents the 32% minority interest in Camtronics.
17
18
Financial Position (continued)
The Company's three largest customers, each of which is a significant and valued
customer, were Phillips, G.E. and Siemens, which accounted for approximately
17.1%, 8.4%, and 7.8%, respectively, of product, service, engineering, and
licensing revenue for the fiscal year ended July 31, 1997. Loss of any one of
these customers would have a material adverse effect upon the Company's
business.
Capital expenditures for fiscal 1997 totaled approximately $6,300,000.
As part of a stock repurchase program authorized by the Board of Directors, the
Company purchased 17,500 shares of common stock for its treasury during fiscal
1996 at an aggregate cost of $345,000. No shares were repurchased during fiscal
1997.
Impact of Inflation
Overall, inflation has not had a material impact on the Company's operations
during the past three fiscal years.
Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings Per Share, which is required to be adopted by the
Company after December 15, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating basic earnings per
share, the dilutive effect of stock options will be excluded. There is expected
to be no material impact on the Company's earnings per share.
In June 1997, the FASB issued Statement No. 130 (SFAS 130), Reporting
Comprehensive Income, and Statement No. 131 (SFAS 131), Disclosures about
Segments of an Enterprise and Related Information. The Company is required to
adopt these Statements in fiscal 1999. SFAS 130 establishes new standards for
reporting and displaying comprehensive income and its components. SFAS 131
requires disclosure of certain information regarding operating segments,
products and services, geographic areas of operation and major customers.
Adoption of these Statements is expected to have no impact on the Company's
consolidated financial position, results of operations, or business practices.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statement and supplementary data are listed under PART IV,
Item 14 in this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
18
19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
Other Offices Held
Director Expiration As of
Name Age Since of Term* August 29, 1997
---- --- -------- --------- ------------------
Bernard M. Gordon 70 1969 1998 Chairman of the
Board and Chief
Executive Officer
Bruce R. Rusch 54 1993 2000 President and Chief
Operating Officer
John A. Tarello 66 1979 1998 Senior Vice
President and
Treasurer
M. Ross Brown 63 1984 1999 Vice President
Edward F. Voboril 54 1990 1999 --
Gerald L. Wilson 58 1980 1998 --
Bruce W. Steinhauer 62 1993 2000 --
* 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.
19
20
(b) Executive Officers
Name Age Office Held Has Been Held
---- --- ----------- -------------
Bernard M. Gordon 70 Chairman of the Board and 1969
Chief Executive Officer
Bruce R. Rusch 54 President and Chief 1995
Operating Officer
John A. Tarello 66 Senior Vice President 1980 & 1985,
and Treasurer respectively
M. Ross Brown 63 Vice President 1984
Julian Soshnick 65 Vice President 1982
General Counsel,
and Clerk
Each such officer is elected for a term continuing until the first
meeting of the Board of Directors following the annual meeting of stockholders,
and in the case of the President, Treasurer and Clerk, until their successors
are chosen and qualified; provided that the Board may remove any officer with or
without cause.
(c) Identification of certain significant employees:
None
(d) Family relationships:
None
(e) Business Experience:
Bernard M. Gordon has been the Chairman of the Board of Directors of the
Company since 1969 and, was President from 1980 to 1995.
20
21
Bruce R. Rusch was appointed a Vice President of the Company in January
1993 and President in January 1995. Mr. Rusch has been President of SKY
Computers, Inc. since 1987. SKY Computers, Inc. was acquired by Analogic
effective April 1, 1992. Mr. Rusch is a director of Astea International, Inc.
John A. Tarello was the Company's Controller from May 1970 through July
1982, a Vice President of the Company from 1971 to 1980, a Senior Vice President
since 1980, and Treasurer since 1985. He is also a director of Spire
Corporation.
M. Ross Brown joined the Company in August 1984 and is responsible for
managing its manufacturing operations. He was elected a Vice President in
October 1984.
Julian Soshnick joined the Company in October 1981 as General Counsel and
has served as a Vice President since July 1982 and Clerk since 1988.
Edward F. Voboril has been President and CEO of Wilson Greatbatch Ltd. of
Clarence, New York since December 1990.
Dr. Gerald L. Wilson is the former Dean of the School of Engineering at
Massachusetts Institute of Technology and the Vannevar Bush Professor of
Engineering at the Massachusetts Institute of Technology. Dr. Wilson has served
on MIT's faculty since 1965 and currently serves as a Professor of Electrical
and Mechanical Engineering. He is a trustee of Commonwealth Energy Systems and a
director of ASECO Corporation.
Dr. Bruce W. Steinhauer has been Chief Executive Officer of the
Lahey-Hitchcock Clinic since early 1992. He is also a member of the Board of
Directors of the Lahey-Hitchcock Clinic. 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.
(f) Involvement in certain legal proceedings:
None
(g) Promoters and Control Persons
Inapplicable
Compliance with Section 16(a) of the Exchange Act
Upon review of the forms and representations furnished to the Company
pursuant to Item 405 of Regulation S-K, the Company identifies Edmund F. Becker,
Jr. 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 Exchange Act.
Dr. Becker failed to timely file one (1) Form 4 on which one (1) transaction was
reported.
21
22
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the
Chief Executive Officer and each of the next four most highly compensated
executive officers of the Company during the last fiscal year ("Named Officers")
for services rendered in all capacities for the last three fiscal years.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------------ -----------------------------------------
Restricted All Other
Name and Total Annual Stock Awards Stock Options Compensation
Principal Position Year Salary Bonuses Compensation ($)(A)(B) ($)(C)
- -----------------------------------------------------------------------------------------------------------------------------
Bernard M. Gordon 1997 $325,000 $50,000 $375,000 -- -- $3,645
Chairman (CEO) 1996 325,000 25,000 350,000 -- -- 3,024
1995 325,000 50,000 375,000 -- -- 3,186
Bruce R. Rusch 1997 $225,000 $50,000 $275,000 -- -- $3,442
President (COO) 1996 225,000 21,000 246,000 -- -- 2,855
1995 206,519 35,000 241,519 -- -- 3,007
John A. Tarello 1997 $210,000 $50,000 $260,000 -- -- $3,691
Senior Vice President 1996 210,000 21,000 231,000 -- -- 3,062
and Treasurer 1995 210,000 35,000 245,000 -- -- 3,225
M. Ross Brown 1997 $185,000 $30,000 $215,000 -- -- $3,521
Vice President 1996 185,000 18,000 203,000 -- -- 2,921
1995 185,000 30,000 215,000 -- -- 3,076
Julian Soshnick 1997 $185,000 $40,000 $225,000 -- -- $3,555
Vice President and 1996 185,000 18,000 203,000 -- -- 2,949
General Counsel 1995 185,000 30,000 215,000 -- -- 3,106
22
23
Notes To Summary Compensation Table
- ----------
(A) Represents stock grants under the Company's Key Employee Stock Bonus Plan
dated March 14, 1983, as amended and restated on January 27, 1988,
pursuant to which Common Stock of the Company may be granted to key
employees to encourage them to exert their best efforts on behalf of the
Company. Each Recipient of the Common Stock pursuant to the Bonus Plan is
required to execute a noncompetition agreement in a form satisfactory to
the Company. The Bonus Plan is administered by a committee appointed by
the Board of Directors consisting of the Chairman of the Board and three
other Directors who are not eligible to participate in the Bonus Plan.
Generally, the Common Stock granted pursuant to the Bonus Plan is not
transferable for a period of three years from the date of the grant and
is subject to a risk of forfeiture in the event that the recipient leaves
the employ of the Company during this period for any reason. Generally,
during the subsequent four-year period, the transfer restrictions will
lapse with respect to 25% of the Common Stock for each year the recipient
remains in the employ of the Company. Failure to remain in the Company's
employ during all of the subsequent four-year period will result in a
forfeiture of shares as to which restrictions on disposition still exist.
The Common Stock granted pursuant to the Bonus Plan is held in escrow by
the Company until such restrictions on disposition lapse. However, while
in escrow, the recipient has the right to vote such shares of Common
Stock and to receive any cash dividends thereon. The Board of Directors,
acting upon the recommendation of the Stock Bonus Plan Committee, may at
the time of grant designate a different schedule upon which the transfer
restrictions lapse.
(B) As of July 31, 1997, the following table reflects aggregate stock bonus
awards, granted in 1993, for which transfer restrictions have not yet
lapsed:
Shares Market Value
------ ------------
Bruce R. Rusch 22,500 $821,250
M. Ross Brown 15,000 547,500
Julian Soshnick 8,750 319,375
(C) Represents amounts allocated to the Named Officers pursuant to the
Company's profit sharing plan under which it may, but is not required to,
make contributions to a trust for the purpose of providing retirement
benefits to employees.
23
24
STOCK OPTION GRANTS IN LAST FISCAL YEAR
There were no stock options awarded to named officers under the Company's
Key Employee Stock Option Plans during the last fiscal year.
STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table indicates (i) stock options exercised by the Named
Officers during the last fiscal year; (ii) the number of shares subject to
exercisable (vested) and unexercisable (unvested) stock options as of July 31,
1997; and (iii) the fiscal year-end value of "in-the-money" unexercised options.
Number of Value of Unexercised
Number of Unexercised Options In-The-Money Options
Shares Acquired Value at Fiscal Year End At Fiscal Year End(A)(B)
On Exercise Realized(A) Exercisable Unexercisable Exercisable Unexercisable
--------------- ----------- ----------- ------------- ----------- -------------
Bernard M. Gordon -- -- -- -- -- --
Bruce R. Rusch -- -- -- -- -- --
John A. Tarello 10,000 $173,750 -- -- --
M. Ross Brown 5,000 $ 87,500 -- 5,000 -- $108,125
Julian Soshnick -- -- 3,750 1,250 $81,094 $ 27,031
- ----------
(A) The value realized or the unrealized value of in-the-money options at
year-end represents the aggregate difference between the market value on
the date of grant and, either the market value on the date of exercise
or, in the case of unrealized value, the market value at July 31, 1997.
(B) "In-the-money" options are options whose exercise price was less than the
market price of Common Shares at July 31, 1997.
24
25
Compensation of Directors
Each director who is not an employee of the Company is entitled to an
annual fee of $10,000 plus a fee of $1,000 per meeting for each of the first
four meetings of the Board or any Board Committee attended by him, together with
reimbursement of travel expenses under certain circumstances.
In February 1988, the Board of Directors adopted and stockholders
approved at the January 1989 Annual Meeting of Stockholders, the 1988
Non-Qualified Stock Option Plan for Non-Employee Directors (the "1988 Plan").
Pursuant to the 1988 Plan, options to purchase 50,000 shares of common stock may
be granted only to directors of the Company or any subsidiary who are not
otherwise employees of the Company or any subsidiary. The exercise price of
options granted under the 1988 Plan is the fair market value of the Common Stock
on the date of grant. The 1988 Plan provides that each Non-Employee director as
of the date on which the Board of Directors adopted the 1988 Plan shall be
granted an option to acquire 5,000 shares. Each new Non-Employee director who is
subsequently elected to the Board of Directors shall be granted an option to
acquire 5,000 shares after one year of service. In June, 1996 the Board of
Directors amended the 1988 plan to increase the number of options that could be
granted to each Non-Employee director to 10,000 shares.
Options granted under the 1988 Plan are exercisable for a nine-year
period commencing one year after the date of grant. During that exercise period,
subject to the occurrence of certain events, options may be exercised only to
the extent of (a) 33 1/3% of the number of shares covered by the option one or
more years after the date of grant, (b) 66 2/3% of the number of shares subject
to the option two or more years after the date of grant, and (c) 100% of the
number of shares subject to the option three or more years after the date of
grant.
The 1988 Plan is administered by members of the Company's Board of
Directors.
The following table sets forth options granted pursuant to the 1988 plan
as of July 31, 1997:
Date of Options Option Options Options Options
Grant Granted Price Exercised Exercisable Unexercisable
----- ------- ----- --------- ----------- -------------
Dr. Wilson 2/01/88 5,000 $ 7.125 5,000 -- --
Dr. Wilson 6/12/96 5,000 $27.750 -- 1,667 3,333
Mr. Voboril 6/12/91 5,000 $10.875 -- 5,000 --
Mr. Voboril 6/12/96 5,000 $27.750 -- 1,667 3,333
Dr. Steinhauer 10/08/93 5,000 $14.750 -- 5,000 --
Dr. Steinhauer 6/12/96 5,000 $27.750 -- 1,667 3,333
25
26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following table sets forth information as to all persons (including any
"group", as defined in section 13(d)(3) of the Exchange Act) known by the
Company to have owned beneficially 5% or more of its Common Stock, $.05 par
value, as of August 29, 1997:
Amount and Nature of Percent
Name And Address Beneficial Ownership of Class
---------------- -------------------- --------
Bernard M. Gordon Charitable 4,720,192 shares(1)(2) 37.5%(1)(2)
Remainder Unitrust
Bernard M. Gordon
Julian Soshnick
Gerald P. Bonder, Trustees
8 Centennial Drive
Peabody, MA 01960
T. Rowe Price 1,364,000 shares(3) 10.8%(3)
100 East Pratt Street
Baltimore, MD 21202
Private Capital Management Inc. 1,022,575 shares(3) 8.1%(3)
3003 Ninth Street
Naples, FL 33940
- ----------
(1) Exclusive of 6,000 shares owned by Mr. Gordon's wife, as to which he
disclaims any beneficial interest.
(2) Mr. Gordon serves as Trustee of the Bernard Gordon Charitable Remainder
Unitrust (the "Trust") along with Julian Soshnick and Gerald P. Bonder.
The three Trustees, acting by a majority, have full power to vote or
dispose of the shares held by the Trust. Upon the death of Mr. Gordon,
all of the assets of the Trust, in general, will be distributed to The
Gordon Foundation, a Section 501(c)(3) trust formed by Mr. Gordon with
its principal office located at 8 Centennial Drive, Peabody,
Massachusetts.
(3) The Company has been advised informally by T. Rowe Price and Private
Capital Management Inc. that in their capacity as investment advisors
they may be deemed a beneficial owner on August 29, 1997, of 1,364,000
shares, or 10.8% of the Company's Common Stock and 1,022,575 shares, or
8.1% of the Company's Common Stock, respectively.
26
27
(b) The following table sets forth information as to ownership of the Company's
Common Stock, $.05 par value, by its directors and by all directors and
executive officers as a group, as of August 29, 1997:
Amount and Nature of Percent
Identity of Person Beneficial Ownership(1) of Class
------------------ ----------------------- --------
Bernard M. Gordon 4,720,192 shares(2)(3) 37.5%
Bruce R. Rusch 33,750 shares(4) *
John A. Tarello 30,000 shares *
M. Ross Brown 15,000 shares(4) *
Gerald L. Wilson 3,667 shares(5) *
Edward F. Voboril 6,667 shares(5) *
Bruce W. Steinhauer 6,667 shares(5) *
All Directors and Executive
Officers as a group
(8 persons) 4,845,943 shares(4)(5) 38.5%
* 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) Exclusive of 6,000 shares owned by Mrs. Gordon, in which Mr. Gordon
disclaims all beneficial interest.
(3) Mr. Gordon serves as Trustee of the Bernard Gordon Charitable Remainder
Unitrust (the "Trust") along with Julian Soshnick and Gerald P. Bonder.
The three Trustees, acting by a majority, have full power to vote or
dispose of the shares held by the Trust. Upon the death of Mr. Gordon,
all of the assets of the Trust, in general, will be distributed to the
Gordon Foundation, a Section 501(c)(3) trust formed by Mr. Gordon with
its principal office located at 8 Centennial Drive, Peabody,
Massachusetts.
(4) These amounts include certain shares issued under the Company's Key
Employee Stock Bonus Plan which are subject to forfeiture under certain
circumstances.
(5) These amounts include certain shares deemed beneficially owned under
Exchange Act Rule 13d-3(d)(1).
27
28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Bernard M. Gordon and Mr. Bernard L. Friedman, the Company's former
Vice Chairman of the Board (Mr. Friedman resigned on July 31, 1993), each own
50% interest in a limited partnership (Audubon Realty), which owns the Danvers,
Massachusetts facilities leased by the Company for a term to July 31, 2001.
These facilities include a 50,000 square foot building completed in 1978; a
40,000 square foot addition to that building, completed in 1982; and an 80,000
square foot building which the Company moved into during 1980. The fixed annual
rent on the entire 170,000 square feet was increased from $1,042,000 to
$1,125,000 effective March 1, 1995, and shall be adjusted as of March 1 every
third year to reflect increases in the cost of living. Both of the facilities
are sublet on a self-renewing lease to Siemens Medical Electronics, Inc. for a
term which as presently extended will end on December 1, 1999, subject to an
eighteen-month notice of cancellation, on a triple-net basis.
Mr. Gordon and Mr. Friedman each own a 50% interest in a limited
partnership which owns the facility located at 360 Audubon Road, Wakefield,
Massachusetts, which is leased by the Company for a term to July 31, 2003. This
facility has been utilized by the Company for manufacturing and office space
since May 1, 1981. The fixed annual rent for this facility was increased from
$315,000 to $333,000 effective May 1, 1996, and shall be adjusted as of May 1
every third year to reflect increases in the cost of living.
All of the foregoing rents are on a net lease basis, and accordingly the
Company pays, in addition to the above rental payments, all taxes, maintenance,
insurance, and other costs relating to the leased premises.
The terms of the several lease agreements, at the time they were
executed, were at least as favorable as those that could have been obtained from
unaffiliated third parties. Prior to execution of each such lease, two
independent appraisals were obtained in order to establish the fair market rate
for subject premises. A rent, in each case discounted below the fair market rate
established by the appraisals, was then agreed upon by the parties.
