UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 on
FORM 10-Q/A
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the period ended October 31, 2000
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-6715
ANALOGIC CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts | 04-2454372 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
8 Centennial Drive, Peabody, Massachusetts | 01960 | |
(Address of principal executive offices) | (Zip Code) |
(978) 977-3000
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
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 ¨
The number of shares of Common Stock outstanding at November 30, 2000 was 12,880,768.
ANALOGIC CORPORATION
QUARTERLY REPORT ON FORM 10-Q/A
FOR THE QUARTER ENDED OCTOBER 31, 2000
INTRODUCTORY NOTE
Pursuant to Rule 12b-15 of the Rules and Regulations under the Securities Exchange Act of 1934, this Amendment on Form 10-Q/A to the Quarterly Report on Form 10-Q of Analogic Corporation (the Company) for the quarter ended October 31, 2000 is being filed to (i) restate the Companys Condensed Consolidated Financial Statements (unaudited) for the three months ended October 31, 2000 and (ii) revise related disclosures included in the Form 10-Q.
On October 15, 2003, the Company reported that it would restate its financial statements for the fiscal years ended July 31, 2002 and July 31, 2001, and condensed financial statements for the quarters within the fiscal years ended July 31, 2003, 2002 and 2001, and would file amended annual reports on Form 10-K/A and amended quarterly reports on Form 10-Q/A. The purpose of this restatement is to reflect the application of the appropriate accounting principles to the recognition of software revenue by Camtronics Medical Systems, Ltd., a 81% owned U.S. subsidiary of the Company, for fiscal years ended July 31, 2003, 2002 and 2001. As restated, the Companys financial results for the quarter ended October 31, 2000 reflect a reduction in revenues of $602,000, net income of $87,000, and diluted earnings per share of $0.01. See Note 2, Restatement, of the Notes to Condensed Consolidated Financial Statements for a more complete discussion of the restatement.
This Amendment amends Part I, Items 1 and 2, and Part II, Item 6 of the Quarterly Report on Form 10-Q for the period ended October 31, 2000. This filing should be read in conjunction with the Companys Annual Report on Form 10-K/A for the year ended July 31, 2000, as filed on June 4, 2001 with the Securities and Exchange Commission and the Companys Form 10-Q for the three months ended October 31, 1999 as filed on December 13, 1999 with the Securities and Exchange Commission. This Amendment continues to reflect circumstances as of the date of the original filing of the Quarterly Report on Form 10-Q, and the Company has not updated the disclosures contained therein to reflect events that occurred at a later date, except for items relating to the restatement.
2
ANALOGIC CORPORATION
Page No | ||||
Part I. |
Financial Information |
|||
Item 1. |
Financial Statements | |||
Unaudited Condensed Consolidated Balance Sheets as of October 31, 2000 (Restated) and July 31, 2000 | 4 | |||
Unaudited Condensed Consolidated Statements of Income for the Three Months Ended October 31, 2000 (Restated) and 1999 | 5 | |||
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended October 31, 2000 (Restated) and 1999 | 6 | |||
Notes to Unaudited Condensed Consolidated Financial Statements | 7-15 | |||
Item 2. |
Managements Discussion and Analysis of Results of Operations and Financial Condition | 15-17 | ||
Part II. |
Other Information |
|||
Item 6. |
Exhibits and Reports on Form 8-K | 18 | ||
Signatures | 19 | |||
Exhibit Index | 20 | |||
Certifications |
3
Part I. Financial Information
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited)
October 31, 2000 |
July 31, 2000 |
|||||||
Restated | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 32,402 | $ | 29,132 | ||||
Marketable securities, at market |
83,052 | 87,242 | ||||||
Accounts and notes receivable, less allowance for doubtful accounts of $1,069 in fiscal 2001, and $1,010 in fiscal 2000 |
66,327 | 63,437 | ||||||
Inventories |
68,797 | 62,326 | ||||||
Costs related to deferred revenue |
202 | |||||||
Deferred income taxes |
8,951 | 8,511 | ||||||
Other current assets |
5,423 | 5,239 | ||||||
Total current assets |
265,154 | 255,887 | ||||||
Property, plant and equipment, net |
62,663 | 63,524 | ||||||
Investments in and advances to affiliated companies |
5,006 | 4,855 | ||||||
Capitalized software, net |
5,130 | 5,368 | ||||||
Costs related to deferred revenue |
167 | |||||||
Other assets |
3,296 | 3,567 | ||||||
Total Assets |
$ | 341,416 | $ | 333,201 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Mortgage and other notes payable |
$ | 364 | $ | 363 | ||||
