-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TjpxPfrWC8Z6qVJa03yPm/4+7uVEUED+YoHWF/RxGhavw7CRXWgMCLmp/kLNGURO 7oJKANPIP2W2mzIi8YDM/g== 0000864906-96-000001.txt : 19960216 0000864906-96-000001.hdr.sgml : 19960216 ACCESSION NUMBER: 0000864906-96-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LUNAR CORP CENTRAL INDEX KEY: 0000864906 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 391200501 STATE OF INCORPORATION: WI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18643 FILM NUMBER: 96518898 BUSINESS ADDRESS: STREET 1: 313 W BELTLINE HIGHWAY CITY: MADISON STATE: WI ZIP: 53713 BUSINESS PHONE: 6082742663 MAIL ADDRESS: STREET 1: 313 WEST BELTLINE HIGHWAY CITY: MADISON STATE: WI ZIP: 53713 10-Q 1 QUARTERLY REPORT FOR QUARTER ENDING 12/31/95 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1995 ----------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-18643 LUNAR CORPORATION (Exact name of registrant as specified in its charter) Wisconsin 3845 39-1200501 (State of (Primary Standard Industry (IRS Employer Incorporation) Classification Code Number) Identification No.) 313 West Beltline Highway Madison, Wisconsin 53713 608-274-2663 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) 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 --- --- As of January 31, 1996, 8,220,775 shares of the registrant's Common Stock, $0.01 par value, were outstanding. LUNAR CORPORATION AND SUBSIDIARIES FORM 10-Q For the quarterly period ended December 31, 1995 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets December 31, 1995, and June 30, 1995 . . . . . . . . . . . . . .3 Consolidated Statements of Income Three and Six Months Ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Consolidated Statements of Cash Flows Six Months Ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Notes to Consolidated Financial Statements . . . . . . . . . . .8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . .9 PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 11 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 PART 1. FINANCIAL INFORMATION ITEM 1. Financial Statements LUNAR CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets - ----------------------------------------------------------------------------- Assets - ----------------------------------------------------------------------------- December 31, June 30, 1995 1995 (Unaudited) (Audited) - ----------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 6,359,857 $ 2,577,655 Marketable securities 8,884,682 11,647,041 Accounts receivable: Trade, less allowance for doubtful accounts of $1,670,000 at December 31, 1995 and $1,150,000 at June 30, 1995 21,613,737 19,109,561 Other 618,598 422,728 - ----------------------------------------------------------------------------- 22,232,335 19,532,289 Inventories 8,471,085 6,650,726 Deferred income taxes 1,447,000 1,180,000 Other 210,671 156,451 - ----------------------------------------------------------------------------- Total current assets 47,605,630 41,744,162 Property, plant and equipment--at cost: Buildings and improvements 2,223,033 2,219,148 Furniture and fixtures 614,871 582,206 Machinery and other equipment 3,497,953 3,043,258 - ----------------------------------------------------------------------------- 6,335,857 5,844,612 Less accumulated depreciation and amortization 2,835,694 2,456,356 - ----------------------------------------------------------------------------- 3,500,163 3,388,256 Land 138,858 138,858 - ----------------------------------------------------------------------------- 3,639,021 3,527,114 Long-term trade accounts receivable 5,937,776 4,496,457 Long-term marketable securities 3,457,884 4,322,629 Excess of cost over fair value of net assets of subsidiary acquired, net of accumulated amortization of $508,788 at December 31, 1995 and $464,064 at June 30, 1995 851,129 895,853 Patent fees and other intangibles, net of accumulated amortization of $883,515 at December 31, 1995 and $682,995 at June 30, 1995 1,339,346 1,371,269 Other 332,524 342,484 - ----------------------------------------------------------------------------- $63,163,310 $56,699,968 ============================================================================= See accompanying notes to consolidated financial statements LUNAR CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets - ----------------------------------------------------------------------------- Liabilities and Shareholders' Equity - ----------------------------------------------------------------------------- December 31, June 30, 1995 1995 (Unaudited) (Audited) - ----------------------------------------------------------------------------- Current liabilities: Accounts payable $ 2,880,880 $ 2,258,695 Customer advances and deferred income 514,865 462,050 Income taxes payable 1,529,796 2,201,898 Accrued liabilities: Commissions payable 2,160,898 1,767,139 Compensation payable 207,829 89,532 Property, payroll, and other taxes 201,295 146,219 Accrued warranty and installation expenses 1,722,000 1,555,000 Other 201,066 123,669 - ----------------------------------------------------------------------------- Total current liabilities 9,418,629 8,604,202 Minority interest in subsidiary 60,752 - Shareholders' equity: Common stock--authorized 10,000,000 shares of $.01 par value; issued and outstanding 8,172,555 shares at December 31, 1995 and 7,988,190 at June 30, 1995 81,726 53,255 Capital in excess of par value 17,394,924 15,438,402 - ----------------------------------------------------------------------------- 17,476,650 15,491,657 Retained earnings 36,193,770 32,622,240 Unrealized appreciation in marketable securities 42,839 - Cumulative translation adjustment (29,330) (18,131) - ----------------------------------------------------------------------------- 53,683,929 48,095,766 - ----------------------------------------------------------------------------- $63,163,310 $56,699,968 ============================================================================= See accompanying notes to consolidated financial statements LUNAR CORPORATION AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) - ----------------------------------------------------------------------------- Three months ended Six months ended December 31, December 31, December 31, December 31, 1995 1994 1995 1994 - ----------------------------------------------------------------------------- REVENUES Equipment sales and other revenue $16,934,285 $10,450,226 $29,294,274 $19,563,508 - ----------------------------------------------------------------------------- OPERATING EXPENSES Cost of sales 7,677,353 4,167,632 13,052,066 7,721,116 Research and development 1,564,806 1,076,447 2,871,432 2,004,603 Selling and marketing 3,559,406 2,522,872 6,338,899 4,546,898 General and administrative 1,380,357 726,088 2,881,572 1,603,006 - ----------------------------------------------------------------------------- 14,181,922 8,493,039 25,143,969 15,875,623 - ----------------------------------------------------------------------------- Earnings from operations 2,752,363 1,957,187 4,150,305 3,687,885 - ----------------------------------------------------------------------------- OTHER INCOME Interest income 385,023 316,443 784,250 625,219 Other (76,815) 61,387 (87,869) 134,746 - ----------------------------------------------------------------------------- 308,208 377,830 696,381 759,965 - ----------------------------------------------------------------------------- Earnings before provision for income taxes 3,060,571 2,335,017 4,846,686 4,447,850 Provision for income taxes 816,783 583,521 1,275,156 1,131,925 - ----------------------------------------------------------------------------- NET INCOME $ 2,243,788 $ 1,751,496 $ 3,571,530 $ 3,315,925 ============================================================================= Net income per common and common equivalent share $0.24 $0.20 $0.39 $0.38 ============================================================================= Weighted average number of common and common equivalent shares 9,226,295 8,822,376 9,162,620 8,741,235 ============================================================================= See accompanying notes to consolidated financial statements LUNAR CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) - ----------------------------------------------------------------------------- Six months ended December 31, December 31, 1995 1994 - ----------------------------------------------------------------------------- Cash flows from operating activities: Net income $3,571,530 $3,315,925 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 754,925 686,180 Minority interest in subsidiary 60,752 (37,489) Changes in assets and liabilities: Receivables (4,131,405) (3,978,475) Inventories (1,820,359) (1,598,494) Prepaid expenses (54,220) (28,819) Deferred income taxes (267,000) (154,000) Accounts payable 610,986 203,979 Customer advances and deferred income 52,815 21,238 Accrued liabilities 811,529 397,091 Income taxes payable (672,102) (34,828) - ----------------------------------------------------------------------------- Net cash used in operating activities (1,082,549) (1,207,692) - ----------------------------------------------------------------------------- Cash flows from investing activities: Purchases of marketable securities - (1,042,910) Maturities of marketable securities 3,539,600 