The leases each incorporated periodic rent escalation clauses, based upon
the CPI. At the present time, the rents that the Company is paying under the
several leases reflect fair rental value for the properties.
See Item 2 of this Report for information as to the character of the
leased premises, and Note 7 of Notes to Consolidated Financial Statements for
further information as to the leases.
Bernard M. Gordon, Chairman of Analogic, personally owns 72% of the
outstanding stock of UltraAnalog, Inc., which he acquired on October 2, 1989.
UltraAnalog is a manufacturer of analog-to-digital and digital-to-analog
converters, located in Fremont, California. Analogic has the irrevocable right
to acquire Mr. Gordon's interest at his cost.
28
29
(b) Certain Business Relationships:
None
(c) Indebtedness of Management:
None
(d) Transactions with Promoters:
None
29
30
PART IV
[CAPTION]
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
Number
(a) 1. Financial Statements
Report of independent accountants 32
Consolidated balance sheets at July 31, 1997 and
1996 33
Consolidated statements of income for the years
ended July 31, 1997, 1996, and 1995 34
Consolidated statements of stockholders' equity
for the years ended July 31, 1997, 1996, and
1995 35
Consolidated statements of cash flows for the
years ended July 31, 1997, 1996, and 1995 36
Notes to consolidated financial statements 37 - 52
2. Financial Statement Schedule
II - Valuation and qualifying accounts 53
Other schedules have been omitted because they
are not required, not applicable, or the
required information is furnished in the
consolidated statements or notes thereto.
3. Exhibits - See Index to Exhibits 54 - 58
(b) Report on Form 8-K
No reports on Form 8-K were filed by the
registrant during the quarter ended July 31,
1997.
30
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ANALOGIC CORPORATION
Date: October 9, 1997 By /s/ Bernard M. Gordon
--------------------------------------
Bernard M. Gordon
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: October 9, 1997 /s/ Bernard M. Gordon
--------------------------------------
Chairman of the Board,
Chief Executive Officer and Director
Date: October 9, 1997 /s/ Bruce R. Rusch
--------------------------------------
President,
Chief Operating Officer and Director
Date: October 9, 1997 /s/ John A. Tarello
--------------------------------------
Senior Vice President, Treasurer
and Director
Date: October 9, 1997 /s/ M. Ross Brown
--------------------------------------
Vice President and Director
Date: October 9, 1997 /s/ Bruce W. Steinhauer
--------------------------------------
Director
Date: October 9, 1997 /s/ Edward F. Voboril
--------------------------------------
Director
Date: October 9, 1997 /s/ Gerald L. Wilson
--------------------------------------
Director
31
32
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Analogic Corporation
Peabody, Massachusetts
We have audited the accompanying consolidated balance sheets of Analogic
Corporation and subsidiaries as of July 31, 1997 and 1996 and the related
consolidated statements of income, stockholders' equity, and cash flows and the
financial statement schedule listed in Item 14(a) of this Form 10-K for each of
the three years in the period ended July 31, 1997. These financial statements
and financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Analogic
Corporation and subsidiaries as of July 31, 1997 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended July 31, 1997 in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 15, 1997
32
33
Analogic Corporation and Subsidiaries
Consolidated Balance Sheets (000 omitted)
JULY 31,
1997 1996
-------- --------
Assets
Current assets:
Cash and cash equivalents $24,954 $18,040
Marketable securities, at market 89,496 82,509
Accounts and notes receivable,
net of allowance for doubtful accounts
(1997, $1,370; 1996, $1,426) 50,728 45,207
Accounts receivable, affiliates 1,910 1,608
Inventories 47,800 50,232
Prepaid expenses and other current assets 6,714 4,416
-------- --------
Total current asset 221,602 202,012
-------- --------
Property, plant and equipment, at cost:
Land and land improvements 4,252 4,252
Buildings 36,853 36,825
Property under capital leases 6,251 6,251
Leasehold and capital lease improvements 2,090 2,090
Manufacturing equipment 66,117 63,196
Furniture and fixtures 20,737 19,194
Motor vehicles 926 998
-------- --------
137,226 132,806
Less accumulated depreciation and
amortization 88,979 85,050
-------- --------
48,247 47,756
-------- --------
Investments in and advances to
affiliated companies 7,095 8,129
-------- --------
Excess of cost over acquired net assets,
net of accumulated amortization 171 375
-------- --------
Other assets, including unamortized
software costs ( 1997, $4,437;
1996, $6,073) 5,244 6,890
-------- --------
$282,359 $265,162
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Mortgage and other notes payable $ 344 $ 3,644
Obligations under capital leases 497 442
Accounts payable, trade 13,185 11,438
Accrued employee compensation
and benefits 11,654 9,822
Accrued warranty 2,764 2,521
Accrued expenses 3,579 3,632
Accrued income taxes 3,449 1,998
-------- --------
Total current liabilities 35,472 33,497
-------- --------
Long-term debt:
Mortgage and other notes payable 6,333 6,677
Obligations under capital leases 2,281 2,778
-------- --------
8,614 9,455
-------- --------
Deferred income taxes 3,854 4,832
-------- --------
Minority interest in subsidiaries 5,538 4,268
-------- --------
Excess of acquired net assets over cost, net 665 1,310
-------- --------
Commitments
Stockholders' equity:
Common stock, $.05 par; authorized
30,000,000 shares; issued 1997, 13,835,364 shares;
issued 1996, 13,767,614 shares 692 688
Capital in excess of par value 22,916 21,413
Retained earnings 220,343 202,761
Unrealized holding gains and losses 1,713 2,092
Cumulative translation adjustments (1,617) 1,539
-------- --------
244,047 228,493
Less:
Treasury stock, at cost (1997, 1,234,653
shares; 1996, 1,273,073 shares ) 14,121 14,550
Unearned compensation 1,710 2,143
-------- --------
Total stockholders' equity 228,216 211,800
-------- --------
$282,359 $265,162
======== ========
The accompanying notes are an integral part of these financial statements.
33
34
Analogic Corporation and Subsidiaries
Consolidated Statements of Income (000 omitted, except share data)
YEARS ENDED JULY 31,
1997 1996 1995
-------- -------- --------
Revenues:
Product and service, net $222,033 $205,991 $187,964
Engineering and licensing 17,517 7,790 6,070
Other operating revenue 11,591 10,528 9,720
Interest and dividend income 5,588 6,151 5,073
-------- -------- --------
Total revenues 256,729 230,460 208,827
-------- -------- --------
Cost of sales and expenses:
Cost of sales:
Product and service 131,937 125,726 108,203
Engineering and licensing 10,136 7,379 2,769
Other operating expenses 5,959 5,627 5,294
General and administrative 18,070 18,463 17,188
Selling 25,451 27,195 29,066
Research and product development 33,948 29,017 29,890
Interest expense 607 832 812
(Gain) loss on foreign exchange (1,045) (524) 666
Amortization of excess of cost over acquired net assets 204 306 317
Amortization of excess of acquired net assets over cost (645) (542) (533)
-------- -------- --------
Total cost of sales and expenses 224,622 213,479 193,672
-------- -------- --------
Income from operations 32,107 16,981 15,155
Gain on sale of marketable securities 1,736
Equity in loss of unconsolidated affiliates (2,374) (821)
Loss on investment (1,742)
-------- -------- --------
Income before income taxes and minority interest 27,991 16,160 16,891
Provision for income taxes 6,631 4,241 3,667
Minority interest in net income (loss) of consolidated subsidiaries 1,270 (1,146) 518
-------- -------- --------
Net income $ 20,090 $ 13,065 $ 12,706
======== ======== ========
Earnings per common and common
equivalent share $ 1.58 $ 1.04 $ 1.02
======== ======= ========
The accompanying notes are an integral part of these financial statements.
