-----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, Fvnyu/6cFygape21AtYTqX5zWQNBx/y39cutbM8xW6pLyOy1+wd4RZE0c8pOluxL Dd9RYci7U0JWMGu8V1xCsw== 0000864906-97-000005.txt : 19971117 0000864906-97-000005.hdr.sgml : 19971117 ACCESSION NUMBER: 0000864906-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-18643 FILM NUMBER: 97719602 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 09/30/97 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 September 30, 1997 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 XX No ------ ------ As of October 31, 1997, 8,764,585 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 September 30, 1997 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION PAGE Item 1. Financial statements Consolidated Balance Sheets September 30, 1997, and June 30, 1997.................................3 Consolidated Statements of Income Three Months Ended September 30, 1997 and 1996........................5 Consolidated Statements of Cash Flows Three Months Ended September 30, 1997 and 1996........................6 Notes to Consolidated Financial Statements............................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................8 PART II - OTHER INFORMATION..................................................10 SIGNATURES...................................................................12 EXHIBIT INDEX................................................................13 PART 1. FINANCIAL INFORMATION ITEM 1. Financial Statements LUNAR CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets - ------------------------------------------------------------------------------ Assets - ------------------------------------------------------------------------------ September 30, June 30, 1997 1997 (Unaudited) (Audited) - ------------------------------------------------------------------------------ Current assets: Cash and cash equivalents $16,190,931 $ 14,417,155 Marketable securities 6,586,471 5,891,350 Accounts receivable: Trade, less allowance for doubtful accounts of $2,602,000 at September 30, 1997 and $2,602,000 at June 30, 1997 24,731,725 25,468,881 Other 1,289,914 1,061,558 - ------------------------------------------------------------------------------ 26,021,639 26,530,439 Inventories 11,018,906 9,373,490 Deferred income taxes 1,350,000 2,291,000 Other 379,319 84,790 - ------------------------------------------------------------------------------ Total current assets 61,547,266 58,588,224 Property, plant and equipment--at cost: Buildings and improvements 2,378,950 2,376,763 Furniture and fixtures 684,836 680,413 Machinery and other equipment 5,623,194 5,276,267 - ------------------------------------------------------------------------------ 8,686,980 8,333,443 Less accumulated depreciation and amortization 4,225,529 3,889,838 - ------------------------------------------------------------------------------ 4,461,451 4,443,605 Land 138,858 138,858 - ------------------------------------------------------------------------------ 4,600,309 4,582,463 Long-term trade accounts receivable 4,076,520 2,485,022 Long-term marketable securities 15,280,405 16,592,053 Patent fees and other intangibles, net of accumulated amortization of $1,282,873 September 30, 1997 and $1,185,613 at June 30, 1997 795,254 850,867 Other 182,138 183,954 - ------------------------------------------------------------------------------ $86,481,892 $83,282,583 ============================================================================== See accompanying notes to consolidated financial statements LUNAR CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets - ------------------------------------------------------------------------------ Liabilities and Shareholders' Equity - ------------------------------------------------------------------------------ September 30, June 30, 1997 1997 (Unaudited) (Audited) - ------------------------------------------------------------------------------ Current liabilities: Accounts payable $ 4,863,256 $ 4,209,485 Customer advances and deferred income 757,113 639,707 Income taxes payable 2,179,261 2,375,955 Accrued liabilities: Commission payable 2,310,924 2,146,189 Compensation payable 506,248 290,913 Property, payroll, and other taxes 110,297 141,906 Accrued warranty and installation expenses 3,164,000 2,984,000 Other 286,862 251,036 - ------------------------------------------------------------------------------ Total current liabilities 14,177,961 13,039,191 Shareholders' equity: Common stock--authorized 25,000,000 shares of $.01 par value; issued and outstanding 8,737,535 shares at September 30, 1997 and 8,721,425 at June 30, 1997 87,375 87,214 Capital in excess of par value 26,506,934 26,500,942 - ------------------------------------------------------------------------------ 26,594,309 26,588,156 Retained earnings 45,719,132 43,706,139 Unrealized appreciation in marketable securities 79,225 34,220 Cumulative translation adjustment (88,735) (85,123) - ------------------------------------------------------------------------------ 72,303,931 70,243,392 - ------------------------------------------------------------------------------ $86,481,892 $83,282,583 ============================================================================== See accompanying notes to consolidated financial statements LUNAR CORPORATION AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) - ------------------------------------------------------------------------------ Three months ended September 30, September 30, 1997 1996 - ------------------------------------------------------------------------------ REVENUES Equipment sales and other revenue $18,832,428 $18,914,639 - ------------------------------------------------------------------------------ OPERATING EXPENSES Cost of sales 8,786,725 8,377,478 Research and development 1,619,709 1,160,278 Selling and marketing 4,545,138 3,968,333 General and administrative 1,134,247 1,119,760 - ------------------------------------------------------------------------------ 16,085,819 14,625,849 - ------------------------------------------------------------------------------ Earnings from operations 2,746,609 4,288,790 - ------------------------------------------------------------------------------ OTHER INCOME (EXPENSE): Interest income 478,499 342,821 Other (236,135) (197,649) - ------------------------------------------------------------------------------ 242,384 145,172 - ------------------------------------------------------------------------------ Earnings before provision for income taxes 2,988,993 4,433,962 Provision for income taxes 976,000 1,533,000 - ------------------------------------------------------------------------------ NET INCOME $ 2,012,993 $ 2,900,962 ============================================================================== Net income per common and common-equivalent share $0.22 $0.32 ============================================================================== Weighted average number of common and common-equivalent 9,121,609 9,072,295 shares ============================================================================== See accompanying notes to consolidated financial statements LUNAR CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) - ------------------------------------------------------------------------------ Three months ended September 30, September 30, 1997 1996 - ------------------------------------------------------------------------------ Cash flows from operating activities: Net income $2,012,993 $2,900,962 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 539,483 295,843 Changes in assets and liabilities: Receivables (1,080,882) 298,703 Inventories (1,645,416) (1,290,175) Other current assets (294,529) (159,522) Deferred income taxes 941,000 (338,000) Accounts payable 650,159 (350,543) Customer advances and deferred income 117,406 (9,871) Accrued liabilities 564,287 (510,765) Income taxes payable (196,694) 1,505,090 - ------------------------------------------------------------------------------ Net cash provided by operating activities 1,607,807 2,341,722 - ------------------------------------------------------------------------------ Cash flows from investing activities: Maturities of marketable securities 555,000 851,600 Additions to property, plant and equipment (353,537) (720,706) Patent fees (41,647) (27,685) - ------------------------------------------------------------------------------ Net cash provided by investing activities 159,816 103,209 - ------------------------------------------------------------------------------ Cash flows from financing activities: Proceeds from exercise of stock options 231,454 86,591 Income tax benefit from stock option exercises 184,699 615,910 Repurchase of common stock (410,000) - - ------------------------------------------------------------------------------ Net cash provided by financing activities 6,153 702,501 - ------------------------------------------------------------------------------ Net increase in cash and cash equivalents 1,773,776 3,147,432 Cash and cash equivalents at beginning of period 14,417,155 8,001,582 - ------------------------------------------------------------------------------ Cash and cash equivalents at end of period $16,190,931 $11,149,014 ============================================================================== Supplemental disclosure of cash flow information: Income taxes paid $50,000 $ 1,151,000 ============================================================================== 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, 1997, 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, 1997, included in the Company's Form 10-K as filed with the Securities and Exchange Commission on September 26, 1997. The consolidated balance sheet as of September 30, 1997, the consolidated statements of income for the three months ended September 30, 1997 and 1996, and the consolidated statements of cash flows for the three months ended September 30, 1997 and 1996 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 months ended September 30, 1997, are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 1998. (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: - ------------------------------------------------------------------------------ September 30, June 30, 1997 1997 (Unaudited) (Audited) - ------------------------------------------------------------------------------ Finished goods and work in progress $ 3,892,228 $2,909,854 Materials and purchased parts 7,126,678 6,463,636 ----------- ---------- $11,018,906 $9,373,490 =========== ========== (3) SHAREHOLDERS' EQUITY On April 22, 1997, the Company approved a stock repurchase program pursuant to which it may repurchase up to 1,000,000 shares of its common stock from time to time based upon market conditions and other factors. The Company has repurchased 55,000 shares under this program as of November 13, 1997. Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Overall equipment sales and other revenue decreased $83,000 to $18,832,000 in the three months ended September 30, 1997 from $18,915,000 in the three months ended September 30, 1996. Sales by product line are summarized as follows: Revenues by Product in thousands) Three Months Ended ------------------------------- September 30, September 30, 1997 1996 ------------- ------------- X-ray densitometry $12,856 $15,285 Ultrasound densitometry 1,328 1,189 Orthopedic Imaging 2,694 1,181 Service Revenue 1,407 804 Other 547 456 ------------- ------------- $18,832 $18,915 ============= ============= The Company attributes the decrease in X-ray densitometry sales to customer uncertainty over 1998 Medicare reimbursement rates as originally proposed in June 1997. At that time, the Health Care Financing Administration (HCFA) had indicated that the 1998 rate for axial bone measurement tests would decrease to $40 from $121. On October 31, 1997, HCFA proposed an increase in the reimbursement rate for axial bone measurement tests from $121 to $131. Similarly, the reimbursement for peripheral bone measurements will increase from $38 to $69. These increases are scheduled to become effective January 1, 1998. The increase in Orthopedic Imaging sales is primarily due to increased unit sales of Artoscan dedicated MRI and Orthopedic C-Arm (ORCA) systems. The increase in service revenue is primarily due to the expanded number of installed units in the United States. Cost of sales as a percentage of equipment sales averaged approximately 47% in the three month period ended September 30, 1997, compared to 44% in the three month period ended September 30, 1996. The increase is the result of a higher mix of orthopedic imaging equipment which have a higher cost of sales. Research and development expenditures increased to $1,620,000 in the three months ended September 30, 1997 from $1,160,000 in the three months ended September 30, 1996. The Company increased research and