2,816,830 Additions to property, plant and equipment (491,245) (602,245) Patent fees (168,597) (142,620) Distributor fee - (45,200) - ----------------------------------------------------------------------------- Net cash provided by investing activities $2,879,758 $ 983,855 - ----------------------------------------------------------------------------- LUNAR CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) - ----------------------------------------------------------------------------- Six months ended December 31, December 31, 1995 1994 - ----------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from exercise of stock options 678,860 206,468 Income tax benefit from stock option exercises 1,306,133 201,822 - ----------------------------------------------------------------------------- Net cash provided by financing activities 1,984,993 408,290 - ----------------------------------------------------------------------------- Net increase in cash and cash equivalents 3,782,202 184,453 Cash and cash equivalents at beginning of period 2,577,655 702,581 - ----------------------------------------------------------------------------- Cash and cash equivalents at end of period $6,359,857 $ 887,034 ============================================================================= Supplemental disclosure of cash flow information: Incomes taxes paid $ 907,450 $1,118,930 ============================================================================= See accompanying notes to consolidated financial statements LUNAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) BASIS OF PRESENTATION The consolidated financial statements of Lunar Corporation (the "Company") presented herein, without audit except for balance sheet information at June 30, 1995, have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended June 30, 1995, included in the Company's Form 10-K as filed with the Securities and Exchange Commission on September 27, 1995. The consolidated balance sheet as of December 31, 1995, the consolidated statements of income for the three and six months ended December 31, 1995 and 1994, and the consolidated statements of cash flows for the six months ended December 31, 1995 and 1994 are unaudited but, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of results for these interim periods. The Company has reclassified the presentation of certain prior year information to conform with the current presentation format. The results of operations for the three and six months ended December 31, 1995, are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 1996. (2) INVENTORIES Inventories are stated at the lower of cost or market; cost is determined principally by the first-in, first-out method. Inventories are broken down as follows: - ----------------------------------------------------------------------------- December 31, June 30, 1995 1995 (Unaudited) (Audited) - ----------------------------------------------------------------------------- Finished goods and work in progress $3,900,677 $3,661,586 Materials and purchased parts 4,570,408 2,989,140 ---------- ---------- $8,471,085 $6,650,726 ========== ========== (3) MARKETABLE SECURITIES Effective December 31, 1995, the Company reclassified its marketable securities portfolio from held-to-maturity to available-for-sale. (4) STOCK DIVIDEND The Company distributed a 3-for-2 stock split in the form of a stock dividend on December 21, 1995. All share and per-share data has been adjusted to reflect the stock dividend. Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Equipment sales and other revenue increased 62% to $16,934,000 in the three months ended December 31, 1995 from $10,450,000 in the three months ended December 31, 1994. For the six months ended December 31, 1995, equipment sales and other revenue increased 50% to $29,294,000 from $19,564,000 in the six months ended December 31, 1994. Sales by product line are broken down as follows: Revenues by Product (000's Omitted) Three Months Ended Six Months Ended ----------------------------- ---------------------------- December 31, December 31, December 31, December 31, 1995 1994 1995 1994 ------------ ------------ ------------ ------------ EXPERT $ 4,052 $ 1,149 $ 5,709 $ 1,754 DPX 8,548 5,748 15,842 10,928 Achilles 1,244 1,257 3,000 3,720 Artoscan 2,105 1,671 2,998 1,956 Other 985 625 1,745 1,206 ------- ------- ------- ------- $16,934 $10,450 $29,294 $19,564 ======= ======= ======= ======= Prior to the quarter ended December 31, 1995, EXPERT sales had been constrained by delays caused by a supplier of a key component. This problem has been resolved, and EXPERT sales have been positively impacted. Absent such delays, additional EXPERT systems