Analogic Corporation
Filed 10/26/01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED: JULY 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-6715
ANALOGIC CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2454372
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
8 CENTENNIAL DRIVE, PEABODY, MASSACHUSETTS 01960
(Address of principal executive offices) (Zip Code)
(978) 977-3000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.05 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant at August 31, 2001 was
approximately $314,440,000.
Number of shares of Common Stock outstanding at August 31, 2001: 13,224,267
DOCUMENTS INCORPORATED BY REFERENCE: NONE
PART I
ITEM 1. BUSINESS
(a) Developments During Fiscal 2001
Total revenues of Analogic Corporation (hereinafter, together with its subsidiaries, referred to as "Analogic" or the "Company")
for the fiscal year ended July 31, 2001, were $360.6 million as compared to $291.6 million for fiscal 2000, an increase of 24%.
Net income for fiscal 2001 was $15.2 million, or $1.17 per diluted share as compared to $14.1 million or $1.09 per diluted
share for fiscal 2000. Net income for fiscal 2001 includes a write-down of $3.2 million of certain assets of Anatel
Communications Corporation, a wholly owned subsidiary.
The Company's Danish subsidiary B-K Medical Systems A/S (B-K) announced in May 2001 the construction of a new
135,000 square foot facility in Herlev, north of Copenhagen, for the manufacture of specialized diagnostic ultrasound equipment
at an estimated cost of $15.5 million. The new facility, scheduled for completion in May 2002, will host manufacturing, research
and development, service, marketing, sales and administrative functions. The new facility is expected to be financed by a
combination of internally generated cash and borrowings.
In July 2001, the Company's ownership of Camtronics Medical Systems, Ltd. (formerly Camtronics, Ltd.) increased from 81%
to 100 %, as a result of the Company acquiring all outstanding shares of Camtronics common stock. The Company issued
190,255 shares of common stock from its treasury, for a value of $7.6 million, to acquire the remaining 19% minority interest.
In September 2001, the Corporation announced that it acquired a 19% interest in Cedara Software Corporation of
Mississauga, Ontario, Canada, in return for an equity investment of $7.5 million and other considerations. Cedara is a premier
independent provider of imaging software technology and custom imaging software development to leading Original Equipment
Manufacturers (OEMs) in the healthcare industry. Cedara enables healthcare solution providers to integrate better imaging
software into their systems and hardware in such fields as Computed Tomography (CT) and Magnetic Resonance Imaging
(MRI). Analogic has agreed to refinance the debt owed by Cedara to its bank lender through the provision of a credit facility
with Analogic's principal bank or by refinancing the debt directly. Analogic will have two of the seats on Cedara's seven person
board of directors.
Mr. Thomas J. Miller was appointed Chief Executive Officer in February 2001. Mr. Bernard M. Gordon, Founder, Chairman
of the Board, and Chief Executive Officer retained the position of Chairman of the Board.
Mr. Lothar Koob joined the Company as Executive Vice President in January 2001.
(b) Financial Information About Industry Segment
The Company's operations are primarily within a single segment within the electronics industry (Medical Instrumentation
Technology Products). The operations encompass design, manufacture and sale of high technology, high-performance,
high-precision data acquisition, conversion (analog/digital) and signal processing instruments and systems to customers that
manufacture products for medical and industrial use. (See Note 16 of Notes to Consolidated Financial Statements)
(c) Narrative Description of Business
Analogic conceives, designs, manufactures, and sells standard and customized high-precision data acquisition, signal and
imaging processing based medical imaging and industrial systems and subsystems. Analogic's principal customers are original
equipment manufacturers (OEM) who incorporate Analogic's state-of-the art products into systems used in medical, industrial
and scientific applications.
Analogic has been a leader in the application of precision analog-to-digital (A/D) and digital-to-analog (D/A) conversion
technology, which involves the conversion of continuously varying (i.e., "analog") electrical signals, such as those representing
temperature, pressure, voltage, weight, velocity, ultrasound and x-
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ray intensity, into and from the numeric (or "digital") form required by computers, medical imaging equipment and other data
processing equipment and in subsystems and systems based on such technology.
In addition to their precision measurement capabilities, most of Analogic's products perform very high-speed complex
calculations on the data being analyzed. Thus, Analogic's products are an integral part of the communications link between
various analog sensors, detectors or transducers and the people or systems that interpret or utilize this information.
Analogic's products may be divided into three groupings as described below. These groupings are classified by product
technology and not by application.
Medical Technology Products, consisting primarily of electronic systems and subsystems for medical imaging equipment,
accounted for approximately 79% of product and engineering revenue in fiscal 2001.
Analogic's medical imaging data acquisition systems and related computing equipment are incorporated by U.S., European and
Asian manufacturers into advanced X-ray equipment known as Computed Tomography (CT) scanners. These scanners
generate images of the internal anatomy, which are used primarily in diagnosing medical conditions. Analogic's data acquisition
and signal processing systems have advanced CT scanner technology by substantially increasing resolution of the image, by
reducing the time necessary to acquire the image, and by reducing the computing time required to produce the image. Analogic
supplies to its medical imaging customers A/D and D/A conversion equipment and complete data acquisition systems. The
Company also manufactures complete mobile and other CT scanners incorporating proprietary technology.
The Company manufactures electronics for a family of hard copy laser printers in single and multi-user configurations that
address the diagnostic image market. These printers are used in hospitals world-wide to print diagnostic quality images on film
from the electronic data collected by medical imaging equipment such as CT scanners and MRI scanners. The Company also
designs and manufactures for OEM customers advanced RF amplifiers, gradient coil amplifiers and spectrometers for use in
Magnetic Resonance Imaging (MRI) equipment. These MRI scanners are used primarily to create diagnostic medical images.
The Company manufactures fetal monitoring products for conversion and display of biomedical signals. These monitors are
designed for use in antepartum applications and have the capability to measure, compute, display and print fetal heart rates,
maternal contraction frequency and relative intensity to determine both maternal and fetal well being.
The Company also manufactures a lightweight, portable, multi-functional, custom patient monitor instrument which acquire,
calculate and display combinations of the five most common vital sign parameters -- Electrocardiogram (ECG), Respiration,
Temperature, Non Invasive Blood Pressure (NIBP) and Pulse Oximetry (SpO2). These monitors are designed to be used in a
variety of hospital settings such as emergency room, step-down units, general care and surgical centers where ease-of-use,
portability, flexibility and costs are important considerations.
The Company also manufactures a broad line of medical connectivity products that allows medical equipment such as CT
Scanners and MRI and ultrasound equipment to attach to local Digital Imaging and Communications for Medicine (DICOM),
Picture Archive & Communications Systems (PACS) and wide area networks. The line includes Computed Radiography (CR)
image processing and viewing workstations.
The Company, through an exclusive OEM relationship with a major international OEM, is designing, developing, and
manufacturing Direct Digital Radiography (DDR) systems. DDR uses a solid-state, flat-panel detector technology, consisting of
an amorphous selenium coating over a Thin Film Transistor (TFT) array, to convert X-Rays into electrical signals and create an
image.
B-K Medical Systems A/S, a 100% owned subsidiary, designs and manufactures ultrasound systems and probes for end user
markets in urology, surgery, and radiology. Their scanners generate real-time images of the internal anatomy that are used for
medical diagnosis and interventional procedures. The Company also manufactures key subsystems on an OEM basis for
ultrasound equipment manufacturers.
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Camtronics, a 100% owned subsidiary, manufactures products which are considered medical technology products. Camtronics
designs and manufactures multi-modality image and information management systems for cardiology. This system integrates all
cardiac patient data into an enterprise-wide information system. The industry leader in cardiac workstation technology,
Camtronics also designs and manufactures state-of-the-art digital imaging systems for cardiology and radiology.
Anrad, a 100% owned subsidiary, designs and manufactures a state-of-the-art direct conversion series of amorphous selenium
based, X-ray, flat panel detectors for diagnostic and interventional applications in mammography and other digital radiology
application.
Signal Processing Technology Products, consisting of A/D converters and supporting modules, high-speed digital signal
processors such as Array Processors, and image processing equipment, accounted for approximately 12% of fiscal 2001
product and engineering revenue.
A/D converters convert continuously varying "analog" signals into the numerical "digital" form required by microprocessors and
other data processing equipment. Analogic manufactures a wide variety of high speed 14 and 16 bit low noise converters.
Analogic specializes in the manufacture of high-precision and high performance, rather than lower-cost, low-precision and
minimal performance, data conversion products. Typical applications of these devices include the conversion of industrial and
biomedical signals into computer language.
The Company manufactures a line of Compact Peripheral Computer Interface (CPCI) boards. These products are fully
compatible with the CPCI form factor and bus structure and take advantage of software written for the PCIbus. The boards,
which are designed for OEM embedded applications requiring precision measurements and high sampling rates, perform
acquisition, conditioning, multiplexing, as well as signal processing functions, and are supported by Microsoft Windows NT(R)
software.
Analogic manufactures the EXACT system, an advanced computed tomography imaging system capable of providing data for
3-D images of every object in a package, parcel, or bag. An OEM customer has exclusive rights to marketing the EXACT
system as part of a comprehensive explosive detection system to scan checked luggage for aircraft.
SKY Computers, a 100% owned subsidiary, designs and manufactures high performance multicomputing platforms used in
advanced medical, military, and industrial imaging applications. The company's SKYpack(TM) multiprocessors provide the
image processing power for Analogic's advanced CT scanners.
Industrial Technology Products, consisting of test instruments and industrial weight measurement equipment, accounted for
approximately 9% of fiscal 2001 product and engineering revenues.
Test instruments are used as components of large Automated Test Equipment (ATE) for the semiconductor test and other
industries. These instruments provide precision signal source and measurement capabilities for testing high performance
mixed-signal and analog semiconductors. Various instruments provide a range of speed and accuracy capabilities. Test
instruments are also used for stand-alone operation on a test bench.