development expenditures for ultrasound and peripheral X-ray densitometry products during the quarter ended September 30, 1997. Sales and marketing expenses increased $577,000 to $4,545,000 in the three months ended September 30, 1997, compared to $3,968,000 in the three months ended September 30, 1996. The increase is primarily the result of a higher mix of sales directly to international end-users, whereby the Company pays agent commissions. Interest income was $478,000 in the three months ended September 30, 1997 compared to $343,000 in the three months ended September 30, 1996. This increase is primarily the result of increased investments in marketable securities partially offset by decreases in the amount of financed receivables. The effective tax rate averaged 33% in the three month period ended September 30, 1997 compared to 35% in the three month period ended September 30, 1996. The effective tax rate is lower in the quarter ended September 30, 1997 versus the comparable prior year period due to increased tax exempt interest income. The rate for the three month period ended September 30, 1997 is below the 34% federal statutory rate as a result of the tax benefit of tax-exempt interest income and from foreign sales corporation treatment, offset by the provision for state income taxes. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased $1,774,000 to $14,417,000 in the three months ended September 30, 1997. Additionally, the Company has a laddered portfolio of high-grade municipal bonds with various maturities not exceeding 48 months. The Company owned approximately $21,867,000 in municipal securities as of September 30, 1997, which are readily marketable. The decrease in the current portion of accounts receivable at September 30, 1997 is primarily a result of a reduction in revenues compared to the quarter ended June 30, 1997. The increase in long-term accounts receivable is primarily due to the Company not selling any Latin American receivables during the quarter ended September 30, 1997. Inventories increased 18% to $11,019,000 at September 30, 1997 from $9,373,000 at June 30, 1997. The increase in finished goods is primarily attributable to increases in Artoscan MRI units. The Company entered into an agreement to purchase a 25-acre parcel of land for approximately $1,950,000 for the future construction of a assembly, warehouse and office building. The purchase agreement is subject to customary closing conditions. The Company does not have any other 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: On March 5, 1996, the Company and University of Alabama-Birmingham Research Foundation (UAB) (collectively the co-plaintiffs) sued EG&G Astrophysics (EG&G) of Long Beach, California, in the United States District Court for the Western District of Wisconsin for infringement of U.S. Patent 4,626,688 (the '688 Patent) by EG&G's dual-energy baggage scanners. A trial of the matter in December of 1996 concluded with a verdict in favor of the co-plaintiffs. The Company and UAB were awarded $4.2 million in damages which was divided between the co-plaintiffs after deducting legal expenses. The co-plaintiffs also entered into a Settlement and License Agreement with EG&G whereby EG&G was licensed under the '688 patent and a related U.S. patent. The license agreement provides for payment of royalties to the co-plaintiffs on EG&G's dual-energy baggage scanners manufactured or sold in the United States. The license agreement ends on December 2, 2003. The Company is presently co-defendant and counterclaim co-plaintiff with the UAB in two declaratory judgment actions filed in the United States District Court for the Central District of California. Both actions seek a determination of non-infringement and invalidity of the '688 Patent. The first declaratory judgment action was filed on January 21, 1997 by RapiScan Security Systems, Inc. ("RapiScan"). RapiScan manufactures and sells baggage scanning equipment and is a competitor of EG&G. The second declaratory judgment action was filed on February 26, 1997 by Osteometer Meditech A/S ("Osteometer"), a competitor of the Company. Osteometer manufactures and sells bone densitometry products and is located in Denmark. The Company intends to vigorously defend against these lawsuits. The Company does not believe these lawsuits will have a material effect on the results of operations or financial condition of the Company. Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Certain statements in this filing, and elsewhere (such as in other filings by the Company with the Securities and Exchange Commission, press releases, presentations by the Company or its management, and oral statements) constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, regulation, technical risks associated with the development of new products, regulatory policies in the United States and other countries, reimbursement policies of public and private health care payors, introduction and acceptance of new drug therapies, competition from existing products and from new products or technologies, and market and general economic factors. 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 September 30, 1997. 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: November 13, 1997 /s/ Richard B. Mazess ------------------------ Richard B. Mazess President (Principal Executive Officer) Date: November 13, 1997 /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 September 30, 1997 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 September 30, September 30, 1997 1996 ------------- ------------- Net income $2,012,993 $2,900,962 ============= ============= Weighted average shares outstanding 8,715,833 8,513,892 Stock options calculated according to the treasury stock method 405,776 558,403 Weighted average number of common and common-equivalent shares outstanding 9,121,609 9,072,295 ============= ============ Net income per common and common-equivalent shares $0.22 $0.32 ===== ===== EX-27 3 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 This schedule contains summary financial information extracted from Form 10-Q for the three months ended September 30, 1997, and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS JUN-30-1998 SEP-30-1997 16,191 21,867 32,700 2,602 11,019 61,547 8,826 4,461 86,482 14,178 0 87 0 0 72,217 86,482 18,832 18,832 8,787 16,068 236 0 0 2,989 976 2,013 0 0 0 2,013 .22 .22
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