would have shipped in the quarter ended September 30, 1995 versus the quarter ended December 31, 1995. The increase in DPX sales in the current fiscal year is primarily attributable to increased shipments in the United States, which the Company believes are related to the introduction of Fosamax, a new drug therapy for osteoporosis introduced by Merck in October 1995. Achilles sales were flat in the quarter ended December 31, 1995 as compared to the quarter ended December 31, 1994 due to lower sales in Japan, offset by increased sales to customers in Europe. Cost of sales as a percentage of equipment sales averaged approximately 45% in the three and six month periods ended December 31, 1995, up from 40% and 39% in the three and six month periods ended December 31, 1994. This increase is primarily a result of increased sales of the lower-margin EXPERT and Artoscan extremity MRI products and proportionately less sales of the higher-margin Achilles. Research and development expenditures increased to $1,565,000 in the three months ended December 31, 1995 from $1,076,000 in the three months ended December 31, 1994, and to $2,871,000 in the six months ended December 31, 1995 from $2,005,000 in the six months ended December 31, 1994. These increases are primarily attributable to expenditures related to the development of a new imaging device scheduled for introduction in calendar 1996. Bone Care International, the Company's 96% owned pharmaceutical development subsidiary, also increased expenditures for clinical testing of 1-alpha-D2 in the treatment of renal osteodystrophy. Lunar intends to spin off Bone Care International to shareholders in a tax- free transaction within the next few months. This spinoff is contingent upon a favorable tax opinion from the Company's outside accountants. If the spinoff is executed, Lunar will no longer be responsible for the costs of these clinical trials, which totaled $457,000 in the six months ended December 31, 1995. Sales and marketing expenses were $3,559,000 in the three months ended December 31, 1995 and $2,523,000 in the three months ended December 31, 1994, a decrease to 21% from 24% as a percentage of equipment sales. This decrease is attributable to a decrease in agent commissions due to a lower mix of sales made directly to end users. For the six months ended December 31, 1995, sales and marketing expenses were $6,339,000 as compared to $4,547,000 for the six months ended December 31, 1994, representing a decrease to 22% from 23% as a percentage of equipment sales. General and administrative expenses increased to $1,380,000 in the three months ended December 31, 1995 from $726,000 in the three months ended December 31, 1994, and to $2,882,000 in the six months ended December 31, 1995 from $1,603,000 in the six months ended December 31, 1994. These increases are primarily attributable to higher legal expenses. Lunar had been involved in several patent lawsuits with Hologic, Inc., a Massachusetts-based competitor, related to x-ray and ultrasound densitometers. These lawsuits were settled on November 22, 1995. Interest income was $385,000 in the three months ended December 31, 1995 compared to $316,000 in the three months ended December 31, 1994, and $784,000 in the six months ended December 31, 1995, as compared to $625,000 in the six months ended December 31, 1995. These increases are primarily the result of increases in the amount of financed receivables. The effective tax rate averaged 27% and 26% in the three and six month periods ended December 31, 1995 compared to 25% in the three and six month periods ended December 31, 1994. These rates are below the 34% federal statutory rate as a result of the benefit of Lunar FSC, Inc., and tax-exempt interest income, but offset by the provision for state income taxes. The effective tax rate has been trending higher in the current fiscal year due to increased profits from sales within the United States, which do not benefit from FSC treatment. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents increased $3,782,000 to $6,360,000 in the six months ended December 31, 1995. The Company also has a laddered portfolio of high-grade municipal bonds with various maturities not exceeding 48 months. The Company owned approximately $12,343,000 in municipal securities as of December 31, 1995, which are readily marketable. The Company plans to contribute approximately $10,000,000 in cash and municipal securities to Bone Care in exchange for additional equity prior to the spinoff. The Company believes this additional capital contribution will be sufficient to fund the expected losses of Bone Care during the next several years. The Company's accounts