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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the period ended January 31, 2005
 
or
 
o
   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
(Address of principal executive offices)		   01960
(Zip Code)
(978) 977-3000
(Registrant’s 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 þ          No o
      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o
      The number of shares of Common Stock outstanding at February 28, 2005 was 13,706,653.
 
 

ANALOGIC CORPORATION
TABLE OF CONTENTS
             
        Page No.
         
   Financial Information        
   Financial Statements        
     Unaudited Condensed Consolidated Balance Sheets as of January 31, 2005 and July 31, 2004     2  
     Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended January 31, 2005 and 2004     3  
     Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended January 31, 2005 and 2004     4  
     Notes to Unaudited Condensed Consolidated Financial Statements     5-14  
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     15-28  
   Quantitative and Qualitative Disclosures about Market Risk     28  
   Controls and Procedures     28-29  
 
Part II.
   Other Information        
   Exhibits     30  
 Signatures     31  
 Exhibit Index     32  
 EX-31.1 Section 302 Certification of CEO
 EX-31.2 Section 302 Certification of CFO
 EX-32.1 Section 906 Certification of CEO
 EX-32.2 Section 906 Certification of CFO

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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ANALOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
                     
    January 31,   July 31,
    2005   2004
         
ASSETS
Current assets:
                
 
Cash and cash equivalents
   $ 160,040     $ 149,549  
 
Marketable securities, at fair value
     65,460       27,088  
 
Accounts and notes receivable, net of allowance for doubtful accounts of $2,473 at January 31, 2005 and $2,493 at July 31, 2004
     48,742       55,498  
 
Inventories
     70,339       65,952  
 
Costs related to deferred revenue
     13,857       12,723  
 
Refundable and deferred income taxes
     —       10,861  
 
Other current assets
     7,572       6,450  
             
   
Total current assets
     366,010       328,121  
             
Property, plant and equipment, net
     91,443       91,077  
Investments in and advances to affiliated companies
     2,112       10,967  
Capitalized software, net
     12,217       9,502  
Goodwill
     1,623       1,565  
Intangible assets, net
     7,869       9,223  
Costs related to deferred revenue
     219       219  
Other assets
     3,898       1,397  
             
   
Total Assets
   $ 485,391     $ 452,071  
             
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
                
 
Notes payable
   $ 42     $ 785  
 
Obligations under capital leases
     165       177  
 
Accounts payable, trade
     22,274       21,707  
 
Accrued liabilities
     20,264       21,380  
 
Deferred revenue
     28,346       26,281  
 
Advance payments
     11,976       6,125  
 
Accrued income taxes
     2,876       5,791  
 
Deferred income taxes
     5,822       —  
             
   
Total current liabilities
     91,765       82,246  
             
Long-term liabilities:
                
 
Obligations under capital leases
     87       155  
 
Deferred revenue
     1,711       1,459  
 
Deferred income taxes
     2,191       810  
             
   
Total long-term liabilities
     3,989       2,424  
             
Commitments and guarantees (Note 14)
                
Stockholders’ equity:
                
 
Common stock, $.05 par value
     714       713  
 
Capital in excess of par value
     48,083       47,257  
 
Retained earnings
     318,289       324,025  
 
Accumulated other comprehensive income
     28,892       2,141  
 
Unearned compensation
     (6,341 )     (6,735 )
             
   
Total stockholders’ equity
     389,637       367,401  
             
   
Total Liabilities and Stockholders’ Equity
   $ 485,391     $ 452,071  
             
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ANALOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
                                     
    Three Months Ended   Six Months Ended
    January 31,   January 31,
         
    2005   2004   2005   2004
                 
Net revenue:
                                
 
Product
   $ 79,201     $ 86,896     $ 155,287     $ 149,573  
 
Engineering
     3,169       4,000       8,409       10,596  
 
Other
     1,946       1,745       4,711       4,181  
                         
Total net revenue
     84,316       92,641       168,407       164,350  
                         
Cost of sales:
                                
 
Product
     47,494       49,833       94,633       88,508  
 
Engineering
     3,480       2,132       7,542       4,936  
 
Other
     1,280       1,140       2,718       2,349  
                         
Total cost of sales
     52,254       53,105       104,893       95,793  
                         
Gross margin
     32,062       39,536       63,514       68,557  
                         
Operating expenses:
                                
 
Research and product development
     15,272       14,482       29,209       29,785  
 
Selling and marketing
     9,841       9,795       18,728       17,819  
 
General and administrative
     10,662       10,081       20,655       18,554  
 
Asset impairment charges
     947       —       947       —  
                         
Total operating expenses
     36,722       34,358       69,539       66,158  
                         
Income (loss) from operations
     (4,660 )     5,178       (6,025 )     2,399  
                         
Other (income) expense:
                                
 
Interest income
     (1,029 )     (962 )     (1,885 )     (2,086 )
 
Interest expense
     5       119       21       192  
 
Equity (gain) loss in unconsolidated affiliates
     356       (158 )     239       (1 )
 
Other
     12       101       (580 )     (5 )
                         
Total other (income) expense
     (656 )     (900 )     (2,205 )     (1,900 )
                         
Income (loss) before income taxes
     (4,004 )     6,078       (3,820 )     4,299  
Provision (benefit) for income taxes
     (294 )     1,167       (275 )     989  
                         
