<PAGE> 1
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 March 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 April 30, 1995, 5,297,980 shares of the registrant's Common Stock, $0.01
par value, were outstanding.
Exhibit index located on page 13 of 15 total pages.
1
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LUNAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the quarterly period ended March 31, 1995
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1995, and June 30, 1994 . . . . . . . . . 3
Consolidated Statements of Income
Three and Nine Months Ended March 31, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
Nine Months Ended March 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
2
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PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------
Assets
- - - - --------------------------------------------------------------------------------
March 31, June 30,
1995 1994
(Unaudited) (Audited)
- - - - --------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 521,462 $ 702,581
Marketable securities--at cost (which
approximates market values) 9,513,033 5,902,838
Accounts receivable:
Trade, less allowance for doubtful accounts
of $1,100,000 at March 31, 1995
and $900,000 at June 30, 1994 17,468,337 11,204,504
Other 318,815 524,124
- - - - --------------------------------------------------------------------------------
17,787,152 11,728,628
Inventories 6,025,222 3,289,884
Deferred income taxes 1,151,000 882,000
Other 115,440 123,643
- - - - --------------------------------------------------------------------------------
Total current assets 35,113,309 22,629,574
Property, plant and equipment--at cost:
Buildings and improvements 2,208,289 2,020,174
Furniture and fixtures 557,478 428,882
Machinery and other equipment 2,854,676 2,239,970
- - - - --------------------------------------------------------------------------------
5,620,443 4,689,026
Less accumulated depreciation and amortization 2,342,187 1,927,456
- - - - --------------------------------------------------------------------------------
3,278,256 2,761,570
Land 138,858 138,858
- - - - --------------------------------------------------------------------------------
3,417,114 2,900,428
Long-term trade accounts receivable 3,796,531 1,997,535
Long-term marketable securities--at cost 8,059,201 15,208,294
Excess of cost over fair value of net assets
of subsidiary acquired, net of accumulated
amortization of $441,702 at March 31, 1995
and $374,616 at June 30, 1994 918,215 985,301
Patent fees and other intangibles, net of
accumulated amortization of $590,702 at
March 31, 1995 and $316,435 at June 30, 1994 1,391,978 1,437,919
Other 347,721 356,366
- - - - --------------------------------------------------------------------------------
$53,044,069 $45,515,417
================================================================================
See accompanying notes to consolidated financial statements
</TABLE>
3
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LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- - - - --------------------------------------------------------------------------------
March 31, June 30,
1995 1994
(Unaudited) (Audited)
- - - - --------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,221,122 $ 1,042,643
Customer advances and deferred income 387,069 255,969
Income taxes payable 1,661,752 1,198,052
Accrued liabilities:
Commissions payable 1,555,904 1,080,071
Compensation payable 305,768 352,460
Property, payroll, and other taxes 95,941 54,452
Accrued warranty and installation expenses 1,482,000 911,000
Other 163,718 131,946
- - - - --------------------------------------------------------------------------------
Total current liabilities 6,873,274 5,026,593
Minority interest in subsidiary 0 38,160
Shareholders' equity:
Common stock--authorized 10,000,000 shares
of $.01 par value; issued and outstanding
5,296,480 shares at March 31, 1995
and 5,225,380 at June 30, 1994 52,958 52,254
Capital in excess of par value 15,123,981 14,476,602
- - - - --------------------------------------------------------------------------------
15,176,939 14,528,856
Retained earnings 31,004,290 25,920,978
Cumulative translation adjustment (10,434) 830
- - - - --------------------------------------------------------------------------------
46,170,795 40,450,664
- - - - --------------------------------------------------------------------------------
$53,044,069 $45,515,417
================================================================================
See accompanying notes to consolidated financial statements
</TABLE>
4
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LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------
Three months ended Nine months ended
March 31, March 31, March 31, March 31,
1995 1994 1995 1994
- - - - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Equipment sales and
other revenue $12,230,814 $7,983,999 $31,794,322 $20,747,681
- - - - --------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales 5,687,011 3,055,355 13,408,128 7,906,030
Research and development 1,085,119 722,786 3,089,721 1,963,864
Selling and marketing 2,613,444 1,678,616 7,160,342 4,911,743
General and administrative 979,877 615,260 2,582,883 1,786,096
- - - - --------------------------------------------------------------------------------
10,365,451 6,072,017 26,241,074 16,567,733
- - - - --------------------------------------------------------------------------------
Earnings from operations 1,865,363 1,911,982 5,553,248 4,179,948
- - - - --------------------------------------------------------------------------------
OTHER INCOME
Interest income 339,997 368,865 964,795 959,643
Other 136,082 145,874 271,249 157,433
- - - - --------------------------------------------------------------------------------
476,079 514,739 1,236,044 1,117,076
- - - - --------------------------------------------------------------------------------
Earnings before provision
for income taxes 2,341,442 2,426,721 6,789,292 5,297,024
Provision for income taxes 574,055 423,734 1,705,980 1,192,846
- - - - --------------------------------------------------------------------------------
NET INCOME $ 1,767,387 $2,002,987 $ 5,083,312 $ 4,104,178
================================================================================
Net income per common and
