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, 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 October 31, 1995, 5,373,210 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, 1995
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1995, and June 30, 1995. . . . . . . . . . . . . .3
Consolidated Statements of Income
Three Months Ended September 30, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows
Three Months Ended September 30, 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
- -----------------------------------------------------------------------------
September 30, June 30,
1995 1995
(Unaudited) (Audited)
- -----------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 5,195,850 $ 2,577,655
Marketable securities--at cost (which
approximates market values) 10,128,560 11,647,041
Accounts receivable:
Trade, less allowance for doubtful accounts
of $1,300,000 at September 30, 1995
and $1,150,000 at June 30, 1995 18,434,422 19,109,561
Other 206,690 422,728
- -----------------------------------------------------------------------------
18,641,112 19,532,289
Inventories 8,570,374 6,650,726
Deferred income taxes 1,233,000 1,180,000
Other 196,739 156,451
- -----------------------------------------------------------------------------
Total current assets 43,965,635 41,744,162
Property, plant and equipment--at cost:
Buildings and improvements 2,221,049 2,219,148
Furniture and fixtures 600,452 582,206
Machinery and other equipment 3,117,407 3,043,258
- -----------------------------------------------------------------------------
5,938,908 5,844,612
Less accumulated depreciation and amortization 2,624,901 2,456,356
- -----------------------------------------------------------------------------
3,314,007 3,388,256
Land 138,858 138,858
- -----------------------------------------------------------------------------
3,452,865 3,527,114
Long-term trade accounts receivable 4,912,758 4,496,457
Long-term marketable securities--at cost 3,435,605 4,322,629
Excess of cost over fair value of net assets
of subsidiary acquired, net of accumulated
amortization of $486,426 at September 30, 1995
and $464,064 at June 30, 1995 873,491 895,853
Patent fees and other intangibles, net of
accumulated amortization of $783,255 at
September 30, 1995 and $682,995 at June 30, 1995 1,335,779 1,371,269
Other 337,926 342,484
- -----------------------------------------------------------------------------
$58,314,059 $56,699,968
=============================================================================
See accompanying notes to consolidated financial statements
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
- -----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- -----------------------------------------------------------------------------
September 30, June 30,
1995 1995
(Unaudited) (Audited)
- -----------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 2,293,171 $ 2,258,695
Customer advances and deferred income 489,559 462,050
Income taxes payable 2,172,260 2,201,898
Accrued liabilities:
Commissions payable 1,628,288 1,767,139
Compensation payable 320,271 89,532
Property, payroll, and other taxes 103,848 146,219
Accrued warranty and installation expenses 1,558,000 1,555,000
Other 153,103 123,669
- -----------------------------------------------------------------------------
Total current liabilities 8,718,500 8,604,202
Shareholders' equity:
Common stock--authorized 10,000,000 shares
of $.01 par value; issued and outstanding
5,338,860 shares at September 30, 1995
and 5,325,460 at June 30, 1995 53,389 53,255
Capital in excess of par value 15,628,869 15,438,402
- -----------------------------------------------------------------------------
15,682,258 15,491,657
Retained earnings 33,949,982 32,622,240
Cumulative translation adjustment (36,681) (18,131)
- -----------------------------------------------------------------------------
49,595,559 48,095,766
- -----------------------------------------------------------------------------
$58,314,059 $56,699,968
=============================================================================
See accompanying notes to consolidated financial statements
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
- -----------------------------------------------------------------------------
Three months ended
September 30, September 30,
1995 1994
- -----------------------------------------------------------------------------
REVENUES
Equipment sales and
other revenue $12,359,989 $9,113,281
- -----------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales 5,374,713 3,553,484
Research and development 1,306,626 928,156
Selling and marketing 2,779,493 2,024,026
General and administrative 1,501,215 876,918
- -----------------------------------------------------------------------------
10,962,047 7,382,584
- -----------------------------------------------------------------------------
Earnings from operations 1,397,942 1,730,697
- -----------------------------------------------------------------------------
OTHER INCOME
Interest income 399,227 308,776
Other (11,054) 73,359
- -----------------------------------------------------------------------------
388,173 382,135
- -----------------------------------------------------------------------------
Earnings before provision
for income taxes 1,786,115 2,112,832
Provision for income taxes 458,373 548,404
- -----------------------------------------------------------------------------
NET INCOME $ 1,327,742 $1,564,428
=============================================================================
Net income per common and
common equivalent share $0.22 $0.27
=============================================================================
Weighted average number of
common and common equivalent
shares 6,065,341 5,773,394
=============================================================================
See accompanying notes to consolidated financial statements
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
- -----------------------------------------------------------------------------
Three months ended
September 30, September 30,
1995 1994
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net income $1,327,742 $1,564,428
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 357,072 352,284
Minority interest in subsidiary 0 (18,459)
Changes in assets and liabilities:
Receivables 479,434 (1,521,712)
Inventories (1,919,648) (970,484)
Prepaid expenses (40,288) (45,855)
Deferred income taxes (53,000) (95,000)
Accounts payable 15,926 (81,654)
Customer advances and deferred income 27,509 (6,551)
Accrued liabilities 81,951 195,743
Income taxes payable (29,638) 249,370
- -----------------------------------------------------------------------------
Net cash provided by (used in) operating
activities 247,060 (377,890)
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Maturities of marketable securities 2,339,600 1,631,630
Additions to property, plant and equipment (94,296) (406,329)
Patent fees (64,770) (91,764)
- -----------------------------------------------------------------------------
Net cash provided by investing activities $2,180,534 $1,133,537