Industrial weighing products are sold to both OEMs and end users and are used in many industrial and process control
applications requiring high precision weight measurement.
Anatel Communications, a 100% owned subsidiary formed in March 2000, designs, manufactures, and markets Voice over
Internet Protocol (VoIP) Data Signal Processor (DSP) resource boards; network access boards; and media gateway
development systems and associated software for the Internet Telephony market. Applications include VoIP gateways,
softswitch architectures, voice routers (PBXs) and call center systems.
HOTEL OPERATION
The Company owns a hotel, which is located adjacent to the Company's principal executive offices and manufacturing facility in
Peabody, Massachusetts. The hotel is strategically situated in an industrial park, is in close proximity to the historic and tourist
area of Boston's North Shore and is approximately 18 miles from
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Boston. The hotel has 256 rooms, a ballroom and several other function rooms and appropriate recreational facilities. The hotel
is managed for the Company under a contract with Marriott Corporation.
MARKETING AND DISTRIBUTION
The Company sells its products domestically and abroad directly through the efforts of its officers and employees and on
occasion through a network of independent sales representatives and distributors located in principal cities around the world. In
addition, Analogic subsidiaries in England and Denmark act as distributors. Domestically, Analogic has several regional sales
offices staffed by salespeople who sell the Company's products in the surrounding areas and supervise independent sales
representatives and distributors in their regions. The majority of distributors order from the Company as they receive orders
from their customers and do not stock inventory for resale. Sales made to distributors are based on fixed discounts applied to
established list prices under normal payment terms. Returns are allowed for defective products under authorized warranty
repair. Some of Analogic's distributors also represent manufacturers of competing products.
SOURCES OF COMPONENTS/RAW MATERIALS
In general, Analogic's products are composed of Company-designed proprietary integrated circuits, printed circuit boards, and
precision resistor networks, manufactured by Analogic and others in accordance with Analogic's specifications, as well as
standard electronic integrated circuits, transistors, displays and other components. Most items procured are believed to be
available from more than one source. However, it may be necessary, if a given component ceases to be available, for Analogic
to modify its product design to adapt to a substitute component or to purchase new tooling to enable a new supplier to
manufacture the component which would result in additional expense and/or delays in product sales. Also, from time to time the
availability of certain electronic components has been disrupted. Accordingly, Analogic carries a substantial inventory of raw
material components in an effort to assure its ability to make timely delivery to its customers.
PATENTS AND LICENSES
The Company holds approximately 100 patents of varying duration issued in the United States which covers technology
developed by it. In many instances, the Company holds corresponding foreign patents. The Company regularly files domestic
patent applications and, where appropriate, foreign patents applications as well as continuations to cover both new and
improved methods, apparatus, processes, designs and products. At present, approximately 275 U.S. and foreign patents
applications are pending.
The Company also relies on a combination of trade secret, copyright and trademark laws, as well as contractual agreements to
safeguard its proprietary rights in technology and products. In seeking to limit access to sensitive information to the greatest
practical extent, the Company routinely enters into confidentiality and assignment of invention agreements with each of its
employees and nondisclosure agreements with its key customers and vendors.
Management believes that any legal protection afforded by patent, copyright, and trade secret laws are of secondary
importance as a factor in the Company's ability to compete. Future prospects are more a function of the continuing level of
excellence and creativity of engineers in developing products which satisfy customer needs, and the innovative skills,
competence and marketing and managerial skills of its personnel in selling those products. Moreover, the Company believes that
market positioning and rapid market entry are equally important to the success of its products. Management is of the opinion
that the loss of patent protection would not have a material effect on the Company's competitive position.
SEASONAL ASPECT OF BUSINESS
There is no material seasonal element to the Company's business, although plant closings in the summer, particularly in Europe,
tend to decrease the activity of certain buying sources during the first quarter of the Company's fiscal year.
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WORKING CAPITAL MATTERS
The Company does not carry a substantial inventory of finished goods but does carry a substantial inventory of raw material
components and work-in-process to enable it to meet its customers' delivery requirements. (See Note 4 of Notes to
Consolidated Financial Statements.)
MATERIAL CUSTOMERS
The Company's three largest customers in fiscal 2001, each of which is a significant and valued customer, were Philips, General
Electric and Toshiba, which accounted for approximately 22.6%, 10.5%, and 7.2%, respectively, of product and engineering
revenue for the fiscal year ended July 31, 2001. Loss of any one of these customers would have a material adverse effect upon
the Company's business. The Company does business with Philips through several of the Company's product groups and
subsidiaries, principally under OEM contracts. In addition, Philips funds research and development of some products to be
manufactured by Analogic for Philips. No other individual customer accounted for as much as 7.2% of the Company's product
and engineering revenue during fiscal 2001. The Company's ten largest customers, including Philips, General Electric and
Toshiba, accounted for approximately 62% of product and engineering revenue during fiscal 2001.
BACKLOG
The backlog of orders at July 31, 2001 was approximately $74.8 million compared with approximately $96.4 million at July 31,
2000. This decrease is principally due to lower demand for the Company's high frequency Automatic Test Equipment (ATE)
boards. Many of the orders in the Company's backlog permit cancellation by the customer under certain circumstances. To
date, Analogic has not experienced material cancellation of orders. The Company reasonably expects to ship most of its July
31, 2001 backlog during fiscal 2002.
GOVERNMENT CONTRACTS
The amount of the Company's business that may be subject to renegotiation of profits or termination of contracts or
subcontracts at the election of the Government is insignificant.
COMPETITION
Analogic is subject to competition based upon product design, performance, pricing, quality and service. Analogic believes that
its innovative engineering and product reliability have been important factors in its growth. While the Company tries to maintain
competitive pricing on those products which are directly comparable to products manufactured by others, in many instances,
Analogic's products will conform to more exacting specifications and carry a higher price than analogous products manufactured
by others.
Analogic's medical X-ray imaging systems are highly specialized. The Company considers its selection by its OEM customers
for design and manufacture of these products and its other medical products to be much less a function of other competitors in
the field than it is of the "make-or-buy" decision of its individual OEM customers. Many OEM customers and potential OEM
customers of the Company have the capacity to design and manufacture these products for themselves. In the Company's area
of expertise, the continued signing of new contracts indicates continued strength in the Company's relationship with its major
customers, although some of these customers continue to commit to shorter-term contracts.
Analogic's competitors include divisions of some larger, more diversified organizations, as well as several specialized companies.
Some of them have greater resources and larger staffs than Analogic. The Company believes that it is a leading manufacturer of
CT scanner and MRI electronic sub-systems in the medical industry.
RESEARCH AND PRODUCT DEVELOPMENT
Research and product development ("R&D") is a significant factor in Analogic's business. The Company maintains a constant
and comprehensive R&D program directed toward the creation of new
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products as well as toward the improvement and refinement of its present products and the expansion of their uses and
applications.
Company funds expended for R&D amounted to $41.3 million in fiscal 2001, $38.3 million in fiscal 2000, and $39.6 million in
fiscal 1999. Analogic intends to continue its emphasis on new product development. As of July 31, 2001, Analogic had
approximately 510 employees, including electronic development engineers, software engineers, physicists, mathematicians, and
technicians, engaged in research and product development activities. These individuals, in conjunction with the Company's
salespeople, also devote a portion of their time assisting customers in utilizing the Company's products, developing new uses for
these products, and anticipating customer requirements for new products.
During fiscal 2001, the Company capitalized $3.6 million of computer software testing and coding costs incurred after
technological feasibility was established. These costs will be amortized by the straight-line method over the estimated economic
life of the related products, generally three years. Amortization of capitalized software amounted to $1.6 million in fiscal 2001.
ENVIRONMENTAL PROTECTION
The Company does not anticipate any material effect upon its capital expenditures, earnings or competitive position resulting
from compliance by it and its subsidiaries with presently enacted or adopted Federal, State and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the protection of the environment.
EMPLOYEES
As of July 31, 2001, the Company had approximately 1,830 employees.
FINANCIAL INFORMATION ABOUT SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT REVENUE
The Company's operations are primarily within a single segment within the electronics industry (Medical Instrumentation
Technology Products). The operations encompass design, manufacture and sale of high technology, high-performance,
high-precision data acquisition, conversion (analog/digital) and signal processing instruments and systems to customers who
manufacture products for medical and industrial use. (See Note 16 of Notes to Consolidated Financial Statements)
Domestic and foreign revenues were $330.5 million and $30.0 million respectively for fiscal 2001 compared to $260.6 million
and $31.0 million in fiscal 2000 and $248.4 million and $24.6 million in fiscal 1999. (See Note 17 of Notes to Consolidated
Financial Statements for further information regarding foreign and domestic operations.)
Export revenue, primarily from sales of products and services to companies in Europe and Asia, amounted to approximately
$110.6 million (32%) in fiscal 2001 as compared to approximately $93.9 million (34%) in fiscal 2000, and approximately
$95.5 million (37%) in fiscal 1999. Management believes that the Company's export revenue is at least as profitable as its
domestic revenue. The Company's export revenue is primarily denominated in U.S. dollars.
Management does not believe the Company's foreign and export revenue is subject to significantly greater risks than its
domestic revenue.
ITEM 2. PROPERTIES
Analogic's principal executive offices and major manufacturing facility are located in a building owned by the Company, which it
constructed on its site in Peabody, Massachusetts. This facility consists of approximately 404,000 square feet of manufacturing,
engineering, and office space. The Company owns approximately 65 acres of land at this location, which will accommodate
future consolidation and expansion as required. The Company uses approximately 7 1/2 acres of this land for the Peabody
Marriott Hotel which is owned by a wholly owned subsidiary of the Company and managed by the Marriott Corporation.
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The Company and its subsidiaries own and lease various other office, manufacturing, engineering and sales facilities in both the
United States and abroad. The Company believes that its existing facilities are generally adequate to meet its current needs, and
that suitable additional or substitute space will be available on commercially reasonable terms when needed.