Obligations under capital leases |
585 | 714 | ||||||
Accounts payable, trade |
24,751 | 20,015 | ||||||
Accrued expenses |
16,683 | 20,038 | ||||||
Deferred revenue |
741 | |||||||
Advance payments and other |
1,476 | |||||||
Accrued income taxes |
2,949 | 1,780 | ||||||
Accrued dividends payable |
902 | |||||||
Total current liabilities |
48,451 | 42,910 | ||||||
Long-term liabilities: |
||||||||
Mortgage and other notes payable |
5,061 | 5,265 | ||||||
Obligations under capital leases |
332 | 374 | ||||||
Deferred revenue |
215 | |||||||
Deferred income taxes |
2,452 | 2,519 | ||||||
Excess of acquired net assets over cost, net |
76 | 104 | ||||||
Minority interest in subsidiary |
4,237 | 4,268 | ||||||
12,373 | 12,530 | |||||||
Stockholders equity: |
||||||||
Common stock, $.05 par value |
699 | 699 | ||||||
Capital in excess of par value |
27,683 | 27,703 | ||||||
Retained earnings |
269,495 | 266,127 | ||||||
Accumulated other comprehensive income |
(2,867 | ) | (2,118 | ) | ||||
Treasury stock, at cost |
(11,856 | ) | (11,869 | ) | ||||
Unearned compensation |
(2,562 | ) | (2,781 | ) | ||||
Total stockholders equity |
280,592 | 277,761 | ||||||
Total Liabilities and Stockholders Equity |
$ | 341,416 | $ | 333,201 | ||||
The accompanying notes are an integral part of these financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended October 31, |
||||||||
2000 |
1999 |
|||||||
Restated | ||||||||
Net revenue: |
||||||||
Product |
$ | 71,133 | $ | 54,365 | ||||
Engineering |
5,743 | 5,395 | ||||||
Other |
4,119 | 3,953 | ||||||
Total net revenue |
80,995 | 63,713 | ||||||
Cost of sales: |
||||||||
Product |
46,681 | 34,709 | ||||||
Engineering |
4,000 | 3,874 | ||||||
Other |
1,736 | 1,682 | ||||||
Total cost of sales |
52,417 | 40,265 | ||||||
Gross margin |
28,578 | 23,448 | ||||||
Operating expenses: |
||||||||
Research and product development |
9,013 | 9,148 | ||||||
Selling and marketing |
7,315 | 5,913 | ||||||
General and administrative |
7,328 | 5,180 | ||||||
23,656 | 20,241 | |||||||
Income from operations |
4,922 | 3,207 | ||||||
Other (income) expense: |
||||||||
Interest income, net |
(1,485 | ) | (1,638 | ) | ||||
Equity in unconsolidated affiliates |
(811 | ) | 1,049 | |||||
Other, net |
384 | 107 | ||||||
(1,912 | ) | (482 | ) | |||||
Income before income taxes and minority interest |
6,834 | 3,689 | ||||||
Provision for income taxes |
2,210 | 1,144 | ||||||
Minority interest |
72 | 27 | ||||||
Net income |
$ | 4,552 | $ | 2,518 | ||||
Net income per common share: |
||||||||
Basic |
$ | 0.35 | $ | 0.20 | ||||
Diluted |
0.35 | 0.20 | ||||||
Weighted average shares outstanding: |
||||||||
Basic |
12,879 | 12,733 | ||||||
Diluted |
12,932 | 12,792 |
The accompanying notes are an integral part of these financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended October 31, |
||||||||
2000 |
1999 |
|||||||
Restated | ||||||||
OPERATING ACTIVITIES: |
||||||||
Net Income |
$ | 4,552 | $ | 2,518 | ||||
Adjustments to reconcile net income to net cash provided (used) by operating activities: |
||||||||
Deferred income taxes |
(375 | ) | (565 | ) | ||||
Depreciation and amortization |
2,830 | 3,389 | ||||||
Minority interest in net income of consolidated subsidiaries |
72 | 27 | ||||||
Allowance for doubtful accounts |
59 | 77 | ||||||
Gain on sale of equipment |
(23 | ) | (5 | ) | ||||
Excess of equity in gain (loss) of unconsolidated affiliates |
(811 | ) | 1,049 | |||||
Loss on investment |
166 | |||||||
Compensation from stock grants |
183 | 74 | ||||||
Net changes in operating assets and liabilities |
(4,861 | ) | (3,784 | ) | ||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: |
1,792 | 2,780 | ||||||
INVESTING ACTIVITIES: |
||||||||
Investments in and advances to affiliated companies |
(1,500 | ) | ||||||
Additions to property, plant and equipment |
(2,290 | ) | (2,646 | ) | ||||
Capitalized software |
497 | (504 | ) | |||||
Proceeds from sale of property, plant and equipment |
57 | 8 | ||||||
Purchases of marketable securities |
(5,805 | ) | ||||||
Maturities of marketable securities |
4,400 | 5,210 | ||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
2,664 | (5,237 | ) | |||||
FINANCING ACTIVITIES: |
||||||||
Payments on debt and capital lease obligations |
(374 | ) | (352 | ) | ||||
Issuance of common stock pursuant to exercise of stock options and employee stock purchase plan |
63 | 409 | ||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
(311 | ) | 57 | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
(875 | ) | 523 | |||||
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS |
3,270 | (1,877 | ) | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
29,132 | 30,017 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 32,402 | $ | 28,140 | ||||
The accompanying notes are an integral part of these financial statements.
