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adobe pdf icon Analogic Corporation Announces Results for Its First Quarter

Analogic Corporation Announces Results for Its First Quarter

Analogic Corporation Announces Results for Its First Quarter

PEABODY, Mass.–(BUSINESS WIRE)–Dec. 6, 2007–Analogic
Corporation (NASDAQ: ALOG), a leading designer and manufacturer of
high-precision health and security imaging equipment, today announced
results for its first quarter ended October 31, 2007.

    Highlights of the quarter included:

    --  Revenues - $94,201,000; up $18,599,000 or 25% over preceding
        first quarter

    --  Net Income (GAAP) - $6,388,000

    --  EPS (GAAP) - $0.48 per diluted share

    --  Medical technology products demonstrated growth

    --  Security technology segment returned to profitability

Revenues for the first quarter ended October 31, 2007, were
$94,201,000, compared with the prior year’s first quarter revenues of
$75,602,000, an increase of $18,599,000, or 25%. On a GAAP basis, net
income for the first quarter was $6,388,000, or $0.48 per diluted
share, compared with a net loss of $5,360,000, or a loss of $0.39 per
diluted share, for the prior year’s first quarter. The first quarter
ended October 31, 2006, included pre-tax asset impairment charges of
$9,705,000 associated with the Company’s digital radiography systems

On a non-GAAP basis, earnings per share for the first quarter
ended October 31, 2007, were $0.53 per diluted share, compared to
$0.12 per diluted share for the prior year’s first quarter. A
reconciliation of all GAAP to non-GAAP financial measures is presented
in the financial tables at the end of this news release.

President and CEO Jim Green said, “We are pleased with the solid
improvement demonstrated this quarter in both our health and our
security businesses. Medical technology revenues were $77,490,000, up
14% over the prior first quarter, while security revenues also
improved from a very weak first quarter a year ago. Overall, this is a
very good start to the new fiscal year.”

Sales of medical imaging products were $52,119,000, up 15% over
the prior year’s first quarter. The growth was due to increased demand
for our advanced subsystems for Computed Tomography (CT), including
advanced multislice Data Acquisition Systems (DASs) and new Data
Management Systems (DMSs), and for our Magnetic Resonance Imaging
(MRI) Power Systems. Patient monitoring revenues were essentially flat
for the quarter, and medical CT system revenues, as expected, were
down from a very strong quarter a year earlier. Digital radiography
product revenues were up marginally at $4,866,000, and our B-K Medical
subsidiary, specializing in clinical ultrasound, met our expectations,
with revenues of $20,505,000, up 5% over the prior year, exclusive of
the impact of foreign exchange.

Green added, “We are optimistic about our medical business. We
expect to see continuing growth in sales of our high-precision CT and
MRI subsystems. During the quarter we received our first production
orders for our new high-precision Radio Frequency (RF) amplifier for
high-end, 3.0 Tesla Magnetic Resonance Imaging, a significant
potential growth area. We also completed feasibility studies on the
PowerLink, our innovative non-contact power system for CT, for
multiple Original Equipment Manufacturers (OEMs). After the close of
the quarter, B-K Medical introduced the Pro Focus OR, the first
dedicated ultrasound system for the operating room. We are expecting
continuing growth in demand for B-K Medical’s equipment for
brachytherapy treatment for prostate cancer, as part of the general
growth in urological applications. We are enthusiastic about Anrad’s
prospects as it starts production of direct, digital, flat-panel
detectors for Full-Field Digital Mammography (FFDM) systems.”

Security technology revenues were $13,336,000, up from $4,639,000
a year earlier. This was due primarily to the shipment of 15 EXACT®
systems this quarter, compared to only 4 systems a year earlier. On
August 15, 2007, the Company announced that it had received from L-3
Communications an order for $17.5 million in EXACT systems and upgrade
equipment scheduled to begin shipping early in 2008.

In October, the Company received an Indefinite Delivery Indefinite
Quantity (IDIQ) order for up to 40 COBRA® systems over two years and
field support services for over five years at a combined potential
value of $37.5 million. The IDIQ included an initial purchase order
for 12 COBRA units with installation and support services valued at
$7.6 million, and a potential additional $40 million for further
engineering services over five years, for a combined maximum potential
contract value of $77.5 million.

In summary, Green noted, “Overall, our medical business is doing
well. We significantly reduced our loss in digital radiography, down
to $1,815,000 for the quarter compared to a loss of $13,956,000,
including a $9,705,000 writedown, for the prior first quarter. Our
security business is performing at a modestly higher and more stable
level than last year, and we are on plan to run it profitably at the
current level of shipments. We are continuing development of two new
checked-luggage scanning systems, the XLB1100designed for large,
high-traffic, airports and the KING COBRA, designed primarily for
small to mid-sized airports.