See Item 13 of this Report and Note 8 of Notes to Consolidated Financial Statements for further information concerning certain
of the aforesaid leases.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company or its subsidiaries or of which any of their property is the
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades on the Nasdaq Stock Market under the symbol: ALOG. The following table sets forth
the range of high and low prices for the Common Stock, as reported by Nasdaq during the quarterly periods indicated:
FISCAL YEAR HIGH LOW
----------- ------ ------
2001
First Quarter............................................. $44.75 $33.13
Second Quarter............................................ 47.88 33.88
Third Quarter............................................. 49.10 37.75
Fourth Quarter............................................ 50.00 37.43
2000
First Quarter............................................. $37.00 $23.00
Second Quarter............................................ 37.50 25.00
Third Quarter............................................. 50.25 32.56
Fourth Quarter............................................ 46.69 30.25
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As of August 31, 2001, there were approximately 842 holders of record of the Common Stock.
Dividends of $.07 per share were declared for each of the quarters of fiscal 2001 and fiscal 2000. The policy of the Company
is to retain sufficient earnings to provide funds for the operation and expansion of its business.
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED JULY 31
----------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Total net revenue............... $360,576 $291,581 $272,960 $288,598 $251,141
Total cost of sales............. 237,489 182,791 162,830 171,982 148,032
Gross margin.................... 123,087 108,790 110,130 116,616 103,109
Operating income................ 15,907 16,797 23,567 34,299 25,640
Net income...................... 15,231 14,066 19,185 23,771 18,769
Net income per common share:
Basic......................... $ 1.18 $ 1.10 $ 1.51 $ 1.88 $ 1.49
Diluted....................... 1.17 1.09 1.50 1.86 1.48
Cash dividends declared per
common share.................. $ 0.28 $ 0.28 $ 0.27 $ 0.23 $ 0.20
Number of common shares:
Basic......................... 12,950 12,817 12,683 12,614 12,554
Diluted....................... 13,055 12,883 12,791 12,793 12,702
Cash, cash equivalents, and
marketable securities......... $122,912 $116,374 $124,202 $121,800 $114,450
Working capital................. 224,499 212,977 205,872 200,718 186,131
Total assets.................... 352,519 333,201 312,699 301,053 280,628
Long-term liabilities........... 6,695 5,639 6,714 7,704 8,614
Stockholders' equity............ 300,137 277,761 265,635 249,817 226,895
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion provides an analysis of Analogic Corporation's financial condition and results of operations and should
be read in conjunction with the Consolidated Financial Statements and notes thereto included elsewhere in this Annual Report
on Form 10-K. The discussion below contains forward-looking statements within the meaning of the Securities Act of 1933 and
the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance, or achievements of Analogic Corporation to differ from the
projected results. All statements other than statements of historical fact the Company makes in this document or in any
document incorporated by reference are forward-looking. See "Business Environment and Risk Factors" on page 13.
RESULTS OF OPERATIONS
FISCAL 2001 COMPARED TO FISCAL 2000
Product revenue for fiscal 2001 was $320.1 million as compared with $255.2 million in fiscal 2000, an increase of $64.9 million
or 25%. The increase was principally due to the increase in sales of Medical Technology Products of $70.9 million or 39%,
which can be attributed to increased demand for fully featured mid-range Computed Tomography (CT) systems, digital
radiography systems, patient monitors, and advanced cardiovascular information management systems, and an increase in sales
of $4.1 million or 15%, in Industrial Technology Products, due to demand for the Company's high frequency Automatic Test
Equipment
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(ATE) boards. This increase in product revenue was partially offset by a decrease in Signal Processing Technology Products of
$10.1 million or 21%, caused by a dramatic downturn in demand for its network access boards used in the Internet Telephony
market.
Engineering revenue for fiscal 2001 was $27.7 million compared to $23.3 million in fiscal 2000, an increase of 19%. The
increase of $4.4 million was primarily due to increase in projects for developing imaging equipment.
Other revenues of $12.8 million and $13.0 million represent revenue from the Company's Hotel operation for fiscal 2001 and
2000, respectively.
Cost of product sales was $204.7 million in fiscal 2001 compared to $159.2 million in fiscal 2000. Cost of product sales as a
percentage of product revenue was 64.0% in fiscal 2001, as compared to 62.4% in fiscal 2000. The increase was primarily due
to higher manufacturing costs and changes in product mix.
Engineering cost of sales was $23.2 million in fiscal 2001 as compared to $17.4 million in fiscal 2000. The total cost of
engineering sales as a percentage of engineering revenue increased from 75% in fiscal 2000 to 84% in fiscal 2001. The increase
was mainly attributable to higher costs of projects for developing imaging equipment.
Other costs of sales were $6.4 million and $6.2 million from the Company's Hotel operation for fiscal 2001 and 2000,
respectively.
Asset impairment charges of $3.2 million in fiscal 2001 relates to Anatel, the Company's telecommunications subsidiary. The
writedown of certain assets to their estimated net realizable value was related to the Voice over Internet Protocol business of
Anatel. The estimated fair value of these assets was based on various methodologies, including a review of the business outlook
for the telecommunications market and a comparison of current asset carrying value to projected undiscounted cash flow.
R&D expenses were $41.3 million in fiscal 2001, or 11% of total revenue, compared to $38.3 million or 13% of total revenue
in fiscal 2000. The increase of $3.0 million was due to research and development activities across all the Company's product
lines. The decline in the percentage from 13% to 11% was due to higher revenue for the period.
Selling and marketing expenses were $33.1 million in fiscal 2001 versus $26.2 million in fiscal 2000, an increase of $6.9 million
or 26%. The increase was primarily due to the Company's subsidiary, Camtronics, increasing its sales personnel and marketing
programs and switching to selling products directly to the end users from its prior practice of selling through OEMs; $1.2 million
of the increase was due to Sky Computer, a subsidiary, offering a more "total solution" sales package and the remaining
increase of $2.0 million was primarily associated with additional selling and marketing efforts to support the Company's revenue
growth. As a percentage of total revenues, selling expenses remained unchanged at 9%.
General and administrative expenses were $32.8 million in fiscal 2001 compared to $27.5 million in fiscal 2000. As a
percentage of total revenues, general and administrative expenses were 9% in both fiscal 2001 and 2000. The increase of $5.3
million was primarily due to higher personnel costs of $3.5 million and $1.8 million of other costs to support the Company's
growth.
Computer software costs of $3.6 million and $3.0 million were capitalized in fiscal 2001 and 2000, respectively. Amortization
of capitalized software amounted to $1.6 million and $1.8 million in fiscal 2001 and 2000, respectively, and is included in
research and product development expenses.
Interest income, net for fiscal 2001 was $5.4 million as compared to $5.7 million for fiscal 2000. The decrease was primarily
due to $0.3 million in interest income recorded in fiscal 2000 from a real estate tax abatement.
The Company recorded net income from its equity in unconsolidated subsidiaries of $1.9 million in fiscal 2001 as compared to
losses of $1.3 million in fiscal 2000. This improvement was mainly due to a reduction in the losses from its investment in
Enhanced CT Technology LLC, from $2.2 million loss in fiscal 2000 to $1.8 million income in fiscal 2001; in addition the
Company recognized a loss of $0.1 million in fiscal 2001
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from its investment in Shenzhen Anke High-Tech Co., Ltd. as compared to a gain in fiscal 2000 of $0.9 million. (See Note 6 of
Notes to Consolidated Financial Statements).
Other expense was $0.6 million in fiscal 2001, as compared with $0.2 million in fiscal 2000. The increase in other expense is
mainly due to a write off of approximately $0.4 million which reflect the difference between the Company's investment cost and
the current market value of the restricted securities the Company received during fiscal 2000 as a final distribution of shares in a
publicly traded company made by a limited partnership in which the Company had invested.
The effective tax rate decreased to 30% in fiscal 2001 as compared to 31% in fiscal 2000.
Net income for fiscal 2001 was $15.2 million as compared to $14.1 million for fiscal 2000. Net income for fiscal 2001 includes
an asset impairment charge of $3.2 million related to the Company's telecommunications subsidiary, Anatel. Basic earnings per
share were $1.18 compared to $1.10 for fiscal 2000. Diluted per-share earnings were $1.17 compared to $1.09 for fiscal
2000.
FISCAL 2000 COMPARED TO FISCAL 1999
Product revenue for fiscal 2000 was $255.2 million as compared to $242.9 million in fiscal 1999, an increase of $12.3 million
or 5.0%. The increase was principally due to an increase in sales of Industrial Technology Products of $11.4 million, as a result
of higher demand for the Company's high frequency Automatic Test Equipment (ATE) boards and an increase in sales of $6.4
million in the Signal Processing Technology Products primarily due to sales of EXACT (Explosive Assessment Computed
Tomography) systems. This increase was offset by a decrease of $5.4 million in revenues from Medical Technology Products
mainly related to its enterprise-wide information systems for cardiac patient data.
Engineering revenue for fiscal 2000 was $23.3 million compared to $18.1 million in fiscal 1999, an increase of 29%. This
increase was primarily due to revenues generated from designs of the Company's direct conversion series of amorphous
selenium based, x-ray, flat panel detectors.
Other revenues of $13.0 million and $12.0 million represents revenue from the Company's Hotel operation for fiscal 2000 and
1999, respectively. The increase was due to an increase in occupancy and room rates over the prior year.
Cost of product sales were $159.2 million in fiscal 2000 compared to $144.1 million in fiscal 1999, an increase of $15.1 million
or 11%. Cost of product sales as a percentage of product revenue was 62.4% in fiscal 2000 compared to 59.3% in fiscal
1999, an increase of 3%. The increase was primarily due to reduction in selling prices and higher manufacturing costs.
Cost of engineering sales was $17.4 million in fiscal 2000 as compared to $12.6 million in fiscal 1999. Total cost of engineering
sales as a percentage of engineering revenue increased from 70% in fiscal 1999 to 75% in fiscal 2000.