receivable increased 17% to $28,170,000 at December 31, 1995 from $24,029,000 at June 30, 1995. This increase is primarily due to a 33% increase in sales in the second quarter of fiscal year 1996 as compared to the fourth quarter of fiscal year 1995. Inventories increased 27% to $8,471,000 at December 31, 1995 from $6,651,000 at June 30, 1995. The increase in finished goods and work in progress is primarily attributable to increases in Artoscan MRI units offset by decreases in EXPERT systems. The increase in materials and purchased parts is primarily due to an increase in production of EXPERT and DPX systems. The Company does not have any pending material commitments for capital expenditures. Management believes the current level of cash and short-term investments is adequate to finance the Company's operations for the foreseeable future. PART II - OTHER INFORMATION LUNAR CORPORATION AND SUBSIDIARIES Item 1. Legal Proceedings Patent Litigation: During fiscal 1995 and part of fiscal year 1996, the Company was involved in patent litigation with Hologic, Inc., a Massachusetts-based competitor. On November 22, 1995, the Company announced the signing of a definitive agreement with Hologic settling all disputes between the parties. The agreement provides for certain continuing payments between the companies related to future sales, the net effect of which Lunar does not believe will be material to its revenues or earnings. The agreement also provides that the companies will not engage each other in patent litigation in the area of x-ray densitometry and ultrasound for a ten-year period. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The 1995 Annual Meeting of Shareholders ("Annual Meeting") of the Company was held on November 17, 1995. The total number of shares of the Company's common stock, $.01 par value per share, outstanding as of October 6, 1995, the record date of the Annual Meeting, was 5,340,360. Management of the Company solicited proxies pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and Regulation 14A promulgated thereunder for the Annual Meeting. Two (2) directors, Samuel E. Bradt and Richard B. Mazess, Ph.D., were elected to serve until the 1998 Annual Meeting of Shareholders. The directors were elected by a vote of 5,113,821 votes "FOR" and 537 votes "WITHHELD AUTHORITY." The selection of KPMG Peat Marwick LLP as the Company's independent auditors was also approved. The selection was approved by a vote of 5,112,494 votes "FOR," 810 votes "AGAINST," and 1,054 votes "ABSTAIN." Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits furnished: (11) Statement Re: Computation of Earnings Per Share (27) Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended December 31, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LUNAR CORPORATION (Registrant) Date: February 12, 1996 /s/ Richard B. Mazess - ------------------------ ----------------------------- Richard B. Mazess President (Principal Executive Officer) Date: February 12, 1996 /s/ Robert A. Beckman - ------------------------ ---------------------------- Robert A. Beckman Vice President of Finance and Treasurer (Principal Financial and Accounting Officer) LUNAR CORPORATION AND SUBSIDIARIES Exhibit Index For the Quarterly Period Ended December 31, 1995 No. Description Page 11 Statement Regarding Computation of Earnings Per Share . . . . . . . . 14 27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . 15 EX-11 2 COMPUTATION OF PER-SHARE EARNINGS Exhibit 11 LUNAR CORPORATION AND SUBSIDIARIES Statement Regarding Computation of Earnings Per Share (Unaudited) Three months ended Six months ended December 31, December 31, December 31, December 31, 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Net income $2,243,788 $1,751,496 $3,571,530 $3,315,925 ========== ========== ========== ========== Weighted average shares outstanding 8,093,978 7,882,347 8,046,246 7,865,193 Stock options calculated according to the treasury stock method 1,132,317 940,029 1,116,374 876,042 Weighted average number of common and common-equivalent shares outstanding 9,226,295 8,822,376 9,162,620 8,741,235 ========== ========== ========== ========== Net income per common and common-equivalent shares $0.24 $0.20 $0.39 $0.38 ===== ===== ===== ===== EX-27 3 ART.5 FDS FOR 2ND QUARTER 10-Q
5 This schedule contains summary financial information extracted from Form 10-Q for the six months ended December 31, 1995, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS JUN-30-1996 DEC-31-1995 6,360 12,343 29,840 1,670 8,471 47,606 6,475 2,836 63,163 9,419 0 82 0 0 53,602 63,163 29,294 29,294 13,052 25,144 0 0 0 4,847 1,275 3,572 0 0 0 3,572 .39 .39
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