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
The unaudited condensed consolidated financial statements of Analogic Corporation (the Company) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (SEC) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the results for all periods presented. The results of the operations for the three months ended October 31, 2000 are not necessarily indicative of the results to be expected for the fiscal year ending July 31, 2001, or any other interim period.
These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended July 31, 2000, included in the Companys Form 10-K/A as filed with the SEC on June 4, 2001, and the Companys Form 10-Q for the three months end October 31, 1999 as filed with the SEC on December 13, 1999.
The condensed financial statements have not been audited by independent certified public accountants. The condensed consolidated balance sheet as of July 31, 2000, contains data derived from audited financial statements.
Certain financial statement items have been reclassified to conform to the current years financial presentation format.
2. Restatement:
The Company has restated its prior period condensed financial statements to reflect the application of the appropriate accounting principles to the recognition of software revenue by its 81% owned U.S. subsidiary Camtronics Medical Systems. The adjustments related to this issue resulted in a decrease in previously reported revenues of $602,000, net income of $87,000, and diluted earnings per share of $0.01, compared to the Companys financial results previously reported for the quarter ended October 31, 2000.
Summarized below is a more detailed discussion of the restatement along with a comparison of the amounts previously reported on the condensed balance sheet and statements of operations in the Companys Form 10-Q/A for the three months ended October 31, 2000.
In connection with the preparation of its Financial Statements for the fiscal year ended July 31, 2003, the Company concluded that its accounting for revenue at its Camtronics subsidiary did not meet required accounting standards. The Company has taken steps to ensure that Camtronics sales transactions will be properly accounted for in the future.
Camtronics previously accounted for all of its revenues in accordance with Staff Accounting Bulletin 101, Revenue Recognition (SAB 101). The Company has determined that Camtronics revenue recognition policy should be, in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position 97-2, Software Revenue Recognition(SOP 97-2). Accordingly, certain revenues originally recorded in prior periods should have been deferred. In accordance with SAB 101, the Company had previously recognized revenue when the major components of software had been delivered, installed, and accepted by the customer. In the majority of sales transactions involved in the restatement, the customer has already installed and paid for the software it had accepted. As required by SOP 97-2, the Company will recognize the total revenue related to transactions involving software once all components are delivered, installed, and accepted by the customer.
Camtronics revenues are derived primarily from the sale of Digital Cardiac Information Systems. System sales revenues consist of the following components: computer software licenses, computer hardware, installation support, and sublicensed software. In addition, Camtronics generates revenues related to system sales for software support, hardware maintenance, training, consulting and other professional services.
Camtronics recognizes revenue in accordance with the provisions of SOP 97-2. SOP 97-2 requires revenue earned on software arrangements involving multiple-elements to be allocated to each element based on the fair values of those elements or by use of the residual
7
method. Under the residual method, revenue is recognized in a multiple-element arrangement when vendor-specific objective evidence (VSOE) of fair value exists for all of the undelivered elements in the arrangement, which is determined by the price charged when that element is sold separately (i.e. professional services, software support, hardware maintenance, hardware and sublicensed software), but does not exist for one or more of the delivered elements in the arrangement (i.e. software solutions). Specifically, Camtronics determines the fair value of the maintenance portion of the arrangement based on the renewal price of the maintenance charged to clients, professional services portion of the arrangement, other than installation services, based on hourly rates which Camtronics charges for these services when sold apart from a software license, and the hardware and sublicensed software based on the prices for these elements when they are sold separately from the software. If evidence of the fair value cannot be established for the undelivered elements of a license agreement, the entire amount of revenue under the arrangement is deferred until these elements have been delivered or objective evidence of fair value for the remaining undelivered element is established.
Inherent in the revenue recognition process are significant management estimates and judgments, which influence the timing and the amount of revenue recognition. Camtronics provides several models for the procurement of its digital cardiac information systems. The predominant model includes a perpetual software license agreement, project-related installation services, professional consulting services, computer hardware and sub-licensed software and software support.
Camtronics provides installation services, which include project-scoping services, conducting pre-installation audits detailed installation plans, actual installation of hardware components, and testing of all hardware and software installed at the customer site. Because installation services are deemed to be essential to the functionality of the software, software license and installation services fees are recognized upon completion of installation.
Camtronics also provides professional consulting services, which include consulting activities that fall outside of the scope of the standard installation services. These services vary depending on the scope and complexity requested by the client. Examples of such services may include additional database consulting, system configuration, project management, interfacing to existing systems, and network consulting. Professional consulting services generally are not deemed to be essential to the functionality of the software, and thus, do not impact the timing of the software license revenue recognition. Professional consulting service revenue is recognized as the services are performed.
Hardware and software maintenance fees are marketed under annual and multi-year arrangements and are recognized as revenue ratably over the contracted maintenance term.