Operating costs associated with the Hotel for fiscal years 2000 and 1999 were $6.2 million and $6.1 million, respectively.
Gross margins for the hotel operation increased from 49% in fiscal 1999 to 52% in fiscal 2000, mainly due to increased room
rates.
Research and product development ("R&D") expenses were $38.3 million in fiscal 2000 compared to $39.6 million in fiscal
1999, a decrease of $1.3 million or 3%. The decrease was due to lower R&D expenses of $1.4 million in the Company's B-K
subsidiary related to its ultrasound products. This decrease was part of an overall cost reduction plan at the subsidiary in fiscal
2000 to improve profitability. Accordingly, the Company's R&D expenses as a percentage of total revenue decreased from
15% in fiscal 1999 to 13.1% in fiscal 2000.
Selling and marketing expenses were $26.2 million in fiscal 2000 versus $25.7 in fiscal 1999, an increase of $0.5 million or 2%.
The increase was primarily due to increase in sales personnel and marketing programs of $0.7 million at the Company's
Camtronic's subsidiary, which was changing its sales strategy by selling products directly to end users rather than its prior
practice of selling through OEM's; and its Sky Computer subsidiary of $0.7 million, which is offering a more "total solution"
sales package. This was partially offset by
10
$1.4 million by reduced staffing at the Company's B-K subsidiary, which was reducing operating expenses to improve
profitability. As a percentage of total revenues, selling expenses remained unchanged at 9%.
General and administrative ("G&A") expenses were $27.5 million in fiscal 2000 compared to $21.2 million in fiscal 1999, an
increase of $6.3 million or 30%. As a percentage of revenues, G&A expenses increased from 8% in fiscal 1999 to 9% in fiscal
2000. The increase was due primarily to $1.7 million of additional expenses associated with the Company's Canadian
subsidiary, ANRAD, acquired in June 1999; increased personnel expenses; additions to the bad debt provision; and operating
costs associated with a new Enterprise Resource Planning (ERP) system. These were partially offset by a decrease of $0.6
million as a result of decreased staffing, to increase profitability in the Company's B-K subsidiary.
Net interest income for fiscal 2000 was $5.7 million as compared to $6.4 million for fiscal 1999, a decrease of $0.7 million or
11%. The decrease was primarily due to interest on a real estate tax abatement recorded in fiscal 2000 of $0.3 million versus
$0.8 million recorded in fiscal 1999.
The Company recorded net losses from its equity in unconsolidated subsidiaries of $1.3 million in fiscal 2000 as compared to
losses of $5.1 million is fiscal 1999, a net decrease in losses of $3.8 million. (See Note 6 of Notes to Consolidated Financial
Statements.) This decrease was mainly due to a reduction in the losses from its investment in Enhanced CT Technology LLC,
from $4.8 million in fiscal 1999 to $2.2 million in fiscal 2000; in addition the Company recognized income of $0.9 million in
fiscal 2000 from its investment in Shenzhen Anke High-Tech Co., Ltd. as compared to a loss of $0.4 million in fiscal 1999.
In fiscal 2000, the Company received the final distribution of 1,771,802 shares of restricted securities in a publicly traded
company from a limited partnership. At July 31, 2000, the Company recognized a loss of approximately $0.1 million on the
value of these shares. (See Note 6 of Notes to the Consolidated Financial Statements.)
The Company's effective tax rate increased from 20% in fiscal 1999 to 31% in fiscal 2000, primarily as a result of net losses of
foreign subsidiaries for which there were no tax benefits in fiscal 2000. Also, in fiscal 1999 the effective tax rate reflected the
benefit of a reversal of prior year tax provisions.
Minority interest in the net income of the Company's consolidated subsidiary, Camtronics, in fiscal 2000 amounted to $0.5
million compared to $0.8 million for fiscal 1999. During fiscal 2000, the founders and employees of Camtronics exercised their
rights to sell their shares back to Camtronics. Subsequent to these transactions, the Company's share in Camtronics increased
to approximately 81%. (See Note 2 of Notes to Consolidated Financial Statements.)
Net income for fiscal 2000 was $14.1 million as compared to net income of $19.2 million for the same period last year. Basic
per-share earnings were $1.10 compared to $1.51 for fiscal 1999. Diluted per-share earnings were $1.09 compared to $1.50
for fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and marketable securities totaled $122.9 million and $116.4 million at July 31, 2001 and 2000,
respectively. Working capital was $224.5 million and $213.0 million at July 31, 2001 and 2000, respectively. The Company's
balance sheet at July 31, 2001, reflects a current ratio of 6.1 to 1, compared to 6.0 to 1 at July 31, 2000. Liquidity is sustained
principally through funds provided from operations, with short-term time deposits and marketable securities available to provide
additional sources of cash.
The Company faces limited exposure to financial market risks, including adverse movements in foreign currency exchange rates
and changes in interest rates. These exposures may change over time as business practices evolve and could have a material
adverse impact on the Company's financial results. The Company's primary exposure has been related to local currency revenue
and operating expenses in Europe.
The carrying amounts reflected in the consolidated balance sheets of cash and cash equivalents, trade receivables, and trade
payables approximate fair value at July 31, 2001 due to the short maturities of these instruments.
11
The Company maintains a bond investment portfolio of various issuers, types, and maturities. The Company's cash and
investments include cash equivalents, which the Company considers to be investments purchased with original maturities of three
months or less. Investments having original maturities in excess of three months are stated at amortized cost, which
approximates fair value, and are classified as available for sale. A rise in interest rates could have an adverse impact on the fair
value of the Company's investment portfolio. The Company does not currently hedge these interest rate exposures.
Cash flow provided from operations was $27.5 million in fiscal 2001, $15.0 million in fiscal 2000 and $37.5 million in fiscal
1999. The increase in cash flows from operations in fiscal 2001 over fiscal 2000 was primarily the result of an increase in
operating income, a decrease in working capital balances, and an increase in other non-cash items. The decrease in working
capital balances were primarily due to an increase in trade receivables in fiscal 2001 related primarily to higher sales, and a
decrease in accounts payable.
Net cash used in investing activities was $8.0 million in fiscal 2001 compared to net cash used in investing activity of $12.8
million in fiscal 2000, and $28.7 million in fiscal 1999. The decrease was primarily due to lower investments in advances to
affiliated companies, net proceeds of marketable securities and increase in property, plant and equipment of $4.8 million
primarily related to the construction of an addition to an existing building by the Company's wholly owned subsidiary,
Camtronics.
Net cash used by financing activities was $2.8 million in fiscal 2001, $2.9 million in fiscal 2000 and $6.3 million in fiscal 1999.
The decrease was primarily due to higher proceeds from stock options exercised.
Minority interest in subsidiary decreased $4.3 million as a result of the Company acquiring the remaining 19% interest in
Camtronics.
The Company believes that its balances of cash and cash equivalents, marketable securities and cash flows expected to be
generated by future operating activities will be sufficient to meet its cash requirements over the next 12 months.
IMPACT OF INFLATION
Overall, inflation has not had a material impact on the Company's operations during the past three fiscal years.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard
("SFAS") No. 141, "Business Combinations" ("SFAS No. 141"). SFAS No. 141 requires that all business combinations be
accounted for under the purchase method only and that certain acquired intangible assets in a business combination be
recognized as assets apart from goodwill. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001
and for all business combinations accounted for by the purchase method for which the date of acquisition is after June 30, 2001.
Management has reviewed SFAS No. 141 and does not believe it will have a material effect on its financial position and results
of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets"("SFAS No. 142"), which requires that
ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that intangible assets other than
goodwill be amortized over their useful lives. The provisions of SFAS No. 142 will be effective for fiscal years beginning after
December 15, 2001, and will thus be adopted by the Company, as required, on August 1, 2002. Management has reviewed
SFAS No. 142 and does not believe it will have a material effect on its financial position and results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS 144 supercedes FASB Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long Lived Assets to Be Disposed of ". SFAS 144 applies to all long-lived assets (including discontinued
operations) and consequently amends Accounting Principles
12
Board Opinion No. 30 (APB 30), "Reporting Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business." SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and will
thus be adopted by the Company, as required, on August 1, 2002. Management is currently determining what effect, if any,
SFAS 144 will have on its financial position and results of operations.
BUSINESS ENVIRONMENT AND RISK FACTORS
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contain statements which, to the extent that they are not recitation of historical facts,
constitute "forward looking statements" pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements, including statements about product development, market and
industry trends, strategic initiatives, regulatory approvals, sales, profits, expenses, price trends, research and development
expenses and trends, and capital expenditures involve risk and uncertainties and actual events and results may differ significantly
from those indicated in any forward-looking statements as a result of a number of important factors, including those discussed
below.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION WITH RESPECT TO ANALOGIC COMMON STOCK. ADDITIONAL RISKS NOT
PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR
BUSINESS. ANY OF THESE RISKS COULD HAVE A MATERIAL AND NEGATIVE EFFECT ON OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
BECAUSE A SIGNIFICANT PORTION OF OUR REVENUE CURRENTLY COMES FROM A SMALL NUMBER
OF CUSTOMERS, ANY DECREASE IN REVENUE FROM THESES CUSTOMERS COULD HARM OUR
OPERATING RESULTS.
We depend on a small number of customers for a large portion of our business, and changes in our customers' orders may have
a significant impact on our operating results. If a major customer significantly reduces the amount of business it does with us,
there would be an adverse impact on our operating results. The following table sets forth the percentages of our total net sales
for our three largest customers in any of the last three fiscal years and the percentage of our total net sales to our ten largest
customers in those years:
YEAR ENDED JULY 31,
------------------------
2001 2000 1999
---- ---- ----
Philips................................................. 22% 16% 18%
General Electric........................................ 11% 10% 8%
Toshiba................................................. 7% 9% 9%
Ten largest customers as a group........................ 62% 60% 60%
Although we are seeking to broaden our customer base, we will continue to depend on sales to a relatively small number of
major customers. Because it often takes significant time to replace lost business, it is likely that our operating results would be
adversely affected if one or more of our major customers were to cancel, delay or reduce significant orders in the future. Our
customer agreements typically permit the customer to discontinue future purchases after timely notice.