34
35
Analogic Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity - Years Ended July 31, 1997,
1996 and 1995 (000 omitted, except share data)
Unrealized
Common stock Capital in holding Cumulative Treasury Stock Total
-------------- excess of Retained gains and translation ----------------- Unearned stockholders'
Shares Amount par value Earnings loss adjustments Shares Amount Compensation Equity
------ ------ --------- -------- ---------- ----------- ------ ------ ------------ ---------
Balance,
July 31, 1994 13,602,325 $680 $19,911 $180,222 $558 (1,253,268) $(14,233) $(2,747) $184,391
Shares issued
pursuant to
stock grants,
net of
cancellations 39,500 2 608 (5,000) (610)
Shares issued 432
pursuant to
stock options 50,081 3 429 (19,200) (326) (326)
Purchases of
treasury
stock
Amortization of
unearned
compensation 730 730
Amounts related
to employee
stock
purchase plan 25 8,188 89 114
Income tax
reduction
relating
to stock
options 126 126
Translation
adjustments
for the year 2,288 2,288
Net income
for the year 12,707 12,707
Dividends paid
($0.08 per
share) (991) (991)
Unrealized
holding
gains and
losses for
the period 2,004 2,004
Other 19 (582) (582)
---------- ---- ------- -------- -------- ------ ---------- -------- ------- --------
Balance,
July 31, 1995 13,691,925 685 20,517 191,938 2,004 2,846 (1,269,280) (14,470) (2,627) 200,893
========== ==== ======= ======== ======== ====== ========== ======== ======= ========
Shares issued
pursuant to
stock grants,
net of
cancellations 20,500 1 275 (9,500) (1) (275)
Shares issued
pursuant to
stock options 55,189 2 521 14,100 147 670
Purchases of
treasury
stock (17,500) (345) (345)
Amortization of
unearned
compensation 759 759
Amounts related
to employee
stock purchase
plan 31 9,107 102 133
Income tax
reduction
relating to
stock options 246 246
Translation
adjustments
for the year (1,307) (1,307)
Net income
for the year 13,065 13,065
Dividends paid
($0.18 per
share) (2,242) (2,242)
Unrealized
holding
gains and
losses
for the
period 88 88
Other (177) 17 (160)
---------- ---- ------- -------- -------- ------ ---------- -------- ------- --------
Balance,
July 31, 1996 13,767,614 688 21,413 202,761 2,092 1,539 (1,273,073) (14,550) (2,143) 211,800
---------- ---- ------- -------- -------- ------ ---------- -------- ------- --------
Shares issued
pursuant to
stock grants,
net of
cancellations 10,500 1 231 (6,500) (231)
Shares issued
pursuant to
stock options 57,250 3 904 39,249 369 1,276
Purchases of
treasury
stock
Amortization of
unearned
compensation 664 664
Amounts related
to employee
stock
purchase
plan 84 5,671 60 145
Income tax
reduction
relating
to stock
options 284 284
Translation
adjustments
for the year (3,156) (3,156)
Net income
for the year 20,090 20,090
Dividends paid
($0.20 per
share) (2,508) (2,508)
Unrealized
holding
gains and
losses for
the period (379) (379)
---------- ---- ------- -------- -------- ------- ---------- -------- ------- --------
Balance,
July 31, 1997 13,835,364 $692 $22,916 $220,343 $1,713 $(1,617) (1,234,653) $(14,121) $(1,710) $228,216
========== ==== ======= ======== ======== ======= ========== ======== ======= ========
The accompanying notes are an integral part of these financial statements.
35
36
Analogic Corporation and Subsidiaries
Consolidated Statements of Cash Flows (000 omitted)
Years Ended July 31,
1997 1996 1995
-------- -------- --------
Cash flows from operating activities:
Net income $ 20,090 $ 13,065 $ 12,706
-------- -------- --------
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes (3,153) 177 255
Depreciation 5,805 6,203 6,365
Amortization of capitalized software 3,115 2,325 2,355
Amortization of excess of cost over net acquired assets 204 306 317
Amortization of excess of acquired net assets over cost (645) (542) (533)
Amortization of other assets (deferred charges) 32 (32) 39
Minority interest in net income (losses) of
consolidated subsidiaries 1,270 (1,146) 518
Provision for losses on accounts receivable (56) 65 21
Provision for loss on marketable securities 1,742
Gain on sale of marketable securities (1,736)
Gain on sale of equipment (62) (40) (34)
Equity in loss of unconsolidated affiliates 2,374 821
Compensation from stock grants 664 759 731
Changes in operating assets & liabilities
Decrease (increase) in assets:
Accounts and notes receivable (5,766) (1,403) (8,561)
Inventories 2,432 (3,945) (5,118)
Prepaid expenses and other current assets (124) 399 (305)
Other assets (21) (426) (17)
Increase (decrease) in liabilities:
Accounts payable, trade 1,746 (1,029) 4,899
Accrued expenses and other current liabilities 2,022 (715) 816
Accrued income taxes 1,735 412 627
-------- -------- --------
Total adjustments 13,314 2,189 639
-------- -------- --------
Net cash provided by operating activities 33,404 15,254 13,345
-------- -------- --------
Cash flows from investing activities:
Investments in and advances to affiliated companies (1,340) (2,376) (143)
Additions to property, plant and equipment (6,301) (6,233) (8,217)
Capitalized software (1,480) (1,985) (3,524)
Proceeds from sale of property, plant and equipment 67 119 55
Purchases of marketable securities (19,460) (21,650) (24,062)
Maturities of marketable securities 10,352 26,627 10,475
Proceeds from sale of marketable securities 2,300
-------- -------- --------
Net cash used by investing activities (18,162) (5,498) (23,116)
-------- -------- --------
Cash flows from financing activities:
Proceeds from overdraft facility (3,305) 3,305
Payments on debt and capital lease obligations (780) (758) (2,331)
Purchase of common stock for treasury (345) (325)
Purchase of common stock of majority owned subsidiary (160) (582)
Issuance of common stock pursuant to stock options and
employee stock purchase plan 1,421 803 546
Dividends paid to shareholders (2,508) (2,242) (992)
Purchase of minority interest (3,416)
-------- -------- --------
Net cash used by financing activities (5,172) (2,813) (3,684)
-------- -------- --------
Effect of exchange rate changes on cash (3,156) (1,307) 2,288
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 6,914 5,636 (11,167)
-------- -------- --------
Cash and cash equivalents, beginning of year 18,040 12,404 23,571
-------- -------- --------
Cash and cash equivalents, end of year $ 24,954 $ 18,040 $ 12,404
======== ======== ========
The accompanying notes are an integral part of these financial statements.
36
37
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of business operations and significant accounting policies:
Business operations:
The Company's operations consist of the design, manufacture and sale of
high-technology, high-precision analog/digital signal processing
instruments and systems to customers in the medical and industrial
industry.
Product, service, engineering and licensing export revenue, primarily from
customers in Europe and Asia, amounted to approximately $81,400,000 or 34%,
$77,600,000 or 36%, and $65,200,000 or 34% of total product, service,
engineering and licensing revenue for the years ended July 31, 1997, 1996
and 1995, respectively.
Significant accounting policies are as follows:
(a) Principles of consolidation:
The consolidated financial statements include the accounts of the
Company, all wholly-owned and majority-owned subsidiaries. Investments
in companies in which ownership interests range from 20 to 50 percent
and the Company exercises significant influence over operating and
financial policies are accounted for using the equity method. Other
investments are accounted for using the cost method. All significant
intercompany accounts and transactions have been eliminated.
(b) Inventories:
Inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis.
(c) Property, plant and equipment:
For financial reporting purposes, depreciation and amortization are
provided utilizing the straight-line method over the estimated useful
lives of the assets or lease terms, whichever is shorter, and are
computed principally utilizing accelerated methods for income tax
purposes. Property under capital leases is amortized over the lease
terms.
The annual provisions for depreciation and amortization have been
computed in accordance with the following ranges of estimated useful
lives:
Buildings 35 years
Property under capital lease 14 to 23 years
Manufacturing equipment 4 to 7 years
Furniture and fixtures 4 to 8 years
Leasehold and capital lease improvements 3 to 10 years
Motor Vehicles 3 years
37
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ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of business operations and significant accounting policies:
(continued)
(d) Revenue recognition:
Revenues are recognized when a product is shipped or a service is
performed. For certain transactions, at the request of the customer
and upon completion of the manufacturing process and acceptance of
title by the customer, the Company stores inventory pending shipping
instructions and recognizes revenue. Accounts receivables related to
such sales were approximately $4,684,000 and $1,540,000 at July 31,
1997 and 1996, respectively.
(e) Capitalized software costs:
The Company capitalizes certain computer software costs, after
technological feasibility has been established, which are amortized
utilizing the straight-line method over the economic lives of the
related products not to exceed three years. Accumulated amortization
approximated $12,721,000 and $9,606,000 at July 31, 1997 and 1996,
respectively.
(f) Warranty costs:
The Company provides for estimated warranty costs as products are
shipped.
(g) Income taxes:
The Company does not provide for U.S. Federal income taxes on
undistributed earnings of consolidated foreign subsidiaries as such
earnings are intended to be permanently reinvested in those
operations.
(h) Earnings per share:
Earnings per common and common equivalent share is based upon the
weighted average of common and common equivalent shares outstanding
during the year. Primary and fully diluted earnings per share are the
same. The number of common and common equivalent shares utilized in
the per share computations were 12,701,800, 12,562,085 and 12,475,035
in fiscal 1997, 1996 and 1995, respectively.
(i) Cash and cash equivalents:
The Company considers all short-term deposits with an original
maturity of three months or less at acquisition date to be cash
equivalents. Cash equivalents amounted to approximately $23,956,000
and $16,382,000 at July 31, 1997 and 1996, respectively.
(j) Concentration of credit risk:
The Company grants credit to domestic and foreign original equipment
manufacturers, distributors and end users. 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.
38
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ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of business operations and significant accounting policies:
(continued)
(k) Marketable securities:
The Company's marketable securities are categorized as
available-for-sale securities, as defined by the Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Unrealized holding gains
and losses are reflected as a net amount in a separate component of
stockholders' equity until realized. For the purpose of computing
realized gains and losses cost is identified on a specific
identification basis.