Deferred revenue is comprised of 1) license fee, maintenance and other service revenues for which payment has been received and for which services have not yet been performed and 2) revenues which had been invoiced, and paid in the majority of cases, related to delivered components of a multiple-element arrangement for which fair value has not been determined for components not yet delivered or accepted by the customer. Costs related to deferred revenue represents costs of goods sold and services provided and sales commission expenses.
Deferred Revenue and costs related to deferred revenue which have been classified within the Balance Sheet as long-term represent specific transactions where Camtronics has determined that it will not meet VSOE requirements for these transactions under SOP 97-2 within the next twelve calendar months
8
The following tables show the effect of the restatement on the Companys Statement of Operations and Balance Sheet.
Statements of Operations: (in thousands, except for per share data)
Three Months Ended October 31, 2000 |
||||||||||||
(unaudited) | ||||||||||||
Previously Reported |
Restated |
Changes |
||||||||||
Net revenue: |
||||||||||||
Product |
$ | 71,735 | $ | 71,133 | $ | (602 | )(a) | |||||
Engineering |
5,743 | 5,743 | ||||||||||
Other |
4,119 | 4,119 | ||||||||||
Interest and dividend income |
1,543 | (1,543 | )(b) | |||||||||
Total net revenue |
83,140 | 80,995 | (2,145 | ) | ||||||||
Cost of sales: |
||||||||||||
Product |
46,571 | 46,681 | 110 | (c) | ||||||||
Engineering |
4,000 | 4,000 | ||||||||||
Other |
1,736 | 1,736 | ||||||||||
Total cost of sales |
52,307 | 52,417 | 110 | |||||||||
Gross margin |
30,833 | 28,578 | (2,255 | ) | ||||||||
Operating expenses: |
||||||||||||
Research and product development |
9,573 | 9,013 | (560 | )(d) | ||||||||
Selling and marketing |
7,366 | 7,315 | (51 | )(e) | ||||||||
General and administrative |
7,328 | 7,328 | ||||||||||
24,267 | 23,656 | 611 | ||||||||||
Income from operations |
6,566 | 4,922 | (1,644 | ) | ||||||||
Other (income) expense: |
||||||||||||
Interest income, net |
58 | (1,485 | ) | (1,543 | )(f) | |||||||
Equity in unconsolidated affiliates |
(811 | ) | (811 | ) | ||||||||
Other, net |
384 | 384 | ||||||||||
(369 | ) | (1,912 | ) | 1,543 | ||||||||
Income before income taxes and minority interest |
6,935 | 6,834 | (101 | ) | ||||||||
Provision for income taxes |
2,212 | 2,210 | (2 | )(g) | ||||||||
Minority interest |
84 | 72 | (12 | )(h) | ||||||||
Net income |
$ | 4,639 | $ | 4,552 | $ | (87 | ) | |||||
Net income per common share: |
||||||||||||
Basic |
$ | 0.36 | $ | 0.35 | $ | (0.01 | ) | |||||
Diluted |
0.36 | 0.35 | (0.01 | )(i) | ||||||||
Weighted average shares outstanding: |
||||||||||||
Basic |
12,879 | 12,879 | ||||||||||
Diluted |
12,932 | 12,932 |
9
Statements of Operations components increased (decreased) as a result of the following:
(a) |
Net revenue: Product | |||||
Adjust recognition of revenue for application of SOP 97-2 | $ | (602 | ) | |||
(b) |
Net revenue: Interest and dividend income | |||||
Reclassification not impacting net income | $ | (1,543 | ) | |||
(c ) |
Cost of sales: Product | |||||
Adjust cost of sales related to transactions for which revenue has been deferred | $ | (450 | ) | |||
Reclassification not impacting net income | $ | 560 | ||||
Net increase | $ | 110 | ||||
(d) |
Research and product development | |||||
Reclassification not impacting net income | $ | 560 | ||||
(e) |
Selling and marketing | |||||
Adjust commission expense related to transactions for which revenue has been deferred |
$ | 51 | ||||
(f) |
Interest income, net | |||||
Reclassification not impacting net income | $ | 1,543 | ||||
(g) |
Provision for income taxes | |||||
Net decrease to provision due to above adjustments | $ | 2 | ||||
(h) |
Minority interest | |||||
Adjust minority interest due to above adjustments | $ | 12 | ||||
(i) |
Net income per common share: Diluted | |||||
Net effect to diluted earnings per share due to above adjustments | $ | (0.01 | ) | |||
10
Balance Sheets:
October 31, 2000 |
||||||||||||
(in thousands) | (unaudited) | |||||||||||
Previously Reported |
Restated |
Change |
||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 32,402 | $ | 32,402 | ||||||||
Marketable securities, at market |
83,052 | 83,052 | ||||||||||
Accounts and notes receivable |
66,327 | 66,327 | ||||||||||
Inventories |
68,797 | 68,797 | ||||||||||
Costs related to deferred revenue |
202 | $ | 202 | (a) | ||||||||