In addition, we generate significant accounts receivable in connection with the products we sell and the services we provide to
our major customers. Although our major customers are large corporations, if one or more of our customers were to become
insolvent or otherwise be unable to pay for our services, our operating results and financial condition could be adversely
affected.
COMPETITION FROM EXISTING OR NEW COMPANIES IN THE MEDICAL INSTRUMENTATION
TECHNOLOGY INDUSTRY COULD CAUSE US TO EXPERIENCE DOWNWARD PRESSURE ON PRICES,
FEWER CUSTOMER ORDERS, REDUCED MARGINS, THE INABILITY TO TAKE ADVANTAGE OF NEW
BUSINESS OPPORTUNITIES AND THE LOSS OF MARKET SHARE.
13
We operate in a highly competitive industry. We are subject to competition based upon product design, performance, pricing,
quality and services and we believe our innovative engineering and product reliability have been important factors in our growth.
While we try to maintain competitive pricing on those products which are directly comparable to products manufactured by
others, in many instances our products will conform to more exacting specifications and carry a higher price than analogous
products manufactured by others.
Our competitors include divisions of some larger, more diversified organizations as well as several specialized companies. Some
of them have greater resources and larger staffs than we have.
Many of our OEM customers and potential OEM customers have the capacity to design and manufacture the products we
manufacture for themselves. We face competition from research and product development groups and the manufacturing
operations of our current and potential customers, who continually evaluate the benefits of internal research and product
development and manufacturing versus outsourcing.
WE DEPEND ON OUR SUPPLIERS, SOME OF WHICH ARE THE SOLE SOURCE FOR OUR COMPONENTS,
AND OUR PRODUCTION WOULD BE SUBSTANTIALLY CURTAILED IF THESE SUPPLIERS ARE NOT ABLE
TO MEET OUR DEMANDS AND ALTERNATIVE SOURCES ARE NOT AVAILABLE.
We order raw materials and components to complete our customers' orders, and some of these raw materials and components
are ordered from sole-source suppliers. Although we work with our customers and suppliers to minimize the impact of
shortages in raw materials and components, we sometimes experience short-term adverse effects due to price fluctuations and
delayed shipments. In the past, there have been industry-wide shortages of electronics components. If a significant shortage of
raw materials or components were to occur, we may have to delay shipments or pay premium pricing, which would adversely
affect our operating results. In some cases, supply shortages of particular components will substantially curtail production of
products using these components. We are not always able to pass on price increases to our customers. Accordingly, some raw
material and component price increases could adversely affect our operating results. We also depend on a small number of
suppliers, some of whom are affiliated with customers or competitors and others of whom may be small, poorly financed
companies, for many of the other raw materials and components that we use in our business. If we are unable to continue to
purchase these raw materials and components from our suppliers, our operating results would be adversely affected. Because
many of our costs are fixed, our margins depend on our volume of output at our facilities and a reduction in volume will
adversely affect our margins.
IF WE ARE LEFT WITH EXCESS INVENTORY, OUR OPERATING RESULTS WILL BE ADVERSELY
AFFECTED.
Because of long-lead times and specialized product designs, we typically purchase components and manufacture products for
customer orders or in anticipation of customer orders based on customer forecasts. For a variety of reasons, such as decreased
end-user demand for the products we are manufacturing, our customers may not purchase all of the products we have
manufactured or for which we have purchased components. In either event, we would attempt to recoup our materials and
manufacturing costs by means such as returning components to our vendors, disposing of excess inventory through other
channels or requiring our OEM customers to purchase or otherwise compensate us for such excess inventory. Some of our
significant customer agreements do not give us the ability to require our OEM customers to do this. To the extent we are
unsuccessful in recouping our material and manufacturing costs, not only would our net sales be adversely affected, but also our
operating results would be disproportionately adversely affected. Moreover, carrying excess inventory would reduce the
working capital we have available to continue to operate and grow our business.
UNCERTAINTIES AND ADVERSE TRENDS AFFECTING OUR INDUSTRY OR ANY OF OUR MAJOR
CUSTOMERS MAY ADVERSELY AFFECT OUR OPERATING RESULTS.
Our business depends primarily on a specific segment of the electronics industry, medical instrumentation technology products,
which is subject to rapid technological change and pricing and margin pressure. This
14
industry has historically been cyclical and subject to significant downturns characterized by diminished product demand, rapid
declines in average selling prices and production over-capacity. In addition, changes in government policy relating to
reimbursement for the purchase and use of medical capital equipment could also affect our sales. Our customers' markets are
also subject to economic cycles and are likely to experience recessionary periods in the future. The economic conditions
affecting our industry, in general, or any of our major customers, in particular, may adversely affect our operating results. Our
businesses outside the medical instrumentation technology product sector are subject to the same or greater technological and
cyclical pressures.
OUR CUSTOMERS' DELAY OR INABILITY TO OBTAIN ANY NECESSARY UNITED STATES OR FOREIGN
REGULATORY CLEARANCES OR APPROVALS FOR THEIR PRODUCTS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.
Our products are used by a number of our customers in the production of medical devices that are the subject of a high level of
regulatory oversight. A delay or inability to obtain any necessary United States or foreign regulatory clearances or approvals for
products could have a material adverse effect on our business. The process of obtaining clearances and approvals can be costly
and time-consuming. There is a further risk that any approvals or clearances, once obtained, may be withdrawn or modified.
Medical devices cannot be marketed in the United States without clearance or approval by the FDA. Medical devices sold in
the United States must also be manufactured in compliance with FDA Good Manufacturing Practices, which regulate the design,
manufacture, packing, storage and installation of medical devices. Moreover, medical devices are required to comply with FDA
regulations relating to investigational research and labeling. States may also regulate the manufacture, sale and use of medical
devices. Medical device products are also subject to approval and regulation by foreign regulatory and safety agencies.
OUR ANNUAL AND QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS, WHICH
COULD AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
Our annual and quarterly results may vary significantly depending on various factors, many of which are beyond our control, and
may not meet the expectations of securities analysts or investors. If this occurs, the price of our Common Stock would likely
decline.
These factors include:
- variations in the timing and volume of customer orders relative to our manufacturing capacity;
- introduction and market acceptance of our customers' new products;
- changes in demand for our customers' existing products;
- the timing of our expenditures in anticipation of future orders;
- effectiveness in managing our manufacturing processes;
- changes in competitive and economic conditions generally or in our customers' markets;
- changes in the cost or availability of components or skilled labor; and
- foreign currency exposure.
As is the case with many technology companies, we typically ship a significant portion of our products in the last month of a
quarter. As a result, any delay in anticipated sales is likely to result in the deferral of the associated revenue beyond the end of a
particular quarter, which would have a significant effect on our operating results for that quarter. In addition, most of our
operating expenses do not vary directly with net sales and are difficult to adjust in the short term. As a result, if net sales for a
particular quarter were below our expectations, we could not proportionately reduce operating expenses for that quarter, and,
therefore, that revenue shortfall would have a disproportionate adverse effect on our operating results for that quarter.
15
LOSS OF ANY OF OUR KEY PERSONNEL COULD HURT OUR BUSINESS BECAUSE OF THEIR
INDUSTRY EXPERIENCE AND THEIR TECHNOLOGICAL EXPERTISE.
We operate in a highly competitive industry and depend on the services of our key senior executives and our technological
experts. The loss of the services of one or several of our key employees or an inability to attract, train and retain qualified and
skilled employees, specifically engineering and operations personnel, could result in the loss of customers or otherwise inhibit
our ability to operate and grow our business successfully.
IF WE ARE UNABLE TO MAINTAIN OUR TECHNOLOGICAL EXPERTISE IN RESEARCH AND PRODUCT
DEVELOPMENT AND MANUFACTURING PROCESSES WE WILL NOT BE ABLE TO SUCCESSFULLY
COMPETE.
We believe that our future success will depend upon our ability to provide research and product development and
manufacturing services that meet the changing needs of our customers. This requires that we successfully anticipate and respond
to technological changes in design and manufacturing processes in a cost-effective and timely manner. As a result, we continually
evaluate the advantages and feasibility of new product design and manufacturing processes. We cannot, however, assure you
that our development efforts will be successful.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company places its cash investments in high credit quality financial instruments and, by policy, limits the amount of credit
exposure to any one financial institution. The Company faces limited exposure to financial market risks, including adverse
movements in foreign currency exchange rates and changes in interest rates. These exposures may change over time as business
practices evolve and could have a material adverse impact on the Company's financial results. The Company's primary
exposure has been related to local currency revenue and operating expenses in Europe.
The Company maintains a bond investment portfolio of various issuers, types, and maturities. The Company's cash and
investments include cash equivalents, which the Company considers to be investments purchased with original maturities of three
months or less. Investments having original maturities in excess of three months are stated at amortized cost, which
approximates fair value, and are classified as available for sale.
The Company's three largest customers, each of which is a significant and valued customer, were Philips, General Electric and
Toshiba, which accounted for approximately 22.6%, 10.5%, and 7.2%, respectively, of product and engineering revenue for
the fiscal year ended July 31, 2001. Loss of any one of these customers would have a material adverse effect upon the
Company's business.
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under PART IV, Item 14 in this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the directors of the Company as of August 31, 2001.
DIRECTOR EXPIRATION OTHER OFFICES HELD AT
NAME AGE SINCE OF TERM* AUGUST 31, 2001
---- --- -------- ---------- ---------------------
Bernard M Gordon..................... 74 1969 2004 Chairman of the Board
Thomas J. Miller, Jr................. 44 1999 2003 President and Chief
Executive Officer
John A. Tarello...................... 70 1979 2004 --
M. Ross Brown........................ 67 1984 2002 --
Edward F. Voboril.................... 58 1990 2002 --
Gerald L. Wilson..................... 62 1980 2004 --
Bruce W. Steinhauer.................. 68 1993 2003 --
Julian Soshnick...................... 69 2001 2003 --
Michael T. Modic..................... 51 2001 2002 --
* The Board of Directors is divided into three classes, each having a three year term of office. The term of one class expires
each year. Directors hold office until the Annual Meeting of Stockholders held during the year noted and until their respective
successors have been duly elected and qualified.