(l) Accounting Standards:
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-based Compensation" encourages, but does not
require, recognition of compensation expense based on the fair value
of employee stock-based compensation instruments. The Company will not
adopt the fair value method of accounting for employee stock-based
compensation but will instead comply with the pro forma disclosure
requirements. (See Note 8 of Notes to Consolidated Financial
Statements)
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share," is required to be adopted by the Company after
December 15, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
basic earnings per share, the dilutive effect of stock options will be
excluded. There is expected to be no material impact on the Company's
earnings per share.
Statements of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," and Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information," will be adopted in fiscal
1999. SFAS 130 establishes new standards for reporting and displaying
comprehensive income and its components. SFAS 131 requires disclosure
of certain information regarding operating segments, products and
services, geographic areas of operation and major customers. Adoption
of these Statements is expected to have no impact on the Company's
consolidated financial position, results of operations, or business
practices.
(m) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions and disclosure of contingencies at the date of the
financial statements. Actual results could differ from these
estimates.
39
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ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Business combinations:
The Company's subsidiary, Camtronics, has entered into an agreement with
the three founding stockholders ("Founders") who are also active employees
of Camtronics. The agreement requires Camtronics to purchase up to 5% of
the shares of common stock originally issued to the Founders at their
option during each fiscal year beginning in 1992 pursuant to a
predetermined formula. If a Founder does not exercise his right to cause
Camtronics to purchase his outstanding shares, such rights shall not lapse,
but shall be cumulative and may be exercised thereafter. The Company's
ownership of Camtronics increased from approximately 65% in fiscal 1992 to
approximately 68% in fiscal 1996 as a result of the Founders exercising
their conversion rights to sell 5% of their shares for the amount of
$763,000, $244,000, and $202,000 during fiscal 1996, 1995, and 1994,
respectively. No conversion rights were exercised in fiscal 1997. The
carrying value of the Company's total investment in Camtronics exceeded its
portion of underlying equity in net assets by approximately $1,453,000.
This excess is being amortized over a 10 year period. Accumulated
amortization amounted to $1,282,000 and $1,197,000 as of July 31, 1997 and
1996, respectively.
As of January 1, 1993, the Company acquired an interest of approximately
57% in a newly-formed company, B&K Ultrasound Systems A/S ("B&K"), for
$3,607,000 in cash and a subordinated interest free short-term loan of
$3,500,000 which was converted into equity on July 31, 1993. The Company's
ownership interest was adjusted upward to 59% in fiscal 1994 in accordance
with the shareholders' agreement. B&K, a Danish Corporation, is primarily
engaged in the design and manufacture of ultrasound imaging devices used in
urology and various sonographic techniques. The acquisition was accounted
for as a purchase and B&K's operations have been included in the Company's
consolidated financial statements beginning January 1, 1993. The Company's
equity in net assets of B&K exceeded the purchase price by approximately
$2,662,000. This excess of acquired net assets over cost is being amortized
over a 5 year period beginning in January, 1993. Accumulated amortization
amounted to $2,441,000 and $1,908,000 as of July 31, 1997 and 1996,
respectively.
As of July 1, 1996, the Company acquired the remaining 41% interest in B&K
for $3,416,000 in cash. The Company's equity in net assets of B&K exceeded
the purchase price by approximately $565,000. This excess is being
amortized over a five year period beginning July 1, 1996. Accumulated
amortization amounted to $123,000 and $9,000 as of July 31, 1997 and 1996,
respectively.
On April 1, 1992, the Company acquired all of the common stock of SKY
Computers, Inc. (SKY) for $3,161,000 in cash. The carrying value of the
Company's investment in SKY exceeded its equity in net assets by
approximately $895,000. This excess was amortized over a 5 year period.
Accumulated amortization was $895,000 and $776,000 as of July 31, 1997 and
1996, respectively. As of April 1, 1997 the carrying value of the company's
investment in Sky was fully amortized.
40
41
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Marketable securities:
Marketable securities are categorized as available-for-sale securities and
summarized as follows:
Gross Unrealized
------------------
July 31, 1997 Cost Fair Value Gain Loss
------------- ---- ---------- ---- ----
Debt securities issued by
various state and local
municipalities and agencies $87,783,000 $89,496,000 $1,735,000 $ (22,000)
=========== =========== ========== =========
JULY 31, 1996
-------------
Debt securities issued by
various state and local
municipalities and agencies $78,675,000 $79,651,000 $1,185,000 $(209,000)
Equity securities 1,742,000 2,858,000 1,116,000
----------- ----------- ---------- ---------
$80,417,000 $82,509,000 $2,301,000 $(209,000)
=========== =========== ========== =========
Contractual maturities range from one to nine years, with the majority five
years or less.
4. Inventories:
The components of inventory are as follows:
JULY 31
-------------------------------------
1997 1996
----------- -----------
Raw materials $19,166,000 $19,363,000
Work-in-process 18,381,000 17,830,000
Finished goods 10,253,000 13,039,000
----------- -----------
$47,800,000 $50,232,000
=========== ===========
41
42
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Investments in and advances to affiliated companies:
The Company owns 50% of Analogic Scientific, Inc. ("Scientific"), a joint
venture corporation with Kejian Corporation of The People's Republic of
China. The Company's original investment of $1,500,000 has been accounted
for using the equity method of accounting. The Company's share of
Scientific's Loss amounted to $425,000 in fiscal year 1997. The Company did
not report any income or loss in fiscal years 1996 and 1995 related to this
investment. During fiscal 1996 the Company invested an additional $500,000
in Scientific. The carrying value of this investment was $5,775,000 at July
31, 1997 and $6,200,000 at July 31, 1996. Transactions with Scientific for
fiscal years 1997, 1996 and 1995 consisted of revenues of approximately
$526,000, $735,000 and $1,076,000, respectively. At July 31, 1997 and 1996,
accounts receivable from this affiliate were $668,000 and $676,000,
respectively.
On February 13, 1996, the Company acquired 1,715,384 shares of Park
Meditech Inc. Common Stock and an 11% Convertible Unsecured Subordinated
Debenture in the principal amount of $750,000 in consideration of the
cancellation of the Convertible Subordinated Promissory Note in the amount
of $1,500,000 and 200,000 Common Share purchase warrants. With certain
restrictions, the Convertible Unsecured Subordinated Debenture may be
converted into Common Shares at a price of $1.20 (Canadian) per Common
Share. The Company loaned Park Meditech, Inc. $221,000 in December 1996,
and an additional $294,000 in February, 1997, both were structured as
promissory notes with interest at 11% secured by all of the assets of Park
Meditech, Inc..
On July 3, 1997 Park Meditech, Inc's subsidiary, Park Medical Systems,
filed for assignment in bankruptcy. A trustee was appointed to sell the
assets of Park Medical Systems, which includes patents on imaging
technology. In view of this filing, the Company recognized the impairment
of its investment in Park Meditech, Inc. and wrote off $1,742,000. The
Company currently owns 5,715,384 shares or approximately 14% of the
outstanding shares of Park Meditech, Inc.. Park Meditech, Inc. shares were
traded on the Montreal Exchange (PKM) as well as the NASDAQ small cap
exchange (PMDTF). The investment in Park Meditech, Inc. was included in
marketable securities at July 31, 1996.
On February 22, 1996, the Company invested $2,000,000 for a 33% interest in
a privately held company which designs and will manufacture medical imaging
equipment. Effective May 1, 1997, the Company increased its interest from
33% to 50% with an investment of $340,000. During June, 1997 the Company
and the other investor each invested an additional $1,000,000. The carrying
value of this investment was $570,000 at July 31, 1997 and $1,179,000 at
July 31, 1996. Transactions with this privately held company for fiscal
years 1997 and 1996 consisted of revenues of approximately $5,406,000 and
$2,667,000, respectively. At July 31, 1997 and 1996, accounts receivable
from this company were $1,243,000 and $932,000, respectively.
The Company's $750,000 investment in a limited partnership is accounted for
using the cost method, as the Company is a limited partner, and
accordingly, has no influence over the partnership. During fiscal 1996, the
Company received a distribution of $623,000 from the limited partnership.
42
43
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Mortgage and other notes payable:
Mortgage and other notes payable consists of the following:
July 31
-----------------------------
1997 1996
---------- -----------
3% mortgage note payable, due 2017, payable
quarterly, collateralized by land, office
and manufacturing facilities $5,327,000 $ 5,516,000
Business Development Revenue Bonds, interest of
approximately 5% payable quarterly, annual principal
payments of $150,000 through September 1, 2005,
collateralized by land, office and manufacturing
facilities 1,350,000 1,500,000
Uncollateralized foreign bank overdraft facility
with interest at 8.5% per year 3,305,000
---------- -----------
6,677,000 10,321,000
Less current portion 344,000 3,644,000
---------- -----------
$6,333,000 $ 6,677,000
========== ===========
Principal maturities in each of the next five fiscal years on the above
notes are as follows: 1998, $344,000; 1999, $350,000; 2000, $356,000; 2001,
$363,000; 2002, $369,000.