Deferred income taxes |
8,914 | 8,951 | 37 | (b) | ||||||||
Other current assets |
5,423 | 5,423 | ||||||||||
Total current assets |
264,915 | 265,154 | 239 | |||||||||
Property, plant and equipment, net |
62,663 | 62,663 | ||||||||||
Investments in and advances to affiliated companies |
5,006 | 5,006 | ||||||||||
Capitalized software, net |
5,130 | 5,130 | ||||||||||
Costs related to deferred revenue |
167 | 167 | (c) | |||||||||
Other assets |
3,296 | 3,296 | ||||||||||
Total Assets |
$ | 341,010 | $ | 341,416 | $ | 406 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Mortgage and other notes payable |
$ | 364 | $ | 364 | ||||||||
Obligations under capital leases |
585 | 585 | ||||||||||
Accounts payable, trade |
24,751 | 24,751 | ||||||||||
Accrued expenses |
18,645 | 16,683 | $ | (1,962 | )(d) | |||||||
Deferred revenue |
741 | 741 | (e) | |||||||||
Advance payments and other |
1,476 | 1,476 | (f) | |||||||||
Accrued income taxes |
2,914 | 2,949 | 35 | (g) | ||||||||
Accrued dividends payable |
902 | 902 | ||||||||||
Total current liabilities |
48,161 | 48,451 | 290 | |||||||||
Long-term liabilities: |
||||||||||||
Mortgage and other notes payable |
5,061 | 5,061 | ||||||||||
Obligations under capital leases |
332 | 332 | ||||||||||
Deferred revenue |
215 | 215 | (h) | |||||||||
Deferred income taxes |
2,452 | 2,452 | ||||||||||
Excess of acquired net assets over cost, net |
76 | 76 | ||||||||||
Minority interest in subsidiary |
4,249 | 4,237 | (12 | )(i) | ||||||||
12,170 | 12,373 | 203 | ||||||||||
Stockholders equity: |
||||||||||||
Common stock, $.05 par value |
699 | 699 | ||||||||||
Capital in excess of par value |
27,683 | 27,683 | ||||||||||
Retained earnings |
269,582 | 269,495 | (87 | )(j) | ||||||||
Accumulated other comprehensive income |
(2,867 | ) | (2,867 | ) | ||||||||
Treasury stock, at cost |
(11,856 | ) | (11,856 | ) | ||||||||
Unearned compensation |
(2,562 | ) | (2,562 | ) | ||||||||
Total stockholders equity |
280,679 | 280,592 | (87 | ) | ||||||||
Total liabilities and stockholders equity |
$ | 341,010 | $ | 341,416 | $ | 406 | ||||||
11
The increases (decreases) to the balance sheet components are due to the effect of the current period restatement for deferrals of revenue and related costs. On a net basis the balance sheet components increased (decreased) due to the following:
(a) |
Costs related to deferred revenue (short-term) | |||||
Deferred costs related to deferred revenue | $ | 202 | ||||
(b) |
Deferred income taxes | |||||
Deferred income tax related to deferred cost and revenue | $ | 37 | ||||
(c) |
Costs related to deferred revenue (long-term) | |||||
Deferred costs related to deferred revenue | $ | 167 | ||||
(d) |
Accrued liabilities | |||||
Accrued warranty costs related to deferred revenue | $ | (132 | ) | |||
Reclassification not impacting net income | (1,830 | ) | ||||
Net decrease | $ | (1,962 | ) | |||
(e) |
Deferred revenue (short-term) | |||||
Deferred revenue classified as short-term | $ | 387 | ||||
Reclassification not impacting net income | 354 | |||||
Net increase | $ | 741 | ||||
(f) |
Advance payments and other | |||||
Reclassification not impacting net income | $ | 1,476 | ||||
(g) |
Accrued income taxes | |||||
Tax provision adjusted for the change to net income | $ | 35 | ||||
(h) |
Deferred revenue (long-term) | |||||
Reclassification not impacting net income | $ | 215 | ||||
(i) |
Minority interest in subsidiary | |||||
Adjust minority interest due to above adjustments | $ | (12 | ) | |||
(j) |
Retained earnings | |||||
Net effect to retained earnings from above adjustments | $ | (87 | ) | |||
12
3. Inventories:
The components of inventory are as follows:
October 31, 2000 |
July 31, 2000 | |||||
(in thousands) | ||||||
Raw materials |
$ | 36,137 | $ | 31,728 | ||
Work-in-process |
21,694 | 20,724 | ||||
Finished goods |
10,966 | 9,874 | ||||
$ | 68,797 | $ | 62,326 | |||
4. Investment in and Advances to Affiliated Companies:
During October, 2000, Analogic Scientific, Inc. (ASI), a joint venture corporation located in The Peoples Republic of China, entered into separate agreements with four investors which resulted in these investors owning an 10.8% equity interest in the company. This transaction had the approval of Analogic Corporation and the other shareholder who prior to this transaction each had a 50% equity ownership interest in ASI. On January 18, 2001, the company name was changed from Analogic Scientific, Inc. to Shenzhen Anke High-Tech Co., Ltd (SAHCO).