The following table lists the executive officers of the Company as of August 31, 2001.
DATE SINCE OFFICE
NAME AGE OFFICE HELD HAS BEEN HELD
---- --- ----------- -----------------
Bernard M Gordon............... 74 Chairman of the Board(1) 1969
Thomas J. Miller, Jr........... 44 President and Chief Executive 1999
Officer(2)
Lothar Koob.................... 53 Executive Vice President(3) 2001
John J. Millerick.............. 53 Senior Vice President, Chief 2000
Financial Officer and Treasurer
Gene M. Bauer.................. 52 Vice President, General Counsel 2000
and Clerk(4)
(1) Mr. Gordon retired as Chief Executive Officer on February 1, 2001.
(2) Mr. Miller assumed the title of Chief Executive Officer on February 1, 2001
(3) Mr. Koob joined the Company as Executive Vice President in January 2001.
(4) Mr. Bauer joined the Company as Vice President of Legal Affairs in December 2000 and was elected to this position in in
January 2001. Mr. Bauer resigned from the Company in October 2001.
Each such officer is elected for a term continuing until the first meeting of the Board of Directors following the annual meeting of
stockholders, and in the case of the President, Treasurer and Clerk, until their successors are chosen and qualified; provided
that the Board may remove any officer with or without cause.
There are no family relationships among any of the directors or executive officers of the Company.
Bernard M. Gordon has been the Chairman of the Board of Directors of the Company since 1969 and, was President from
1980 to 1995. Mr. Gordon also is Chairman of the Board of Directors of the Lahey Clinic.
17
Thomas J. Miller, Jr. joined the Company as President and Chief Operating Office in October 1999 and was elected President
and Chief Executive Officer in February 1, 2001. Mr. Miller was the President and CEO of Carl Zeiss, Inc. from 1997 to
1999. Prior to Carl Zeiss, Inc., Mr. Miller was Group Vice President, Imaging Systems, for Siemens Medical Systems, Inc.
from 1995 to 1997. He also is a director of Photoelectron Corporation.
Julian Soshnick joined the Company in October 1981 as General Counsel and served as a Vice President since July 1982 and
Clerk since 1988 before retiring from these positions in January 2001 upon his election as a Director. Mr. Soshnick was
reappointed Vice President and General Counsel in October 2001.
John A. Tarello retired from Analogic in November 1999. Mr. Tarello was the Company's Controller from May 1970 through
July 1982, a Vice President of the Company from 1971 to 1980, a Senior Vice President since 1980, and Treasurer since
1985. He also is a director of Spire Corporation.
M. Ross Brown retired from Analogic in November 1999. Mr. Brown joined the Company in August 1984 and was
responsible for managing its manufacturing operations. He was elected a Vice President in October 1984.
Edward F. Voboril has been President and CEO of Wilson Greatbatch Technologies of Clarence, New York since December
1990. He was elected Chairman of the Board of that company in 1997.
Dr. Gerald L. Wilson is the former Dean of the School of Engineering at Massachusetts Institute of Technology and the
Vannevar Bush Professor of Engineering at the Massachusetts Institute of Technology. Dr. Wilson has served on MIT's faculty
since 1965 and currently serves as a Professor of Electrical and Mechanical Engineering. He is a trustee of NSTAR
Corporation and a director of SATCON Corporation.
Dr. Bruce W. Steinhauer became the President and Chief Executive Officer of the Regional Medical Center at Memphis in
1998. Prior to this position, he was the Chief Executive Officer of the Lahey-Hitchcock Clinic from 1992 to 1998. Prior to that,
he was Senior Vice President for Medical Affairs and Chairman of the Board of Governors for the Medical Group Practice of
the Henry Ford Hospital from 1988 to 1992.
Dr. Michael T. Modic has been Chairman of the Division of Radiology at the Cleveland Clinic Foundation in Cleveland, Ohio
since 1989 and has been on its Board of Governors since 2000. Dr. Modic also has been a Professor of Radiology at the Ohio
State University since 1993.
Gene M. Bauer joined Analogic as Vice President of Legal Affairs in December, 2000 and was elected Vice President and
Clerk as well as being appointed General Counsel in January 2001. From 1995 to 2000, Mr. Bauer was employed by Copley
Pharmaceutical, Inc., first as Vice President, General Counsel and Secretary and, since 1997, as Executive Vice President,
General Counsel and Secretary. Mr. Bauer resigned from the Company in October 2001.
Lothar Koob joined Analogic as Executive Vice President in January 2001. From 1998 to 2001 Mr. Koob was President of
Humphrey Systems, a subsidiary of Carl Zeiss, Inc. Prior to that time, Mr. Koob was employed by Siemens Medical
Engineering Group in various positions including General Manager of ultrasound business (1992 to 1998) and General Manager
of the magnetic resonance business (1989 to 1992).
John J. Millerick joined the Company as Senior Vice President, Chief Financial Officer and Treasurer in January 2000. Mr.
Millerick was previously Senior Vice President and Chief Financial Officer of CalComp Technology Inc. from 1996 to 1999.
Prior to CalComp Technology Inc., Mr. Millerick was Vice President-Finance of Digital Equipment Corporation's Personal
Computer Unit from 1994 to 1995. Before joining Digital Equipment Corporation, Mr. Millerick served in several management
positions at Wang Laboratories, leaving as Vice President-Corporate Controller and Acting Chief Financial Officer.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Upon review of the forms and representations furnished to the Company pursuant to Item 405 of Regulation S-K, the Company
identifies Dr. Michael T. Modic as the only "reporting person" (as defined in said Item 405) who failed to file on a timely basis a
report required by Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"). Dr. Modic filed the Form 3
required upon his election as a Director 10 days late; Dr. Modic had no transactions to report.
18
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the Chief Executive Officer and each of the next four most
highly compensated executive officers of the Company during the last fiscal year ("Named Officers") for services rendered in all
capacities for the last three fiscal years.
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------------------------------
--------------------------------------- RESTRICTED ALL OTHER
NAME AND FISCAL OTHER TOTAL ANNUAL STOCK AWARDS STOCK OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUSES (A) COMPENSATION (B) (C) (D) (E)
------------------ ------ -------- -------- -------- ------------ ------------ ------------- ------------
Bernard M. Gordon.......... 2001 $350,000 $ 30,000 $ 10,800 $390,800 -- -- $ --
Chairman 2000 350,000 25,000 3,900 378,900 -- -- 2,900
1999 350,000 25,000 3,500 378,500 -- -- 3,400
Thomas J. Miller, Jr.(1)... 2001 $400,000 $ -- $ 10,800 $410,800 -- -- $7,400
President and Chief 2000 350,000 200,000 24,500 574,500 $1,511,280 -- --
Executive Officer 1999 -- -- -- -- -- -- --
John J. Millerick (2)...... 2001 $220,000 $ 60,000 $ 10,800 $290,800 $ 726,250 10,000 $7,300
Senior Vice President, 2000 114,000 -- 2,700 116,700 -- 20,000 --
Chief Financial Officer 1999 -- -- -- -- -- -- --
and Treasurer
Lothar Koob (3)............ 2001 $155,000 $ 50,000 $122,500 $327,500 $ 862,500 20,000 $5,100
Executive Vice President 2000 -- -- -- -- -- -- --
1999 -- -- -- -- -- -- --
Gene M. Bauer (4).......... 2001 $143,800 -- $ 7,200 $151,000 $ 862,500 20,000 $5,100
Vice President and 2000 -- -- -- -- -- -- --
General Counsel 1999 -- -- -- -- -- -- --
Notes to Compensation Table
(1) Mr. Miller joined the Company in October 1999.
(2) Mr. Millerick joined the Company in January 2000.
(3) Mr. Koob joined the Company in January 2001.
(4) Mr. Bauer joined the Company in December 2000. (A) Represents car allowance and relocation assistance for Mr. Koob
in fiscal 2001 and for Mr. Miller in fiscal 2000. (B) Represents stock grants under the Company's Key Employee Stock Bonus
Plans, pursuant to which Common Stock of the Company may be granted to key employees to encourage them to exert their
best efforts on behalf of the Company. Each recipient of the Common Stock pursuant to the Bonus Plan is required to execute a
noncompetition agreement in a form satisfactory to the Company. The Bonus Plan is administered by a committee appointed by
the Board of Directors consisting of the Chairman of the Board and three other Directors who are not eligible to participate in
the Bonus Plan. Generally, the Common Stock granted pursuant to the Bonus Plan is not transferable for a period of three years
from the date of the grant and is subject to a risk of forfeiture in the event that the recipient leaves the employ of the Company
during this period for any reason. Generally, during the subsequent four-year period, the transfer restrictions will lapse with
respect to 25% of the Common Stock for each year the recipient remains in the employ of the Company. Failure to remain in
the Company's employ during all of the subsequent four-year period will result in a forfeiture of shares as to which restrictions
on disposition still exist. The Common Stock granted pursuant to the Bonus Plan is held in escrow by the Company until such
restrictions on disposition lapse. However, while in escrow, the recipient has the right to vote such shares of Common Stock
and to receive any cash dividends thereon. The Board of Directors, acting upon the recommendation of the Stock Bonus Plan
Committee, may at the time of grant designate a different schedule upon which the transfer restrictions lapse.
(C) As of July 31, 2001, the following table reflects stock bonus awards for which transfer restrictions have not yet lapsed.