7. Lease commitments and related party transactions:
The Company leases three operating facilities from a partnership in which
the Chairman and the former Vice Chairman are partners under leases that
have been accounted for as capital leases. Certain leases contain
contingent rentals based upon cost of living adjustments. Contingent
rentals were not significant in 1997, 1996 and 1995.
Property under capital leases is included in property, plant and equipment,
as follows:
July 31
----------------------------
1997 1996
---------- ----------
Land and buildings $6,251,000 $6,251,000
Less accumulated amortization 5,085,000 4,781,000
---------- ----------
Net capital lease assets $1,166,000 $1,470,000
========== ==========
43
44
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Lease commitments and related party transactions: (continued)
Certain of the Company's subsidiaries lease manufacturing and office space
under non-cancelable operating leases. These leases expire through 1999 and
contain renewal options. The Company leases certain other real property and
equipment under operating leases which, in the aggregate, are not
significant.
Rent expense approximated $531,000, $534,000 and $610,000 (net of sublease
income of $1,188,000, $1,186,000 and $1,179,000) in fiscal 1997, 1996 and
1995, respectively.
The following is a schedule by year of future minimum lease payments at
July 31, 1997:
Capital Operating
Fiscal Year Leases Leases
----------- ---------- ---------
1998 $ 812,000 $680,000
1999 812,000 239,000
2000 812,000 58,000
2001 812,000 5,000
2002 213,000
2003 213,000
---------- --------
$3,674,000 $982,000
========
Less amount representing
interest, at 9.5% - 17.6% 896,000
----------
Present value of minimum lease
payments (includes current
portion of $497,000) $2,778,000
==========
Future minimum lease payments under capital leases have not been reduced
for sublease rental income of approximately $1,188,000.
Included in accounts and notes receivable are $200,000 of convertible
debentures from UltraAnalog, Inc., a manufacturer of analog-to-digital and
digital-to-analog converters. Bernard M. Gordon, the Company's Chairman,
owns 72% of the outstanding common stock of UltraAnalog, Inc. which the
Company, solely at its option, has the right to acquire at his cost.
8. Stock option and stock bonus plans:
At July 31, 1997, the Company had three key employee stock option plans;
two of which have lapsed as to the granting of options. In addition, the
Company has one key employee stock bonus plan, two non-employee director
stock option plans and one employee stock purchase plan.
44
45
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Stock option and stock bonus plans: (continued)
Options granted under the five stock option plans become exercisable in
installments commencing no earlier than one year from the date of grant and
no later than five years from the date of grant. Options issued under the
plans are non-qualified options or incentive stock options and are issued
at prices of not less than 100% of the fair market value at the date of
grant. Tax benefits from early disposition of the stock by optionees under
incentive stock options, and from exercise of non-qualified options are
credited to capital in excess of par value.
Under the Company's key employee stock bonus plan, common stock may be
granted to key employees under terms and conditions as determined by the
Board of Directors. Generally, participants under the stock bonus plan may
not dispose or otherwise transfer stock granted for three years from date
of grant. Upon issuance of stock under the plan, unearned compensation
equivalent to the market value at the date of grant is charged to
stockholders' equity and subsequently amortized over the periods during
which the restrictions lapse (up to six years). Amortization of $663,000,
$759,000 and $730,000 was recorded in fiscal 1997, 1996 and 1995,
respectively.
Under the employee stock purchase plan, participants are granted options to
purchase the Company's common stock twice a year at the lower of 85% of
market value at the beginning or end of each period. Calculation of the
number of options granted, and subsequent purchase of these shares, is
based upon voluntary payroll deductions during each six month period. The
number of options granted to each employee under this plan, when combined
with options issued under other plans, is limited to a maximum outstanding
fair market value of $25,000 during each calendar year. The number of
shares issued pursuant to this plan totaled 5,671 in 1997, 9,107 in 1996
and 8,188 in 1995.
At July 31, 1997, 927,159 shares were reserved for grant under the above
stock option, bonus and purchase plans.
45
46
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Stock option and stock bonus plans: (continued)
The following table sets forth the stock option transactions for the years
ended July 31, 1997, 1996, and 1995:
1997 1996 1995
---- ---- ----
Option Number Option Number Option Number
price per of price per of price per of
Share Shares Share Shares Share Shares
----- ------ ----- ------ ----- ------
Options outstanding,
beginning of year $ 8.25-$27.75 489,788 $ 7.125-$18.25 446,502 $ 7.125-$18.00 359,729
Options granted 28.75- 33.00 111,400 18.00 - 27.75 151,000 16.50 - 18.25 164,850
Options exercised 8.25- 18.25 (96,499) 7.125 - 16.50 (69,289) 7.125- 11.75 (50,081)
Options cancelled (43,875) (38,425) (27,996)
------- ------- -------
Options outstanding,
end of year 8.25- 33.00 460,814 8.25 - 27.75 489,788 7.125- 18.25 446,502
======= ======= =======
Options exercisable,
end of year 8.25- 27.75 66,934 8.25 - 27.75 94,964 7.125- 16.50 140,406
======= ======= =======
The following table summarizes information about stock options outstanding at
July 31, 1997:
Options Outstanding Options Exercisable
---------------------------------------------------- ---------------------------------
Weighted-Avg
Range of Number Remaining Number
Exercise Outstanding Contractual Weighted-Avg Exercisable Weighted-Avg
Prices As of 7/31/97 Life (years) Exercise Price As of 7/31/97 Exercise Price
-------- ------------- ------------ -------------- ------------- --------------
$ 8.25 - 11.75 27,888 2.40 $10.36 21,515 $10.19
14.13 - 16.50 79,326 3.05 15.77 31,666 15.65
16.75 - 20.25 137,700 5.18 17.74 8,752 18.23
27.75 - 33.00 215,900 7.32 29.39 5,001 27.75
------- ------
$ 8.25 - 33.00 460,814 5.65 $22.41 66,934 $15.14
======= ======
46
47
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Stock option and stock bonus plans: (continued)
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-based Compensation" encourages, but does not require, recognition
of compensation expense based on the fair value of employee stock-based
compensation instruments. The Company will not adopt the fair value method
of accounting for employee stock-based compensation but will instead comply
with the pro forma disclosure requirements. The fair value method of the
Company's stock options was estimated using the Black-Scholes option
pricing model. This model was developed for use in estimating fair value of
traded options that have no vesting restrictions and are fully
transferable. This model requires the input of highly subjective
assumptions including the expected stock price volatility. Because the
Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing model does not necessarily provide a reliable single
measure of the fair value of its stock options. The fair value of the
Company's stock options was estimated using the following weighted-average
assumptions:
1997 1996
---- ----
Expected life (in years) 7 7
Volatility 38% 38%
Risk-free interest rate 6.54% 6.64%
Dividend yield .5% .6%
The weighted-average estimated fair value of stock options granted during
fiscal 1997 and 1996 was $15.30 and $12.61 per share, respectively. For pro
forma purposes, the estimated fair value of the Company's stock options is
amortized over the options' vesting period. The Company's pro forma
information is as follows:
Years Ended July 31, (in thousands, except per share amounts) 1997 1996
---- ----
Net income
As reported $20,090 $13,065
Pro forma $19,847 $13,029
Net income per share
As reported $ 1.58 $ 1.04
Pro forma $ 1.56 $ 1.04
Because SFAS 123 is applicable only to options granted subsequent to July
31, 1995, its pro forma effect will not be fully reflected until
approximately 2000.
47
48
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Profit sharing retirement plan:
The Company has a qualified Profit Sharing Retirement Plan for the benefit
of eligible employees. The plan provides that the Company shall make
contributions from current or accumulated earnings as determined by the
Board of Directors. The contribution each year shall in no event exceed the
maximum allowable under applicable provisions of the Internal Revenue Code.
Profit sharing expense amounted to $900,000 in 1997, $700,000 in 1996 and
$700,000 in 1995.
The Company has 401(K) plans under which employees can contribute up to 15%
of their annual base income, not to exceed the maximum amount allowable
under the Internal Revenue Code in any one calendar year.
10. Interest:
Total interest incurred amounted to $779,000, $1,002,000, and $988,000 in
1997, 1996 and 1995, respectively, of which $172,000 in 1997, $170,000 in
1996 and $176,000 in 1995 was capitalized.