common equivalent share $0.30 $0.35 $0.87 $0.72
================================================================================
Weighted average number of
common and common equivalent
shares 5,893,243 5,715,037 5,848,826 5,673,756
================================================================================
See accompanying notes to consolidated financial statements
</TABLE>
5
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LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------
Nine months ended
March 31, March 31,
1995 1994
- - - - --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $5,083,312 $ 4,104,178
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,071,763 769,623
Minority interest in subsidiary (38,160) (29,947)
Increase in accounts receivable (7,848,188) (2,567,673)
Increase in inventories (2,735,338) (1,287,317)
(Increase) decrease in other
current assets 8,203 (81,859)
(Increase) decrease in deferred income
taxes (269,000) 110,000
Increase (decrease) in accounts payable 167,215 (128,127)
Increase in customer advances 131,100 28,267
Increase in accrued liabilities 1,073,402 447,496
Increase in income taxes
payable 463,700 266,655
- - - - --------------------------------------------------------------------------------
Net cash provided by (used in) operating
activities (2,891,991) 1,631,296
- - - - --------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of marketable securities (1,042,910) (4,032,038)
Maturities of marketable securities 4,266,129 5,065,652
Additions to property, plant and equipment (931,417) (1,104,578)
Patent fees (183,813) (149,312)
Distributor Fee (45,200) (1,000,000)
- - - - --------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities $2,062,789 $(1,220,276)
- - - - --------------------------------------------------------------------------------
</TABLE>
6
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LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------
Nine months ended
March 31, March 31,
1995 1994
- - - - --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from exercise of stock options 368,572 45,469
Income tax benefit from stock option exercises 279,511 47,619
- - - - --------------------------------------------------------------------------------
Net cash provided by financing activities 648,083 93,088
- - - - --------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (181,119) 504,108
Cash and cash equivalents at beginning of period 702,581 2,262,081
- - - - --------------------------------------------------------------------------------
Cash and cash equivalents at end of period $521,462 $2,766,189
================================================================================
Supplemental disclosure of cash flow information:
Incomes taxes paid $1,101,038 $705,178
================================================================================
See accompanying notes to consolidated financial statements
</TABLE>
7
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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,
1994, 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,
1994, included in the Company's Form 10-K as filed with the Securities and
Exchange Commission on September 23, 1994.
The consolidated balance sheet as of March 31, 1995, the consolidated
statements of income for the three and nine months ended March 31, 1995 and
1994, and the consolidated statements of cash flows for the nine months ended
March 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 results of operations for the three and nine months ended March 31,
1995, are not necessarily indicative of the results to be expected for the
entire fiscal year ending June 30, 1995.
(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:
<TABLE>
- - - - --------------------------------------------------------------------------------
March 31, June 30,
1995 1994
(Unaudited) (Audited)
- - - - --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods and work in progress $1,865,857 $ 871,258
Materials and purchased parts 4,159,365 2,418,626
- - - - --------------------------------------------------------------------------------
$6,025,222 $3,289,884
================================================================================
</TABLE>
8
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Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- - - - ---------------------
Equipment sales and other revenue increased 53% to $12,231,000 in the three
months ended March 31, 1995 from $7,984,000 in the three months ended March 31,
1994. For the nine months ended March 31, 1995, equipment sales and other
revenue increased 53% to $31,794,000 from $20,748,000 in the nine months ended
March 31, 1994. The increase for the three-month period is primarily due to
increased sales of the DPX densitometer, initial commercial shipments of the
EXPERT high-end densitometer, and increasing demand for the Artoscan extremity
MRI. These same factors, plus an increase in sales of the Achilles ultrasound
device, contributed to the increase in revenues for the nine-month period.
Gross profit margins averaged approximately 54% and 58% of equipment sales
in the three- and nine-month periods ended March 31, 1995, respectively, and 62%
in the three- and nine-month periods ended March 31, 1994. The Company's gross
profit margins were lower in the current period due to increased competition in
its DPX product line, increased sales of lower margin EXPERT and Artoscan
extremity MRI products, and a special charge of $400,000 to accrue for upgrading
the installed base of EXPERT systems. These lower margins were partially offset
by increased sales of the higher margin Achilles.
Research and development expenditures increased to $1,085,000 in the three
months ended March 31, 1995 from $723,000 in the three months ended March 31,
1994, and to $3,090,000 in the nine months ended March 31, 1995, from $1,964,000
in the nine months ended March 31, 1994. This increase is primarily
attributable to expenditures related to the EXPERT (Trademark) bone
densitometer. The EXPERT is a high-end imaging densitometer which has faster
scan times and better spatial resolution than current bone densitometers. The
Company also incurred increased research and development costs to develop the
Achilles Plus, an improved version of the Achilles ultrasound bone densitometer.