MARKET VALUE AT
SHARES DATE OF GRANT
------ ---------------
Thomas J. Miller, Jr........................................ 60,000 $1,511,280
Lothan Koob................................................. 20,000 862,500
Gene M. Bauer............................................... 20,000 862,500
John J. Millerick........................................... 20,000 726,250
(D) Represents options granted pursuant to the Key Employee Stock Option Plan dated June 11, 1998.
(E) Represents Profit Sharing distribution and 401(k) match for all Officers listed.
19
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock option grants to the Named Officers in fiscal 2001 and their
fiscal year end option holdings:
INDIVIDUAL GRANT (1)
-------------------------------------------------
PERCENT OF
NUMBER TOTAL POTENTIAL REALIZABLE VALUE
OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------------
NAME GRANTED YEAR SHARE DATE 5% 10%
---- ---------- ----------- --------- ---------- ----------- -------------
Bernard M. Gordon.... -- -- -- -- -- --
Thomas J. Miller, -- -- -- -- -- --
Jr.................
John J. Millerick.... 10,000 2.8% $43.13 1/19/09 $271,700 $ 685,800
Lothar Koob.......... 20,000 5.6% $44.00 1/02/09 $554,400 $1,399,200
Gene M. Bauer........ 20,000 5.6% $40.56 12/11/08 $511,000 $1,289,800
(1) The exercise price per share of each option was equal to the fair market value per share of the Common Stock on the date
of grant. Options became exercisable in equal installments over four years beginning in the third year from date of grant and
terminates seven years from date of grant or upon termination of the Named Officer's employment with the Company,
whichever occurs earlier.
(2) The 5% and 10% assumed rates of appreciation are required by the rules and regulations of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the price of the Common Stock in the future. The
amounts shown in this table are are net of the option exercise price, but do not include deductions for taxes or other expenses
associate with the exercise of the option or the sale of the underlying shares. The actual gains, if any, upon the exercise of stock
options will depend upon the future performance of the Common Stock, the optionholders' continued employment through the
option period, and the date on which the options are exercised. There can be no assurances that the rates of appreciation in this
table can be achieved or that the amounts reflected will be received by the Named Officer.
STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding stock options held by Named Officers as of July 31, 2001. No
Named Officer exercised any stock options during the last fiscal year.
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY-OPTIONS
FISCAL YEAR END AT FISCAL YEAR END(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Bernard M. Gordon.................... -- -- -- --
Thomas J. Miller, Jr................. -- -- -- --
John J. Millerick.................... -- 30,000 -- $82,200
Lothar Koob.......................... -- 20,000 -- --
Gene M. Bauer........................ -- 20,000 -- --
(1) The value of in-the-money options at year-end represents the aggregate difference between the option exercise price and
the market value of the common stock at July 31, 2001. "In-the-money" options are options whose exercise price was less than
the market value of the Common Stock at July 31, 2001.
20
COMPENSATION OF DIRECTORS
Each Director who is not an employee of the Company is entitled to an annual fee of $10,000 plus a fee of $1,000 per meeting
for each of the first four meetings of the Board or any Board Committee attended by him, together with reimbursement of travel
expenses under certain circumstances.
In June 1996, the Board of Directors adopted and stockholders approved at the January 1997 Annual Meeting of
Stockholders, the 1997 Non-Qualified Stock Option Plan for Non-Employee Directors (the "1997 Plan"). Pursuant to the
1997 Plan, options to purchase 50,000 shares of Common Stock may be granted only to directors of the Company or any
subsidiary who are not otherwise employees of the Company and any subsidiary. The exercise price of options granted under
the 1997 Plan is the fair market value of the Common Stock on the date of grant. The 1997 Plan provides each new
non-employee Director who is elected to the Board shall be granted an option to acquire 5,000 shares, effective as of the date
he or she is first elected to the Board.
Every four (4) years from the date on which a non-employee Director was last granted a non-employee Director option, that
non-employee Director shall be granted an option to acquire 5,000 shares, effective as of the date of that fourth anniversary.
Options granted under the 1997 Plan become exercisable in three equal annual installments on each of the first three
anniversaries of the date of grant, and expire 10 years after the date of grant.
The 1997 Plan is administered by members of the Company's Board of Directors. In fiscal 2001, the only option granted under
the 1997 plan was an option for 5000 shares, at an option price of $44.00 per share, granted to Dr. Modic on April 12, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of Directors during fiscal 2001 were Mr. Voboril, Dr.
Wilson and Dr. Steinhauer. No executive officer of the Company has served as a director or member of the Compensation
committee of any other company whose executive officers serve as a member of the Company's Board of Directors or
Compensation Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to all persons (including any "group", as defined in section 13(d)(3) of the Exchange
Act) known by the Company to have owned beneficially 5% or more of its Common Stock, as of August 31, 2001:
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
---------------- -------------------- --------
Bernard M. Gordon Charitable Remainder Unitrust............. 4,642,292 shares(1) 35.1%(1)
Bernard M. Gordon and Julian Soshnick, Trustees
8 Centennial Drive
Peabody, MA 01960
T. Rowe Price............................................... 1,748,780 shares(2) 13.2%(2)
100 East Pratt Street
Baltimore, MD 21202
Private Capital Management Inc.............................. 1,044,364 shares(2) 7.9%(2)
3003 Ninth Street
Naples, FL 33940
(1) Mr. Gordon serves as Trustee of the Bernard Gordon Charitable Remainder Unitrust (the "Trust") along with Julian
Soshnick. The Trustees, acting by a majority, have full power to vote or dispose of the shares held by the Trust. Upon the death
of Mr. Gordon, all of the assets of the Trust, in general, will be distributed to The Gordon Foundation, a Section 501(c)(3) trust
formed by Mr. Gordon with its principal office located at 8 Centennial Drive, Peabody, Massachusetts. The total shares
reported above include 12,900 shares owned by the Gordon Foundation.
21
(2) The Company has been advised informally by T. Rowe Price and Private Capital Management Inc. that in their capacity as
investment advisors they may be deemed a beneficial owner on August 31, 2001, of 1,748,780 shares, or 13.2% of the
Company's Common Stock and 1,044,364 shares, or 7.9% of the Company's Common Stock, respectively.
The following table sets forth information as to ownership of the Company's Common Stock, by its Directors and by Executive
Officers as a group, as of August 31 2001:
AMOUNT AND NATURE OF PERCENT
IDENTITY OF PERSON BENEFICIAL OWNERSHIP (1) OF CLASS
------------------ ------------------------ --------
Bernard M. Gordon........................................... 4,642,292 shares(2) 35.1%
Thomas J. Miller, Jr........................................ 67,850 shares(3) *
Julian Soshnick............................................. 0 shares(3) *
John A. Tarello............................................. 6,667 shares(3) *
M. Ross Brown............................................... 1,667 shares(3) *
Gerald L. Wilson............................................ 8,667 shares(3) *
Edward F. Voboril........................................... 6,667 shares(3) *
Bruce W. Steinhauer......................................... 11,667 shares(3) *
Michael T. Modic............................................ 0 shares(3) *
Gene M. Bauer............................................... 20,000 shares(3) *
Lothar Koob................................................. 20,050 shares(3) *
John J. Millerick........................................... 20,000 shares(3) *
All Directors and Executive Officers as a group (12 4,805,527 shares(3) 36.3%
persons)..................................................
* Represents less than 1% ownership
(1) The amounts shown are based upon information furnished by the individual directors and officers. Unless otherwise noted,
the beneficial owners have sole voting and investment power with respect to the shares listed.
(2) Mr. Gordon serves as Trustee of the Bernard Gordon Charitable Remainder Unitrust (the "Trust") along with Julian
Soshnick. The Trustees, acting by a majority, have full power to vote or dispose of the shares held by the Trust. Upon the death
of Mr. Gordon, all of the assets of the Trust, in general, will be distributed to the Gordon Foundation, a Section 501(c)(3) trust
formed by Mr. Gordon with its principal office located at 8 Centennial Drive, Peabody, Massachusetts. The total shares
reported above includes 12,900 shares owned by the Gordon Foundation
(3) These amounts include certain shares deemed beneficially owned under Exchange Act Rule 13d-3(d)(1).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Bernard M. Gordon owns a 48% interest and Mr. Bernard L. Friedman, the Company's former Vice Chairman of the
Board (Mr. Friedman resigned on July 31, 1993), own 52% interest in a limited partnership (Audubon Realty), which owns the
Danvers, Massachusetts facilities leased by the Company for a term which expired July 31, 2001. These facilities include a
50,000 square foot building completed in 1978; a 40,000 square foot addition to that building, completed in 1982; and an
80,000 square foot building which the Company moved into during 1980. The annual rent on the entire 170,000 square feet
was increased from $1,219,000 to $1,346,000 effective March 1, 2001. A total of 155,000 square feet of the facilities were
sublet to Siemens Medical Electronics, Inc. under two subleases for terms, which ended on December 1, 2000 and July 31,
2001, respectively.
Mr. Gordon owns a 48% interest and Mr. Friedman own a 52% interest in a limited partnership which owns the facility located
at 360 Audubon Road, Wakefield, Massachusetts, which is leased by the Company for a term expiring on July 31, 2003. This
facility has been utilized by the Company for manufacturing and office space since May 1, 1981. The annual rent for this facility
was increased from $333,000 to $357,000
22
effective May 1, 1999, and shall be adjusted as of May 1 every third year to reflect increases in the cost of living.
All of the foregoing rents are on a net lease basis, and accordingly the Company pays, in addition to the above rental payments,
all taxes, maintenance, insurance, and other costs relating to the leased premises.
The terms of the several lease agreements, at the time they were executed, were at least as favorable as those that could have
been obtained from unaffiliated third parties. Prior to execution of each such lease, two independent appraisals were obtained in
order to establish the fair market rate for subject premises. A rent, in each case discounted below the fair market rate
established by the appraisals, was then agreed upon by the parties.
The leases each incorporated periodic rent escalation clauses, based upon the CPI. At the present time, the rent that the
Company is paying under the Wakefield, Massachusetts lease reflects fair rental value for the property.