At October 31, 2000, the Company has a 44.6% ownership of ASI with a carrying value of $3,750,000. The Company accounts for this investment under the equity method of accounting whereby the Company has adjusted the carrying amount to recognize the Companys share of the earnings or losses, changes in its capital investment and dividends received by the Company. The Company receives financial information from ASI on a quarterly basis for use in accounting for the carrying value of the investment. Therefore, the Company must make adjustments to the financial information received to have it be in accordance with US generally accepted accounting principles (GAAP) due to the estimates, judgments and differences in local statutory and U.S. GAAP. The Company became aware of certain differences between local statutory and U.S. GAAP during the current quarter. The Company concluded that adjustments were necessary for prior periods resulting in a reduction in the Companys investment of SAHCO of $2,375,000 at July 31, 2000 (or $1,808,000 net of tax effect) which reduced the carrying value of the Companys investment at July 31, 2000 from $6,125,000 to $3,750,000 . Although this has the effect of decreasing the Companys net profit by $42,000 in fiscal year 2000, it has no impact in the net profit for the quarter ended October 31, 1999. Additionally, these adjustments have no impact in the net profit for the quarter ended October 31, 2000.
To ensure that the Company has adequate time to review and adjust the financial information provided by SAHCO to conform it to U.S. GAAP, the Company has decided to change its method of recording SAHCO financial results and will use the previous calendar quarters financial information of SAHCO to adjust its investment account in the current quarter, thereby resulting in a consistently applied calendar quarterly delay in recording its equity based accounting. As SAHCO uses a calendar fiscal year and Analogic uses a July 31(st) fiscal year-end, Analogic will use SAHCOs first calendar quarter financial information in Analogics fourth fiscal quarter results, SAHCOs second calendar quarter financial information in Analogics first fiscal quarter results, SAHCOs third calendar quarter financial information in Analogics second fiscal quarter results, and SAHCOs fourth calendar quarter financial information in Analogics third fiscal quarter results. Accordingly, the Company recognized its share of SAHCO previous calendar quarter profit of $414,000 (or $282,000 net of tax effect) in the three months ended October 31, 2000 and adjusted the beginning retained earnings by the $282,000. This change has no impact on fiscal year 2000.
5. Dividends:
The Company declared dividends of $.07 per common share on October 12, 2000, payable on November 10, 2000 to shareholders of record on October 27, 2000 and $.07 per common share on December 5, 2000, payable on January 9, 2001 to shareholders of record on December 26, 2000.
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6. Comprehensive Income:
The following table presents the calculation of comprehensive income and its components for the three months ended October 31, 2000 and 1999:
Three Months Ended October 31, |
||||||||
(in thousands) | ||||||||
2000 |
1999 |
|||||||
Restated | ||||||||
Net income |
$ | 4,552 | $ | 2,518 | ||||
Other comprehensive income (loss) net of taxes: |
||||||||
Unrealized holding gains and losses, net of taxes of $83 and $289 for the three months ended October 31, 2000 and 1999 |
126 | (644 | ) | |||||
Foreign currency translation adjustment, net of taxes of $574 and $9 for the three months ended October 31, 2000 and 1999 |
(876 | ) | 20 | |||||
Total comprehensive income |
$ | 3,802 | $ | 1,894 | ||||
7. Net income per share:
The following table indicates the number of shares utilized in the earnings per share calculations for the three months ending October 31, 2000 and 1999, respectively.
Three Months Ended October 31, | ||||||
2000 |
1999 | |||||
Restated | ||||||
Net income |
$ | 4,552,000 | $ | 2,518,000 | ||
Basic: |
||||||
Weighted average number of common shares outstanding |
12,878,676 | 12,732,545 | ||||
Net income per share |
$ | 0.35 | $ | 0.20 | ||
Diluted: |
||||||
Weighted average number of common shares outstanding |
12,878,676 | 12,732,545 | ||||
Dilutive effect of stock options |
53,472 | 59,663 | ||||
Total |
12,932,148 | 12,792,208 | ||||
Net income per share |
$ | 0.35 | $ | 0.20 | ||
8. Supplemental disclosure of cash flow information:
Changes in operating assets and liabilities are as follows for the three months ended:
October 31, |
||||||||
(in thousands) | ||||||||
2000 |
1999 |
|||||||
Restated | ||||||||
Accounts and notes receivable |
$ | (2,313 | ) | $ | (2,466 | ) | ||
Accounts receivable from affiliates |
(636 | ) | 201 | |||||
Inventories |
(6,471 | ) | (2,970 | ) | ||||
Costs related to deferred revenue |
(369 | ) | ||||||
Other current assets |
(184 | ) | (189 | ) | ||||
Other assets |
271 | (115 | ) | |||||
Accounts payable trade |
4,736 | 2,764 | ||||||
Accrued expenses and other current liabilities |
(981 | ) | (1,369 | ) | ||||
Accrued income taxes |
1,086 | 360 | ||||||
Net changes in operating assets and liabilities |
$ | (4,861 | ) | $ | (3,784 | ) | ||
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9. Segment information:
The Companys operations are primarily within a single segment within the electronics industry (Medical Instrumentation Technology Products). These operations encompass the design, manufacture and sale of high technology, high-performance, high precision data acquisition, conversion (analog/digital) and signal processing instruments and systems to customers that manufacture products for medical and industrial use. The other segment represents the Companys hotel operation, interest and dividend income and other Companys operations, which do not meet the materiality requirements of the statement and thus are not required to be separately disclosed. The table below presents information about the Companys reportable segments for the three months ended October 31, 2000 and 1999:
Three Months Ended October 31, | ||||||
(in thousands) | ||||||
2000 |
1999 | |||||
Restated | ||||||
Revenues: |
||||||
Medical Instrumentation Technology Products |
$ | 72,141 | $ | 57,131 | ||
Corporate and Other |
8,854 | 8,307 | ||||
Total |
$ | 80,995 | $ | 65,438 | ||
Income (Loss) before income taxes and minority interest: |
||||||
Medical Instrumentation Technology Products |
$ | 4,223 | $ | 1,771 | ||
Corporate and Other |
2,611 | 1,918 | ||||
Total |
$ | 6,834 | $ | 3,689 | ||
Identifiable Assets: |
||||||
Medical Instrumentation Technology Products |
$ | 215,062 | $ | 190,731 | ||
Corporate and Other |
126,354 | 125,993 | ||||
Total |
$ | 341,416 | $ | 316,724 | ||
Item 2: Managements discussion and analysis of results of operation and financial condition
The following information has been amended to reflect the revisions made to the Unaudited Condensed Consolidated Financial Statements as further discussed in Note 2, Restatement. This information should be read in conjunction with the information contained in the Condensed Consolidated Financial Statements, and Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q/A. This Quarterly Report on Form 10-Q/A contains forward-looking statements that involve risks and uncertainties.
Results of Operations
Three Months Fiscal 2001 (10/31/00) vs. Three Months Fiscal 2000 (10/31/99)
Product, service, engineering and licensing revenues for the three months ended October 31, 2000 were $76,876,000 as compared to $59,760,000 for the same period last year, an increase of 29%. The increase of $17,116,000 was due to an increase in sales of Medical Technology Products of $11,538,000 , 26% over prior year, primarily due to digital radiography systems and fully featured mid-range of Computed Tomography (CT) systems, an increase in sales of $3,951,000, 76% over prior year, in Industrial Technology Products due to strong demand for the Companys high frequency, Automatic Test Equipment (ATE) boards, and an increase of sales in Signal Processing Technology Products of $1,627,000, 18% over prior year, due to the demand for its multi-processor systems used in some of the most advanced radar systems. Other operating revenue of $4,119,000 and $3,953,000 represents revenue from the Hotel operation for the three months ending October 31, 2000 and 1999, respectively.
The percentage of total cost of sales to total net sales for the three months of fiscal 2001 and fiscal 2000 was 65% and 64%, respectively. The increase was primarily due to higher manufacturing costs and product mix. Other cost of sales, which represents costs associated with the Hotel during the first three months of fiscal 2001 and 2000, were $1,736,000 and $1,682,000, respectively.
General and administrative expenses for the first three months of fiscal 2001 were $7,328,000, or 9% of total revenue, as compared to $5,180,000, or 8% of total revenue, for the same period last year. The increase of $2,148,000 was primarily due to higher personnel-related costs and general expenses to support the Companys strategic plan.
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Selling and marketing expenses were $7,315,000 and $5,913,000 for the three months of fiscal 2001 and 2000, respectively. The increase of $1,402,000 was primarily due to higher personnel and related selling activity costs associated with Camtronics selling their products directly versus historically selling through OEMs. Selling and marketing expenses as a percentage of total revenue were 9% for both the three months of fiscal 2001 and 2000, as a result of increased revenue.
Research and product development expenses were $9,013,000 for the first three months of fiscal 2001, or 11% of total revenue, as compared to $9,148,000 for the same period of prior year or 15% of total revenue. The decrease of $135,000 was primarily due to computer software cost capitalized during the period.
Computer software costs of $729,000 and $504,000 were capitalized in the first three months of fiscal 2001 and 2000, respectively. Amortizations of capitalized software amounted to $560,000 and $463,000 in the first three months of fiscal 2001 and 2000, respectively, and are reported within the Company cost of sales.
The Companys share of the profit in a new privately held company amounted to $397,000 during the first quarter of fiscal 2001, representing license related royalties based on sales of medical imaging equipment. During the first quarter of fiscal 2000, the Company recorded $1,049,000 share of losses in a privately held company related to research and development costs for the design and manufacture of medical imaging equipment.