Sales and marketing expenses were $2,613,000 in the three months ended
March 31, 1995 and $1,679,000 in the three months ended March 31, 1994,
representing 21% of equipment sales. For the nine months ended March 31, 1995,
sales and marketing expenses were $7,160,000 as compared to $4,912,000 for the
nine months ended March 31, 1994, representing a decrease to 23% from 24% as a
percentage of equipment sales. This decrease for the nine-month period is
attributable to lower average selling costs associated with sales of Achilles
densitometers.
General and administrative expenses increased to $980,000 in the three
months ended March 31, 1995 from $615,000 in the three months ended March 31,
1994, and to $2,583,000 in the nine months ended March 31, 1995 from $1,786,000
in the nine months ended March 31, 1994. This increase is primarily
attributable to higher legal expenses. Lunar is engaged in two separate patent
lawsuits with Hologic, Inc. These lawsuits are expected to result in
substantially higher legal expenses for at least the next two quarters.
Interest income was $340,000 in the three months ended March 31, 1995
compared to $369,000 in the three months ended March 31, 1994, and $965,000 in
the nine months ended March 31, 1995, as compared to $960,000 in the nine months
ended March 31, 1994. Interest income for the three- and nine-month periods
ended March 31, 1994 included $65,000 of non-recurring interest income related
to an income tax recovery related to the final settlement of a prior year tax
issue with the Internal Revenue Service.
9
<PAGE> 10
The effective tax rate in the three- and nine-month periods ended March 31,
1995 averaged 25% compared to 17% and 23% in the three- and nine-month periods
ended March 31, 1994. The provision for income taxes for the three- and
nine-month periods ended March 31, 1994 is net of a $235,000 income tax recovery
related to the final settlement of a prior year tax issue with the Internal
Revenue Service. These rates are also 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.
Liquidity and Capital Resources
- - - - -------------------------------
Cash and cash equivalents decreased $181,000 to $521,000 in the nine months
ended March 31, 1995. The Company also has a $17,572,000 portfolio of
marketable securities which management intends to hold to maturity but which is
readily marketable. The Company's accounts receivable increased 57% to
$21,584,000 at March 31, 1995 from $13,726,000 at June 30, 1994. Inventories
increased 83% to $6,025,000 at March 31, 1995 from $3,290,000 at June 30, 1994.
These increases are primarily attributable to higher sales for the nine-month
period ended March 31, 1995 and new product lines offered by the Company. 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.
10
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PART II - OTHER INFORMATION
LUNAR CORPORATION AND SUBSIDIARIES
Item 1. Legal Proceedings
None
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
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 March 31, 1995.
11
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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)
<TABLE>
<S> <C>
Date: May 12, 1995 Richard B. Mazess
- - - - ------------------- ---------------------------------
Richard B. Mazess
President
(Principal Executive Officer)
Date: May 12, 1995 Robert A. Beckman
- - - - ------------------- ----------------------------------
Robert A. Beckman
Vice President of Finance
and Treasurer
(Principal Financial and
Accounting Officer)
</TABLE>
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LUNAR CORPORATION AND SUBSIDIARIES
Exhibit Index
For the quarterly period ended March 31, 1995
No. Description Page
----- ----------- ----
11 Statement Regarding Computation of
Earnings Per Share . . . . . . . . . 14
27 Financial Data Schedule . . . . . . . . 15
13
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Exhibit 11
LUNAR CORPORATION AND SUBSIDIARIES
Statement Regarding Computation of Earnings Per Share
(Unaudited)
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------
Three months ended Nine months ended
March 31, March 31, March 31, March 31,
1995 1994 1995 1994
- - - - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $1,767,387 $2,002,987 $5,083,312 $4,104,178
================================================================================
Weighted average shares
outstanding 5,283,415 5,208,802 5,256,585 5,202,055
Stock options calculated
according to the treasury
stock method 609,828 506,235 592,241 471,701
Weighted average number of
common and common-equivalent
shares outstanding 5,893,243 5,715,037 5,848,826 5,673,756
================================================================================
Earnings per share $0.30 $0.35 $0.87 $0.72
================================================================================
</TABLE>
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[TYPE] EX-27
[DESCRIPTION] ART. 5 FDS FOR 3RD QUARTER 10-Q
[ARTICLE] 5
[LEGEND] THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] JUN-30-1995
[PERIOD-END] MAR-31-1995
[CASH] 521
[SECURITIES] 17,572
[RECEIVABLES] 22,684
[ALLOWANCES] 1,100
[INVENTORY] 6,025
[CURRENT-ASSETS] 35,113
[PP&E] 5,759
[DEPRECIATION] 2,342
[TOTAL-ASSETS] 53,044
[CURRENT-LIABILITIES] 6,873
[BONDS] 0
[COMMON] 53
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 46,118
[TOTAL-LIABILITY-AND-EQUITY] 53,044
[SALES] 31,794
[TOTAL-REVENUES] 31,794
[CGS] 13,408
[TOTAL-COSTS] 26,241
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 6,789
[INCOME-TAX] 1,706
[INCOME-CONTINUING] 5,083
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 5,083
[EPS-PRIMARY] .87
[EPS-DILUTED] .87
</TABLE>
15