See Item 2 of this Report for information as to the character of the leased premises, and Note 8 of Notes to Consolidated
Financial Statements for further information as to the leases.
23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE
NUMBER
-----
(a) 1... Financial Statements
Report of Independent Accountants........................... 26
Consolidated Balance Sheets at July 31, 2001 and 2000....... 27
Consolidated Statements of Income for the years ended July
31, 2001,
2000 and 1999............................................... 28
Consolidated Statements of Stockholders' Equity for the
years ended
July 31, 2001, 2000 and 1999................................ 29
Consolidated Statements of Cash Flows for the years ended
July 31, 2001
2000 and 1999............................................... 30
Notes to Consolidated Financial Statements.................. 31-47
Financial Statement Schedule II.--Valuation and Qualifying
2... Accounts.................................................... 48
Other schedules have been omitted because they are not
required, not applicable, or the required information is
furnished in the consolidated statements or notes thereto
3... Exhibits--See Index to Exhibits............................. 49-53
(b) Report on Form 8-K
No reports on Form 8-K were filed by the registrant during
the quarter
ended July 31, 2001.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
ANALOGIC CORPORATION
Date: October 25, 2001 By /s/ BERNARD M. GORDON
------------------------------------
Bernard M. Gordon
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: October 25, 2001 /s/ BERNARD M. GORDON
--------------------------------------------------------
Bernard M. Gordon
Chairman of the Board
Date: October 25, 2001 /s/ THOMAS J. MILLER, JR.
--------------------------------------------------------
Thomas J. Miller, Jr.
President, Chief Executive Officer and Director
Date: October 25, 2001 /s/ M. ROSS BROWN
--------------------------------------------------------
M. Ross Brown
Director
Date: October 25, 2001 /s/ JOHN J. MILLERICK
--------------------------------------------------------
John J. Millerick
Senior Vice President,
Chief Financial Officer and Treasurer
Date: October 25, 2001 /s/ MICHAEL T. MODIC
--------------------------------------------------------
Michael T. Modic
Director
Date: October 25, 2001 /s/ JULIAN SOSHNICK
--------------------------------------------------------
Julian Soshnick
Director
Date: October 25, 2001 /s/ BRUCE W. STEINHAUER
--------------------------------------------------------
Bruce W. Steinhauer
Director
Date: October 25, 2001 /s/ JOHN A. TARELLO
--------------------------------------------------------
John A. Tarello
Director
Date: October 25, 2001 /s/ EDWARD F. VOBORIL
--------------------------------------------------------
Edward F. Voboril
Director
Date: October 25, 2001 /s/ GERALD L. WILSON
--------------------------------------------------------
Gerald L. Wilson
Director
25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Analogic Corporation:
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 24 present fairly,
in all material respects, the financial position of Analogic Corporation and its subsidiaries at July 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in the period ended July 31, 2001, in conformity with
accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 14(a)(2) on page 24, presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
/S/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
October 1, 2001
26
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31,
-------------------
2001 2000
-------- --------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 46,013 $ 29,132
Marketable securities, at market (Note 3)................. 76,899 87,242
Accounts and notes receivable net of allowance for
doubtful accounts ($1,268 in 2001 and $1,010 in 2000)... 65,937 60,374
Accounts receivable affiliates, net (Note 6).............. 2,350 3,063
Inventories (Note 4)...................................... 60,696 62,326
Deferred income taxes (Note 11)........................... 9,045 8,511
Other current assets...................................... 7,410 5,239
-------- --------
Total current assets............................... 268,350 255,887
Property, plant and equipment, net (Note 4)................. 68,846 63,524
Investments in and advances to affiliated companies (Note
6)........................................................ 4,692 4,855
Capitalized software, net................................... 5,488 5,368
Other assets................................................ 5,143 3,567
-------- --------
Total Assets....................................... $352,519 $333,201
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Mortgage and other notes payable (Note 7)................. $ 369 $ 363
Obligations under capital leases (Note 8)................. 275 714
Accounts payable, trade................................... 15,378 20,015
Accrued expenses (Note 4)................................. 26,183 20,038
Accrued income taxes (Note 11)............................ 1,646 1,780
-------- --------
Total current liabilities.......................... 43,851 42,910
Long term liabilities:
Mortgage and other notes payable (Note 7)................. 4,896 5,265
Obligations under capital leases (Note 8)................. 664 374
Advance payments and other................................ 1,135
-------- --------
6,695 5,639
Deferred income taxes (Note 11)............................. 1,836 2,519
Excess of acquired net assets over cost, net................ 104
Minority interest in subsidiary............................. 4,268
Commitments (Note 8)
Stockholders' equity:
Common stock, $.05 par; authorized 30,000,000 shares;
issued 14,069,702 shares in 2001; 13,980,502 shares in
2000.................................................... 703 699
Capital in excess of par value............................ 37,857 27,703
Retained earnings......................................... 277,450 266,127
Accumulated other comprehensive income.................... (1,598) (2,118)
Treasury stock, at cost 846,185 shares in 2001; 1,102,135
shares in 2000.......................................... (9,035) (11,869)
Unearned compensation..................................... (5,240) (2,781)
-------- --------
Total stockholders' equity......................... 300,137 277,761
-------- --------
Total Liabilities and Stockholders' Equity......... $352,519 $333,201
======== ========
The accompanying notes are an integral part of these financial statements.
27
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JULY 31,
---------------------------------
2001 2000 1999
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
Net revenue:
Product................................................... $320,108 $255,250 $242,853
Engineering............................................... 27,706 23,293 18,092
Other revenue............................................. 12,762 13,038 12,015
-------- -------- --------
Total net revenue........................................... 360,576 291,581 272,960
Cost of sales:
Product................................................... 204,736 159,175 144,120
Engineering............................................... 23,199 17,413 12,612
Other..................................................... 6,354 6,203 6,098
Asset impairment charges (Note 5)......................... 3,200
-------- -------- --------
Total cost of sales......................................... 237,489 182,791 162,830
Gross margin................................................ 123,087 108,790 110,130
Operating expenses:
Research and product development.......................... 41,271 38,260 39,598
Selling and marketing..................................... 33,113 26,207 25,735
General and administrative................................ 32,796 27,526 21,230
-------- -------- --------
107,180 91,993 86,563
Income from operations...................................... 15,907 16,797 23,567
Other (income) expense:
Interest income, net...................................... (5,402) (5,737) (6,370)
Equity in unconsolidated affiliates....................... (1,890) 1,286 5,067
Other, net................................................ 646 156 (54)
-------- -------- --------
(6,646) (4,295) (1,357)
Income before income taxes and minority interest............ 22,553 21,092 24,924
Provision for income taxes (Note 11)........................ 6,792 6,539 4,981
Minority interest in net income of consolidated
subsidiary................................................ 530 487 758
-------- -------- --------
Net income.................................................. $ 15,231 $ 14,066 $ 19,185
======== ======== ========
Net income per common share: (Note 15)
Basic..................................................... $ 1.18 $ 1.10 $ 1.51
Diluted................................................... $ 1.17 $ 1.09 $ 1.50
Weighted-average shares outstanding: (Note 15)
Basic..................................................... 12,950 12,817 12,683
Diluted................................................... 13,055 12,883 12,791
The accompanying notes are an integral part of these financial statements.
28
ANALOGIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 31, 2001, 2000 AND 1999
(000 OMITTED, EXCEPT SHARE DATA)
COMMON STOCK CAPITAL IN TREASURY STOCK
------------------- EXCESS OF --------------------- UNEARNED RETAINED
SHARES AMOUNT PAR VALUE SHARES AMOUNT COMPENSATION EARNINGS
---------- ------ ---------- ---------- -------- ------------ --------
Balance, July 31, 1998................. 13,852,127 $693 $23,567 (1,205,347) $(13,515) $(1,102) $239,891
Shares issued for employee stock
options, grants, and stock purchase
plan, net of cancellations and income
tax benefit........................... 32,000 1 1,043 52,277 964 (730)
Purchases of treasury stock............ (16,000) (549)
Amortization of unearned
compensation.......................... 527
Dividends declared ($0.27 per share)... (3,425)
Other.................................. 108
Comprehensive Income:
Net income for the year............... 19,185
Translation adjustments.............
Unrealized marketable securities
gains and losses..................
Total Comprehensive Income............
---------- ---- ------- ---------- -------- ------- --------
Balance, July 31, 1999................. 13,884,127 $694 $24,718 (1,169,070) $(13,100) $(1,305) $255,651
Shares issued for employee stock
options, grants, and stock purchase
plan, net of cancellations and income
tax benefit........................... 96,375 5 2,915 66,935 1,231 (2,120)
Amortization of unearned
compensation.......................... 644
Dividends declared ($0.28 per share)... (3,590)
Other.................................. 70
Comprehensive Income:
Net income for the year............... 14,066
Translation adjustments (Net of tax
of $1,265)........................
Unrealized marketable securities
gains and losses (Net of tax of
$122).............................
Total Comprehensive Income..........
---------- ---- ------- ---------- -------- ------- --------
Balance, July 31, 2000................. 13,980,502 $699 $27,703 (1,102,135) $(11,869) $(2,781) $266,127
Shares issued for employee stock
options, grants, and stock purchase
plan, net of cancellations and income
tax benefit........................... 89,200 4 4,643 65,695 802 (3,435)
Amortization of unearned
compensation.......................... 976
Dividends declared ($0.28 per share)... (3,626)
Shares issued to purchase minority
interest in subsidiary................ 5,552 190,255 2,032
Adjustment to reporting period of
equity investment (Note 6)............ (282)
Other.................................. (41)
Comprehensive Income:
Net income for the year............... 15,231
Translation adjustments (Net of tax
of $485)..........................
Unrealized marketable securities
gains and losses (Net of tax of
$824).............................
Total Comprehensive Income:.........
---------- ---- ------- ---------- -------- ------- --------
Balance, July 31, 2001......