To ensure that the Company has adequate time to review and adjust the financial information provided by SAHCO to conform it to U.S. GAAP, the Company has decided to change its method of recording SAHCO financial results and will use the previous calendar quarters financial information of SAHCO to adjust its investment account in the current quarter, thereby resulting in a consistently applied quarterly delay in recording its equity based accounting. Accordingly, the Company recognized its share of SAHCO previous calendar quarter profit of $414,000 (or $282,000 net of tax effect) in the three months ended October 31, 2000 and adjusted the beginning retained earnings by the $282,000. This change has no impact in fiscal year 2000.
The Company recognized a loss of approximately $166,000 during the first three months of fiscal 2001 on the value of the restricted securities it received during fiscal 2000, as final distribution in a publicly traded company from a limited partnership, and is reported in other loss in the statements of income.
The effective tax rate for the first quarter of fiscal 2001 and 2000 was 32% and 31%, respectively.
Net income for the three months ended October 31, 2000 was $4,552,000 or $.35 per diluted share as compared with $2,518,000 or $.20 per share for the same period last year. The increase was primarily related to sales volume across all the product lines.
Financial Condition
The Companys balance sheet reflects a current ratio of 5.5 to 1 at October 31, 2000 compared to 6.0 to 1 at July 31, 2000. Cash, cash equivalents and marketable securities, along with accounts and notes receivable, constitute approximately 69% of current assets at October 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 places its cash investments in high credit quality financial instruments and, by policy, limits the amount of credit exposure to any one financial institution. Management does not anticipate any difficulties in financing operations at anticipated levels. The Companys debt to equity ratio was 0.22 to 1 at October 31, 2000 and 0.20 July 31, 2000.
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 Companys financial results. The Companys primary exposure has been related to local currency revenue and operating expenses in Europe.
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The carrying amounts reflected in the consolidated balance sheets of cash and cash equivalents, trade receivables, and trade payables approximate fair value at October 31, 2000 due to the short maturities of these instruments.
The Company maintains a bond investment portfolio of various issuers, types, and maturities. The Companys 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 Companys investment portfolio. The Company does not currently hedge these interest rate exposures.
Accounts and notes receivable increased $2,890,000 during the quarter ended October 31, 2000 primarily due to days sales outstanding (DSO) increasing from 61 days to 64 days.
Inventory increased $6,471,000 during the first quarter ended October 31, 2000 primarily due to an increase in raw materials. The Company made the decision to procure adequate supplies of key components to ensure that it could meet customer requirements.
During October, 2000, Analogic Scientific, Inc. (ASI), a joint venture corporation located in The Peoples Republic of China, entered into separate agreements with four investors which resulted in these investors owning an 10.8% equity interest in the company. This transaction had the approval of Analogic Corporation and the other shareholder who prior to this transaction each had a 50% equity ownership interest in ASI. On January 18, 2001, the company name was changed from Analogic Scientific, Inc. to Shenzhen Anke High-Tech Co., Ltd (SAHCO).
At October 31, 2000, the Company has a 44.6% ownership of ASI with a carrying value of $3,750,000. The Company accounts for this investment under the equity method of accounting whereby the Company has adjusted the carrying amount to recognize the Companys share of the earnings or losses, changes in its capital investment and dividends received by the Company. The Company receives financial information from ASI on a quarterly basis for use in accounting for the carrying value of the investment. Therefore, the Company must make adjustments to the financial information received to have it be in accordance with US generally accepted accounting principles (GAAP) due to the estimates, judgments and differences in local statutory and U.S. GAAP. The Company became aware of certain differences between local statutory and U.S. GAAP during the current quarter. The Company concluded that adjustments were necessary for prior periods resulting in a reduction in the Companys investment of SAHCO of $2,375,000 at July 31, 2000 (or $1,808,000 net of tax effect) which reduced the carrying value of the Companys investment at July 31, 2000 from $6,125,000 to $3,750,000. Although this has the effect of decreasing the Companys net profit by $42,000 in fiscal year 2000, it has no impact in the net profit for the quarter ended October 31, 1999. Additionally, these adjustments have no impact in the net profit for the quarter ended October 31, 2000.
Accounts payable trade increased $4,736,000 primarily due to increased inventory purchases.
Net cash provided in investing activities was $2,664,000 for the first quarter of fiscal 2001, versus net cash used in investing activities of $5,237,000 for the same period last year. During the three months ended October 31, 2000, cash provided by investing activities was primarily used for the purchase of property, plant and equipment of $2,290,000, offset by maturities of marketable securities of $4,400,000.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit |
Description | |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended | |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended | |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |
(b) During the quarter ended October 31, 2000, the Company did not file any reports on Form 8-K.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment to be signed on its behalf by the undersigned thereunto duly authorized.
ANALOGIC CORPORATION |
Registrant |
/s/JOHN W. WOOD Jr. |
John W. Wood Jr. |
President and Chief Executive Officer |
(Principal Executive Officer) |
Date: October 27, 2003
/s/JOHN J. MILLERICK |
John J. Millerick |
Senior Vice President, |
Chief Financial Officer and Treasurer |
(Principal Financial |
and Accounting Officer) |
Date: October 27, 2003
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Exhibit |
Description | |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended | |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended | |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |
20