11. Income taxes:
The components of the provision for income taxes are as follows:
July 31
-------------------------------------------------------------
1997 1996 1995
----------- ---------- ----------
Current income taxes:
Federal $ 7,495,000 $3,757,000 $2,795,000
State and foreign 2,289,000 307,000 617,000
----------- ---------- ----------
9,784,000 4,064,000 3,412,000
----------- ---------- ----------
Deferred income taxes (benefit):
Federal (2,594,000) 187,000 291,000
State and foreign (559,000) (10,000) (36,000)
----------- ---------- ----------
(3,153,000) 177,000 255,000
----------- ---------- ----------
$ 6,631,000 $4,241,000 $3,667,000
=========== ========== ==========
The tax effects of the principal temporary differences resulting in
deferred tax expense (benefit) are as follows:
July 31
-------------------------------------------------------------
1997 1996 1995
----------- --------- ---------
Unrealized equity gain/loss $(1,642,000) $(369,000) $ 493,000
Capitalized software (494,000) 26,000 151,000
Depreciation 264,000 598,000 306,000
Bad debts 23,000 (59,000) 17,000
Inventory valuation (379,000) (78,000) (42,000)
Benefit plans (6,000) (175,000) (486,000)
Net operating loss carryforwards (368,000)
Other items, net (551,000) 234,000 (184,000)
----------- --------- ---------
$(3,153,000) $ 177,000 $ 255,000
=========== ========= =========
48
49
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Income taxes: (continued)
Income (loss) before income taxes from domestic and foreign operations is
as follows:
July 31
------------------------------------------------------
1997 1996 1995
----------- ----------- -----------
Domestic $27,382,000 $19,951,000 $17,942,000
Foreign 609,000 (3,791,000) (1,051,000)
----------- ----------- -----------
$27,991,000 $16,160,000 $16,891,000
=========== =========== ===========
The components of the deferred tax assets and liabilities are as follows:
Deferred Tax Deferred Tax
Assets Liabilities
------------ ------------
July 31, 1997
-------------
Depreciation $3,476,000
Bad debt allowance $ 181,000
Capitalized interest and other costs 343,000 465,000
Inventory 1,992,000
Warranty 847,000
Benefit plans 1,346,000
Lease transactions 645,000
Unrealized equity gain/loss 2,275,000 1,494,000
Capitalized software 1,384,000
Net operating loss carryforwards 870,000
Miscellaneous 634,000
----------- ----------
9,133,000 6,819,000
Valuation allowance (1,592,000)
----------- ----------
$ 7,541,000 $6,819,000
=========== ==========
July 31, 1996
-------------
Depreciation $3,212,000
Bad debt allowance $ 204,000
Capitalized interest and other costs 156,000 473,000
Inventory 1,613,000
Warranty 659,000
Benefit plans 1,340,000
Lease transactions 710,000
Unrealized equity gain/loss 828,000 1,689,000
Capitalized software 1,878,000
Net operating loss carryforwards 2,630,000
Alternative minimum tax credit
carryforwards 511,000
Miscellaneous 401,000
----------- ----------
9,052,000 7,252,000
Valuation allowance (4,231,000)
----------- ----------
$ 4,821,000 $7,252,000
=========== ==========
49
50
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Income taxes: (continued)
Included in prepaid expenses and other current assets is $4,577,000 and
$2,401,000 of current deferred tax assets at July 31, 1997 and 1996,
respectively.
A reconciliation of income taxes at the United States statutory rate to the
effective tax rate follows:
Year Ended July 31,
------------------------------
1997 1996 1995
---- ---- ----
U.S. federal statutory tax rate 35% 35% 35%
Foreign sales corporation tax benefit (2) (3) (3)
State income taxes, net of
federal tax benefit 2 2 1
Tax exempt interest (4) (8) (8)
Net losses of foreign
subsidiaries not taxed 7
General business credit utilized (1) (3) (1)
Alternative minimum tax (2) (3)
Other items, net (4) (1) (2)
-- -- --
Effective tax rate 24% 26% 22%
== == ==
The Internal Revenue Service has examined the Company's federal
consolidated income tax returns through fiscal 1992. Following a routine
audit, the Company has been notified by the Internal Revenue Service that
it proposes to adjust the Company's tax returns for the years 1990 through
1992 by increasing its tax liability for those years by $2,837,473,
$2,151,574 and $1,762,849, respectively. The major claims relate to an
alleged forgiveness of debt arising from the acquisition of property from a
subsidiary of the FDIC and an alleged excess accumulation of earnings.
The transaction concerning the forgiveness of debt was conducted in
accordance with guidelines established by the Company's independent
auditors, which they advised were in compliance with IRS Regulations.
Accordingly, the Company believes that the claim is without merit.
Similarly, the Company's counsel believes that the claims concerning excess
accumulation of earnings are without foundation and are erroneously based
upon a lack of understanding of the nature of the Company's business. The
Company has filed a protest to the IRS which vigorously contests these ill
founded claims and believes that it will prevail.
Two of the Company's subsidiaries have elected to be taxed as Foreign Sales
Corporations (FSC).
One of the Company's domestic subsidiaries has a net operating loss
carryforward of approximately $2,200,000 expiring in 2009.
50
51
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Quarterly results of operations (unaudited):
The following is a summary of unaudited quarterly results of operations for
the years ended July 31, 1997 and 1996.
Total Net Earnings
revenues income per share
-------- ------ ---------
1997
quarters
--------
First $ 59,474,000 $ 3,934,000 $ .31
Second 61,731,000 4,579,000 .36
Third 64,170,000 5,207,000 .41
Fourth 71,354,000 6,370,000 .50
------------ ----------- -----
Total $256,729,000 $20,090,000 $1.58
============ =========== =====
1996
quarters
--------
First $ 46,478,000 $ 1,359,000 $ .11
Second 53,146,000 2,000,000 .16
Third 60,486,000 3,762,000 .30
Fourth 70,350,000 5,944,000 .47
------------ ----------- -----
Total $230,460,000 $13,065,000 $1.04
============ =========== =====
13. Transactions with major customers and industries:
One export customer accounted for approximately $41,000,000 or 17%, of
total product, service, engineering and licensing revenue in 1997. Another
export customer accounted for approximately $30,000,000 or 14% and
$27,700,000 or 14% of total product, service, engineering and licensing
revenue in 1996 and 1995, respectively. Of the total product, service,
engineering and licensing revenue, one domestic customer accounted for
approximately $20,000,000 or 8%, in 1997. Another domestic Customer
accounted for approximately $18,800,000 or 9% and $20,100,000 or 10% in
1996 and 1995, respectively.
The Company's ten largest customers accounted for approximately 57% of
product, service, engineering, and licensing revenue during fiscal 1997.
Medical Technology Products, consisting primarily of electronic subsystems
for medical imaging equipment, accounted for approximately 73% of product,
service, engineering, and licensing revenue in fiscal 1997.
51
52
ANALOGIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. Supplemental disclosure of cash flow information:
During fiscal years 1997, 1996 and 1995, interest paid amounted to
$745,000, $970,000 and $1,371,000, respectively.
Income taxes paid during fiscal years 1997, 1996 and 1995 amounted to
$8,103,000, $3,040,000 and $2,802,000, respectively.
15. Fair value of financial instruments:
The carrying amounts of cash, cash equivalents, receivables, mortgages and
other notes payable approximate fair value. The Company believes similar
terms for mortgage and other notes payable would be attainable. The fair
value of marketable securities are estimated based on quoted market prices
for these securities.