“We have also made a number of changes in the roles and
responsibilities of the senior management team,” Green added. In July,
Doug Rosenfeld joined the Company as Vice President of Human
Resources. After the close of the quarter John Fry joined the Company
as Vice President, General Counsel, and Corporation Secretary, and
John P. O’Connor was appointed Vice President of Engineering. Most
recently, Peter Cempellin joined the Company as Vice President and
General Manager of our Security Systems Division. Green concluded,
“Our medical and security businesses grew substantially during the
quarter, while we considerably strengthened an already strong
management team. I am confident that we are well on the way to
establishing the foundation for Analogic’s long-term growth as The
World Resource for Health and Security Technology.”

Please note that the Company is still working to resolve certain
matters related to the adoption of Financial Accounting Standards
Board (“FASB”) Interpretation (“FIN”) No. 48, “Accounting for
Uncertainty in Income Taxes”, which is an interpretation of SFAS
No. 109, “Accounting for Income Taxes.” As a result, the Company has
not yet finalized its Stockholders’ Equity and certain tax related
asset and liability accounts as set forth in its Unaudited Condensed
Consolidated Balance Sheet. The adjustments that will result from the
finalization of our FIN No. 48 analysis will have no impact on the
Company’s Unaudited Consolidated Statement of Operations. Therefore,
the Company, in lieu of including an Unaudited Consolidated Balance
Sheet in this announcement, is reporting the following information
related to its Unaudited Condensed Consolidated Balance Sheet
components that have been finalized:

— Cash and cash equivalents, marketable securities, and
short-term investments totaled $236,632,000 and $228,545,000 at
October 31, 2007 and July 31, 2007, respectively.

— Accounts receivable, net of allowance for doubtful accounts,
totaled $56,195,000 and $58,926,000 at October 31, 2007 and July 31,
2007, respectively.

— Inventories totaled $57,941,000 and $54,413,000 at October 31,
2007 and July 31, 2007, respectively.

— Property, plant, and equipment, net totaled $83,110,000 and
$80,482,000 at October 31, 2007 and July 31, 2007, respectively.
Capital spending for the three months ended October 31, 2007 was

— Accounts payable totaled $23,586,000 and $21,734,000 at October
31, 2007 and July 31, 2007, respectively.

— Accrued liabilities totaled $22,209,000 and $26,570,000 at
October 31, 2007 and July 31, 2007, respectively.


Analogic will conduct an investor conference call on Thursday,
December 6, at 11:00 a.m. ET to discuss the results for the first
quarter and recent developments. To participate in the conference
call, dial 1-866-823-6992, or 1-334-323-7225 for international
callers, approximately ten minutes before the conference is scheduled
to begin. Inform the operator that you wish to join the Analogic
conference, Passcode 03391. You will then be asked for your name,
organization, and telephone number and be connected to the conference.
Presentation materials related to quarterly financial information will
be posted on the Company’s website at www.analogic.com. To listen to
the live audio webcast in listen-only mode, visit www.analogic.com
approximately ten minutes before the conference is scheduled to begin.

A telephone digital replay will be available approximately two
hours after the call is completed through midnight (ET) Thursday,
December 13, 2007. To access the digital replay, dial 1-877-919-4059,
or 1-334-323-7226 for international callers. The conference ID number
is 17573477.

A replay of the conference call webcast will be archived on the
Company’s website at www.analogic.com approximately three hours after
the call is completed and will be available through midnight (ET)
Thursday, December 27, 2007.

For more information on the conference call, visit
www.analogic.com, call 978-326-4213, or email proberts@analogic.com.

Analogic Corporation is a leading designer and manufacturer of
advanced health and security systems and subsystems sold primarily to
Original Equipment Manufacturers (OEMs). The Company is recognized
worldwide for advancing the state of the art in Automatic Explosives
Detection, Computed Tomography (CT), Digital Radiography (DR),
Ultrasound, Magnetic Resonance Imaging (MRI), Patient Monitoring, and
Advanced Signal Processing.

Use of Non-GAAP Financial Measures

This presentation includes non-GAAP financial measures that are
not in accordance with, nor an alternative to, generally accepted
accounting principles and may be different from non-GAAP measures used
by other companies. In addition, these non-GAAP measures are not based
on any comprehensive set of accounting rules or principles.