Net income (loss)
   $ (3,710 )   $ 4,911     $ (3,545 )   $ 3,310  
                         
Net income (loss) per common share:
                                
   
Basic
   $ (0.27 )   $ 0.37     $ (0.26 )   $ 0.25  
   
Diluted
     (0.27 )     0.37       (0.26 )     0.25  
Weighted average shares outstanding:
                                
   
Basic
     13,545       13,412       13,534       13,397  
   
Diluted
     13,545       13,464       13,534       13,505  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ANALOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
                     
    Six Months Ended
    January 31,
     
    2005   2004
         
OPERATING ACTIVITIES:
                
Net income (loss)
   $ (3,545 )   $ 3,310  
 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
                
   
Deferred income taxes
     565       543  
   
Depreciation and amortization
     10,085       10,508  
   
Allowance for doubtful accounts
     129       2  
   
Asset impairment charges
     947       —  
   
Gain on sale of property, plant, and equipment
     (1 )     (46 )
   
Equity (gain) loss in unconsolidated affiliates
     239       (1 )
   
Equity loss in unconsolidated affiliate classified as research and product development expense
     759       2,040  
   
Non-cash compensation expense from stock grants
     1,049       806  
   
Net changes in operating assets and liabilities (Note 11)
     3,221       (10,875 )
             
NET CASH PROVIDED BY OPERATING ACTIVITIES:
     13,448       6,287  
             
INVESTING ACTIVITIES:
                
   
Investments in and advances to affiliated companies
     (1,113 )     (19 )
   
Acquisition of businesses, net of cash acquired
     —       (141 )
   
Acquisition of assets
     —       (1,750 )
   
Additions to property, plant and equipment
     (5,562 )     (14,483 )
   
Capitalized software
     (3,322 )     (1,653 )
   
Proceeds from sale of property, plant and equipment
     34       156  
   
Maturities of marketable securities
     10,335       6,485  
             
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
     372       (11,405 )
             
FINANCING ACTIVITIES:
                
   
Payments on debt and capital lease obligations
     (743 )     (1,159 )
   
Issuances of stock pursuant to exercise of stock options and employee stock purchase plan
     172       1,445  
   
Dividends paid to shareholders
     (2,190 )     (2,161 )
             
NET CASH USED FOR FINANCING ACTIVITIES
     (2,761 )     (1,875 )
             
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
     (568 )     319  
             
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
     10,491       (6,674 )
             
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
     149,549       136,806  
             
CASH AND CASH EQUIVALENTS, END OF PERIOD
   $ 160,040     $ 130,132  
             
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. Basis of presentation:
      The unaudited condensed consolidated financial statements of 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 accounting principles generally accepted in the United States of America 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 and six months ended January 31, 2005, are not necessarily indicative of the results to be expected for the fiscal year ending July 31, 2005, or any other interim period.
      These statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended July 31, 2004, included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 1, 2005.
      The financial statements have not been audited by an independent registered certified public accounting firm. The condensed consolidated balance sheet as of July 31, 2004, contains data derived from audited financial statements.
      Certain financial statement items in the prior fiscal year have been reclassified to conform to the current year’s financial presentation format.
2. Stock-based compensation:
      As permitted by Statement of Financial Accounting Standards No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB statement No. 123,” and Statement of Financial Accounting Standards No. 123 (“SFAS 123”) “Accounting for Stock-Based Compensation,” the Company applies the accounting provisions of the Accounting Principle Board (“APB”) No. 25 “Accounting for Stock Issued to Employees,” and related interpretations, with regard to the measurement of compensation cost for options granted under the Company’s equity compensation plans.

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ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
      If the Company had adopted the fair value method described in SFAS 123, using the Black-Scholes option-pricing model the Company would have reported the following results of operations:
                                   
    Three Months Ended   Six Months Ended
    January 31,   January 31,
         
    2005   2004   2005   2004
                 
Net income (loss), as reported
   $ (3,710 )   $ 4,911     $ (3,545 )   $ 3,310  
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects
     501       318       973       688  
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects
     (1,241 )     (993 )     (2,440 )     (2,099 )
                         
Pro forma net income (loss)
   $ (4,450 )   $ 4,236     $ (5,012 )   $ 1,899  
                         
Earnings (loss) per share:
                                
 
Basic — as reported
   $ (0.27 )   $ 0.37     $ (0.26 )   $ 0.25  
 
Basic — pro forma
     (0.33 )     0.32       (0.37 )     0.14  
 
Diluted — as reported
   $ (0.27 )   $ 0.37     $ (0.26 )   $ 0.25  
 
Diluted — pro forma
     (0.33 )     0.31       (0.37 )     0.14  
3. Balance sheet information:
      Additional information for certain balance sheet accounts is as follows for the periods indicated:
                   
    January 31,   July 31,
    2005   2004
         
Inventories:
                
 
Raw materials
   $ 41,434     $ 36,246  
 
Work-in-process
     14,968       12,400  
 
Finished goods
     13,937       17,306  
             
    $ 70,339     $ 65,952  
             
Accrued liabilities:
                
 
Accrued employee compensation and benefits
   $ 9,923     $ 11,247  
 
Accrued warranty
     5,124       5,039  
 
Other
     5,217       5,094  
             
    $ 20,264     $ 21,380  
             
Advance payments and other:
                
 
Long-lead-time components
   $ 8,535     $