16. Foreign Operations
Financial information relating to the Company's foreign and domestic
operations for fiscal years 1997, 1996, and 1995 are as follows:
FY 1997 Foreign Domestic Total
------- ----------- ------------ ------------
Revenue $25,697,000 $231,032,000 $256,729,000
Income from operations 609,000 31,498,000 32,107,000
Identifiable assets 20,370,000 261,989,000 282,359,000
FY 1996
-------
Revenue $26,377,000 $204,083,000 $230,460,000
Income (loss) from operations (3,791,000) 20,772,000 16,981,000
Identifiable assets 23,891,000 241,271,000 265,162,000
FY 1995
-------
Revenue $31,522,000 $177,305,000 $208,827,000
Income (loss) from operations (1,051,000) 16,206,000 15,155,000
Identifiable assets 29,313,000 230,885,000 260,198,000
52
53
ANALOGIC CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E Column F
- ---------------------------------- ---------- --------------------------- ------------ ---------- ----------
Additions
charged to Additions
Balance at profit and charged Deductions Balance
beginning loss or to other from at end
Description of period income accounts reserves Recoveries of period
- ---------------------------------- ---------- ---------- ---------------- ------------ ---------- ----------
Year ended July 31, 1997
Allowance for doubtful accounts $1,426,000 $ 252,000 $ (308,000) $1,370,000
Deferred tax valuation allowance 4,231,000 (2,639,000) 1,592,000
Year ended July 31, 1996:
Allowance for doubtful accounts $1,361,000 $ 185,000 $ (120,000) $1,426,000
Deferred tax valuation allowance 1,491,000 3,720,000 (980,000) 4,231,000
Year ended July 31, 1995:
Allowance for doubtful accounts $1,339,000 $ 188,000 $ (166,000) $1,361,000
Deferred tax valuation allowance 1,384,000 107,000 1,491,000
53
54
INDEX TO EXHIBITS
TITLE INCORPORATED BY REFERENCE TO
----- ----------------------------
3.1 Restated Articles of Organization, Exhibit 3.1 to the Company's Annual Report
as amended March 15, 1988 on Form 10-K for the fiscal year ended
July 31, 1988
3.2 By-laws, as amended January 27, Exhibit 3.2 to the Company's Annual Report
1988 on Form 10-K for the fiscal year ended
July 31, 1988
10.1 Lease dated March 5, 1976 from Exhibit 6(e) to the Company's Registration
Bernard M. Gordon to Analogic Statement on Form S-14 (File No. 2-61959)
10.2 Amendment of Lease dated Exhibit to the Company's Report on Form 8-K
May 1, 1977 between Bernard M. dated May 1, 1977
Gordon and Analogic
10.3 Lease dated January 16, 1976 Exhibit to the Company's Annual Report on
from Bernard M. Gordon to Data Form 10-K for the fiscal year ended
Precision Corporation and July 31, 1977
related Assignment of Lease
dated October 31, 1979 from
Data Precision Corporation to
Analogic
10.4 (a) Lease dated October 31, 1977 Exhibit 6(d) to the Company's Registration
from Audubon Realty, Ltd. Statement on Form S-14 (File No. 2-61959)
to Data Precision Corporation
and related letter agreement
dated January 18, 1978
(b) Amendment of Lease dated Exhibit I to the Company's Annual Report
June 19, 1979 between Audubon on Form 10-K for the fiscal year ended
Realty, Ltd. and Analogic July 31, 1982
(c) Third Amendment of Lease dated Exhibit to the Company's Annual Report
August 2, 1982 on Form 10-K for the fiscal year ended
July 31, 1982
(d) Fourth Amendment of Lease dated Exhibit 19.1 to Quarterly Report on Form
December 31, 1982 10-Q for the three months
ended January 31, 1983
54
55
10.5 (a) Lease dated March 16, 1981 from Exhibit II to the Company's Quarterly
Audubon Realty Ltd. to Analogic Report on Form 10-Q for the three months
ended April 30, 1981
(b) Amendment of Lease dated Exhibit to the Company's Annual Report
October 31, 1984 on Form 10-K for the fiscal year ended
July 31, 1985
10.6 Land Disposition Agreement by and Exhibit to the Company's Annual Report
between City of Peabody Community on Form 10-K for the fiscal year ended
Development Authority and Analogic July 31, 1981
Corporation
10.7 Loan Agreement among the City of Exhibit to the Company's Annual Report
Peabody, its Community Develop- on Form 10-K for the fiscal year ended
ment Authority, and Analogic July 31, 1981
Corporation
10.8 Amendments to Urban Development Exhibit 10.13 to the Company's Annual
Action Grant Agreement dated Report on Form 10-K for the fiscal year
August 28, 1986 and September 30, ended July 31, 1986
1986
10.9 Promissory Note of Analogic payable Exhibit to the Company's Annual Report
to Peabody Community Development on Form 10-K for the fiscal year ended
Authority July 31, 1981
10.10 (a) Stockholder Agreement as of July 9, Exhibits to the Company's Report on
1986 by and among Siemens AG, Form 8-K dated July 31, 1986
SCC, and Analogic including the
following exhibits thereto
(b) Development Agreement dated as of
July 28, 1986 between Siemens AG "
and Medical Electronics
Laboratories, Inc.
(c) Manufacturing Agreement dated
as of July 28, 1986 between "
Analogic and Medical Electronics
Laboratories, Inc.
(d) License Agreement dated as of
July 28, 1986 between Analogic "
and Medical Electronics
Laboratories, Inc.
55
56
(e) License Agreement I dated as Exhibits to the Company's Report on of
July 28, 1986 between Form 8-K dated July 31, 1986
Siemens AG and Medical
Electronics Laboratories, Inc.
(f) License Agreement II dated as
of July 28, 1986 between "
Siemens AG and Medical
Electronics Laboratories, Inc.
(g) Sublease dated as of
July 28, 1986 between Analogic "
as sublessor and Medical
Electronics Laboratories, Inc.
as sublessee
10.11 Stock Purchase Agreement as of Exhibit 10.11 to the Company's Annual
March 11, 1988 by and among Report on Form 10-K for fiscal year
Siemens AG, SCC, SMS, MEL, ended July 31, 1988
and Analogic
10.12 (a) Anamass Partnership Agree- Exhibit 10.12(a) to the Company's Annual
ment dated as of July 5, Report on Form 10-K for fiscal year ended
1988 between Ana/dventure July 31, 1988
Corporation and Massapea,
Inc.
(b) Ground Lease Agreement Exhibit 10.12(b) to the Company's Annual
dated July 5, 1988 between Report on Form 10-K for fiscal year ended
Analogic and Anamass July 31, 1988 Partnership
(c) Equity Infusion Agreement Exhibit 10.12(c) to the Quarterly Report
on Form 10-Q for the three months ended
January 31, 1991
(d) Resolution Agreement Exhibit 10.12(d) to the Company's Annual
dated July 31, 1991 and Report on Form 10-K for fiscal year ended
ratified on August 8, 1991 July 31, 1991.
10.13 Key Employee Stock Option Plan Exhibit 10.7 to the Company's Annual Report
dated April 21, 1978, as amended on Form 10-K for the fiscal year ended
and restated December 4, 1981, July 31, 1987
and further amended on October
9, 1984 and January 28, 1987
10.14 Key Employee Stock Option Plan Exhibit 10.8 to the Company's Annual Report
dated August 8, 1980, as amended on Form 10-K for the fiscal year ended
and restated December 4, 1981, July 31, 1987
and further amended on October
9, 1984 and January 28, 1987
56
57
10.15(a) Analogic Corporation Profit Exhibit 6(c) to the Company's Registration
Sharing Plan dated July 26, 1977 Statement on Form S-14 (File No. 2-61959)
(b) Amendments 2,3,4 and 5 to said Exhibit 10.10(b) to the Company's Annual
Profit Sharing Plan Report on Form 10-K for the fiscal year
ended July 31, 1980
(c) Restated Analogic Corporation Exhibit 10.9(c) to the Company's Annual
Profit Sharing Plan dated Report on Form 10-K for the year ended
July 31, 1985 and Amendment July 31, 1985
No. 1 thereto dated August 20,
1985
10.16 Key Employee Stock Bonus Plan Exhibit A to definitive proxy statement
dated March 14, 1983, as for the Company's Special Meeting in
amended on January 27, 1988 lieu of Annual Meeting of Stockholders
held January 25, 1984 (File No. 33-27372)
10.17 Key Employee Incentive Stock Exhibit 10.15 to the Company's Annual
Option Plan dated March 14, 1983, Report on Form 10-K for the fiscal year
as amended and restated on ended July 31, 1987 (File No. 2-95091)
January 28, 1987
10.18 1985 Non-Qualified Stock Option Exhibit 10.19 to the Company's Annual
Plan dated May 13, 1985 Report on Form 10-K for the fiscal year
ended July 31, 1985 (File No. 33-6835)
10.19 Employee Qualified Stock Purchase Exhibit G to the Company's definitive
Purchase Plan dated January 22, proxy statement dated December 9, 1985
1986 for the Company's Special Meeting in
lieu of Annual Meeting of Stockholders
held January 22, 1986 (File No. 33-5913)
10.20 Proposed 1988 Non-Qualified Exhibit 10.20 to the Company's Annual
Stock Option Plan for Non- Report on Form 10-K for the fiscal year
Employee Directors ended July 31, 1988 (File No. 33-27372)
10.21 Form of Indemnification Exhibit 10.19 to the Company's Annual
Contract Report on Form 10-K for the fiscal year
ended July 31, 1987
10.22 Agreement and Plan of Merger Exhibit 10.22 to the Company's Annual
between SKY COMPUTERS, Inc., Report on Form 10-K for the fiscal year
and Analogic Corporation ended July 31, 1992
57
58
10.23(a) Agreement between B&K Medical Exhibits to the Company's Report on
Holding A/S and Analogic Form 8-K dated December 18, 1992
Corporation dated October 20,
1992
(b) Addendum dated December 11,
1992 to Agreement between B&K "
Medical Holding A/S and
Analogic Corporation dated
October 20, 1992
(c) Shareholders Agreement between
B&K Medical Holding A/S and "
Analogic Corporation dated
December 11, 1992
10.24 Key Employee Incentive Stock Exhibit A to the Company's definitive
Option Plan dated June 11, 1993 Proxy Statement dated December 1, 1993
for the Company's Annual Meeting of
Stockholders held January 21, 1994
(File No. 33-53381)
10.25 Non-Qualified Stock Option Plan Exhibit A to the Company's definitive
for Non-Employee Directors dated Proxy Statement dated December 2, 1996
January 31, 1997. for the Company's annual meeting of
stockholders held January 24, 1997.
58
59
EXHIBITS
TITLE
-----
21. List of Subsidiaries
23. Consent of Coopers & Lybrand, L.L.P.
27. Financial Data Schedule
59