Non-GAAP financial measures should not be considered as a
substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP. They are limited in value because
they exclude charges that have a material effect on our reported
results and, therefore, should not be relied upon as the sole
financial measures to evaluate our financial results. The non-GAAP
financial measures are meant to supplement, and to be viewed in
conjunction with, GAAP financial results. An explanation and a
reconciliation of our non-GAAP measures is provided at the end of this
press release.

Forward-Looking Statements

This press release contains the Company’s or management’s
intentions, hopes, beliefs, expectations, or predictions. These are
considered “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements (statements that are not historical facts) in this
presentation are made 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. Actual results may differ
materially from those indicated by such statements as a result of
various factors, including those discussed in the Company’s periodic
reports filed with the SEC under the heading “Risk Factors.” In
addition, the forward-looking statements included in this press
release represent the Company’s views as of December 6, 2007. The
Company anticipates that subsequent events and developments will cause
the Company’s views to change. However, while the Company may elect to
update these forward-looking statements at some point in the future,
the Company specifically disclaims any obligation to do so. These
forward-looking statements should not be relied upon as representing
the Company’s views as of any date subsequent to December 6, 2007.

Consolidated Statements of Operations (in thousands, except per share

                                                      Three Months
                                                       October 31,
                                                      2007     2006
Net revenue:
Products                                             $85,311 $ 70,748
Engineering                                            5,515    1,664
Other                                                  3,375    3,190
Total net revenue                                     94,201   75,602
Cost of sales:
Products                                              52,049   44,589
Engineering                                            5,456    2,863
Other                                                  1,879    1,487
Asset impairment charges                                  --    8,625
Total cost of sales                                   59,384   57,564
Gross margin                                          34,817   18,038
Operating expenses:
Research and product development                      11,182   11,578
Selling and marketing                                  7,802    7,002
General and administrative                             9,440    9,039
Asset impairment charges                                  --    1,080
Total operating expenses                              28,424   28,699
Income (loss) from operations                          6,393  (10,661)
Other (income) expense:
Interest income, net                                  (2,703)  (3,223)
Equity loss in unconsolidated affiliates                  --       78
Other                                                   (439)     122
Total other income                                    (3,142)  (3,023)
Income (loss) before income taxes                      9,535   (7,638)
Provision (benefit) for income taxes                   3,147   (2,278)
Net income (loss)                                    $ 6,388 $ (5,360)
Net income (loss) per share:
Basic                                                $  0.49 $  (0.39)
Diluted                                                 0.48    (0.39)
Dividends declared per share                         $  0.10 $   0.10
Weighted-average shares outstanding:
Basic                                                 13,089   13,827
Diluted                                               13,216   13,827


The Company provides non-GAAP gross margin, non-GAAP operating
expenses, non-GAAP other (income) expense, non-GAAP income before
taxes, non-GAAP net income and non-GAAP diluted earnings per share as
supplemental measures to GAAP regarding the Company’s operational
performance. These financial measures exclude the impact of certain
items and, therefore, have not been calculated in accordance with
GAAP. The adjustments to these non-GAAP financial measures, and the
basis for such adjustments, are outlined below:

Share-based compensation expense. The Company incurs expense
related to share-based compensation included in its GAAP presentation
of cost of sales, research and development, selling and marketing,
general and administrative expense. Although share-based compensation
is an expense of the Company and viewed as a form of compensation,
these expenses vary in amount from period to period, and are affected
by market forces that are difficult to predict and are not within the
control of management, such as the market price and volatility of the
Company’s shares, risk-free interest rates, the expected term and
forfeiture rates of the awards. In accordance with SFAS No. 123R,
share-based compensation expense is calculated as of the grant date of
each share-based award, and generally cannot be changed or influenced
by management after the grant date. Management believes that exclusion
of these expenses allows comparisons of operating results that are
consistent between periods and allows comparisons of the Company’s
operating results to those of other companies that disclose non-GAAP
financial measures that exclude share-based compensation.

Executive transition expenses. In November 2006, John W. Wood Jr.
resigned as President of the Company and was temporarily replaced by
Bernard M. Gordon, who was appointed as our Executive Chairman, in
which capacity he served as both our principal executive officer and
Chairman of the Board. James W. Green was appointed as our President
and CEO on May 21, 2007, replacing Mr. Gordon as our principal
executive officer. Since his arrival Mr. Green has made and is
continuing to make a number of changes in the senior leadership team
reporting to him. As such, the Company has incurred charges for
severance, executive search, relocation and other related expenses.
Management believes these charges should be excluded from the non-GAAP
results because they are one-time items not associated with the
ongoing operations of the business.

Acquisition related expenses. The Company incurs amortization of
intangibles and other expenses related to acquisitions it has made in
recent years. The intangible assets are valued at the time of
acquisition, are then amortized over a period of several years after
the acquisition and generally cannot be changed or influenced by
management after the acquisition. Management believes that exclusion
of these expenses allows comparisons of operating results that are
consistent over time for both our newly-acquired and long-held

Asset impairment charges. As a result of continuing losses in its
Digital Radiography business and the related business outlook, the
Company evaluated the net realizability of all of the related assets
at October 31, 2006. As a result, the Company recorded an asset
impairment charge of $9,705,000 associated with the write-down of the
Company’s Digital Radiography system business assets to their
estimated fair values as a group based upon the present value of
estimated future cash flows of the business. Of the $9,705,000 asset
impairment charges, $8,625,000 was recorded to cost of sales and
$1,080,000 was recorded to operating expenses. Management believes
these charges should be excluded from the non-GAAP results because
they are one-time items not associated with the ongoing operations of
the business.

Gain on sale of investments. The Company has periodically sold
investments in affiliated companies. On May 23, 2007, the Company sold
its entire ownership interest in Bio-Imaging Research, Inc. (“BIR”),
for approximately $3,714,000, of which approximately $2,807,000 was
paid in cash upon closing and the remaining $907,000 was held in
escrow for a period of up to two years from the date of closing to
secure any indemnification claims, and a dividend of $1,429,000. The
dividend and cash payment, net of book value of $200,000, were
recorded as other income of $4,036,000 during the three months ended
July 31, 2007. During the three months ended October 31, 2007, the
Company received $84,000 as an initial escrow payment and recorded
that amount as other income. This gain has been presented as a
non-GAAP item for that period.

Adjustments for related tax impact. Finally, for purposes of
calculating non-GAAP net income and non-GAAP diluted earnings (losses)
per share, management adjusts the provision (benefit) for income taxes
to tax effect the non-GAAP adjustments described above as they have a
significant impact on the Company’s income tax provision (benefit).

Management excludes the above-described expenses and their related
tax impact in evaluating short-term and long-term operating trends in
the Company’s operations, and allocating resources to various
initiatives and operational requirements. The Company believes that
these non-GAAP financial adjustments are useful to investors because
they allow investors to evaluate the effectiveness of the methodology
and information used by management in its financial and operational

These non-GAAP financial measures have not been prepared in
accordance with GAAP, and should not be considered in isolation or as
a substitute for financial information provided in accordance with
GAAP. Further, these non-GAAP financial measures may not be computed
in the same manner as similarly titled measures used by other

The following table (in thousands, except per share data)
reconciles the non-GAAP financial measures to their most directly
comparable GAAP financial measures.

                                                       Three Months
                                                        October 31,

                                                       2007     2006

GAAP Gross Margin                                     $34,817 $18,038
     Share-based compensation                              28      44
     Asset impairment charges                              --   8,625
Non-GAAP Gross Margin                                 $34,845 $26,707
     Percent of Total Revenue                            37.0%   35.3%
GAAP Operating Expenses                               $28,424 $28,699
     Share-based compensation                            (368)   (604)
     Executive transition                                (418)   (145)
     Acquisition related expense                         (327)   (357)
     Asset impairment charges                              --  (1,080)
Non-GAAP Operating Expenses                            27,311  26,513
     Percent of Total Revenue                            29.0%   35.1%
GAAP Other (income) expense                           $(3,142)$(3,023)
     Gain on sale of investments                           84      --
Non-GAAP Other (income) expense                        (3,058) (3,023)
GAAP Income (Loss) Before Income Taxes                $ 9,535 $(7,638)
     Share-based compensation                             396     648
     Executive transition                                 418     145
     Acquisition related expense                          327     357
     Asset impairment charges                              --   9,705
     (Gain) on sale of investments                        (84)     --
Non-GAAP Income Before Income Taxes                    10,592   3,217
     Percent of Total Revenue                            11.2%    4.3%
GAAP Net Income (Loss)                                $ 6,388 $(5,360)
     Share-based compensation                             254     477
     Executive transition                                 264     118
     Acquisition related expense                          206     225
     Asset impairment charges                              --   6,156
     (Gain) on sale of investments                        (53)     --
Non-GAAP Net Income                                     7,059   1,616
     Percent of Total Revenue                             7.5%    2.1%
GAAP Diluted EPS                                      $  0.48 $ (0.39)
     Effect of non-GAAP adjustments                      0.05    0.51
Non-GAAP Diluted EPS                                  $  0.53 $  0.12

Analogic Corporation
John J. Millerick, 978-326-4000
Senior Vice President & CFO
Paul M. Roberts, 978-326-4213
Director of Communications

SOURCE: Analogic Corporation