- -----------------------------------------------------------------------------
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
- -----------------------------------------------------------------------------
Three months ended
September 30, September 30,
1995 1994
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 72,435 62,492
Income tax benefit from stock option exercises 118,166 70,587
- -----------------------------------------------------------------------------
Net cash provided by financing activities 190,601 133,079
- -----------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,618,195 888,726
Cash and cash equivalents at beginning of period 2,577,655 702,581
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of period $5,195,850 $1,591,307
=============================================================================
Supplemental disclosure of cash flow information:
Incomes taxes paid $ 422,450 $ 324,500
=============================================================================
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 September 30, 1995, the
consolidated statements of income for the three months ended September 30,
1995 and 1994, and the consolidated statements of cash flows for the three
months ended September 30, 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 months ended September 30, 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:
- -----------------------------------------------------------------------------
September 30, June 30,
1995 1995
(Unaudited) (Audited)
- -----------------------------------------------------------------------------
Finished goods and work in progress $4,856,923 $3,933,650
Materials and purchased parts 3,713,451 2,717,076
---------- ----------
$8,570,374 $6,650,726
========== ==========
Item 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
-------------------------------------------------------------
Results of Operations
- ---------------------
Equipment sales and other revenue increased 36% to $12,360,000 in the
three months ended September 30, 1995 from $9,113,000 in the three months
ended September 30, 1994. Equipment sales continued to benefit from growing
acceptance of bone densitometers as a method to diagnose patients for
osteoporosis. Fiscal year 1996 first quarter revenues include approximately
$1,700,000 associated with shipments of the EXPERT high-end densitometer
compared to approximately $600,000 in fiscal year 1995 first quarter. EXPERT
shipments were limited to some extent due to continuing difficulties in
obtaining adequate supplies of a component. Fiscal year 1996 first quarter
revenues include approximately $1,800,000 from sales of the Achilles
ultrasound bone densitometer compared to approximately $2,500,000 in fiscal
year 1995 first quarter. This decrease is primarily attributable to lower
purchases by the Company's Japanese distributor. Fiscal year 1996 first
quarter revenues also include approximately $7,300,000 from sales of the DPX
bone densitometer compared to approximately $5,200,000 in fiscal year 1995
first quarter. The DPX bone densitometer experienced higher sales, but due
to competitive pressures, the average selling price per unit decreased. The
increase in equipment sales is also due in part to increased sales of the
Artoscan extremity MRI system. Artoscan revenues in fiscal year 1996 first
quarter were approximately $900,000 compared to approximately $300,000 in
fiscal year 1995 first quarter. Geographically, sales increases were
particularly strong in the United States and Asia.
Cost of sales as a percentage of equipment sales increased to 43% in the
three-month period ended September 30, 1995 from 39% in the three-month
period ended September 30, 1994. This increase is primarily a result of
increased competition in the DPX product line, increased sales of the
lower-margin EXPERT and Artoscan extremity MRI products, and decreased sales
of the higher-margin Achilles.
Research and development expenditures increased to $1,307,000 in the
three months ended September 30, 1995 from $928,000 in the three months ended
September 30, 1994. This increase is primarily attributable to expenditures
related to the development of a new imaging device scheduled for introduction
in calendar 1996. The Company also incurred increased expenditures for
clinical testing of 1-alpha-D2 in the treatment of renal osteodystrophy.
Sales and marketing expenses were $2,779,000 in the three months ended
September 30, 1995 and $2,024,000 in the three months ended September 30,
1994, with each representing 22% of equipment sales.
General and administrative expenses increased to $1,501,000 in the three
months ended September 30, 1995 from $877,000 in the three months ended
September 30, 1994. This increase is primarily attributable to higher legal
expenses. Lunar has been involved in several patent lawsuits with Hologic,
Inc., a Massachusetts-based competitor, related to x-ray and ultrasound
densitometers. These lawsuits resulted in approximately $773,000 in legal
expenses in the three-month period ended September 30, 1995. A trial which
started in September has been provisionally dismissed, pending execution of a
definitive settlement agreement. Management is unable to predict if a
definitive settlement agreement will be reached by the deadline of November 15,
1995. In the event a final agreement is not reached, additional litigation
could ensue.
Interest income was $399,000 in the three months ended September 30,
1995 compared to $309,000 in the three months ended September 30, 1994.
The effective tax rate averaged 26% in the three-month period ended
September 30, 1995 and the three-month period ended September 30, 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.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents increased $2,618,000 to $5,196,000 in the
three months ended September 30, 1995. The Company also has a laddered
portfolio of high- grade municipal bonds with various maturities not
exceeding 48 months. The Company owned approximately $13,564,000 in
municipal securities as of September 30, 1995, which management intends to
hold to maturity but which is readily marketable. The Company's accounts
receivable decreased 2% to $23,554,000 at September 30, 1995 from $24,029,000
at June 30, 1995. This decrease is primarily due to the payment of extended
term accounts receivable. Inventories increased 29% to $8,570,000 at
September 30, 1995 from $6,651,000 at June 30, 1995. This increase is
primarily attributable to increases in Artoscan MRI units and EXPERT systems.
Management plans to reduce inventory levels somewhat in both of these product
lines during the next six months. 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, the Company was involved
in patent litigation with Hologic, Inc., a Massachusetts-based
competitor. On September 26, 1995, the Company announced that
an agreement in principle was reached with Hologic to settle
several ongoing commercial and patent disputes between the two
companies. A trial of one of the patent disputes that began
September 25, 1995 in Madison has been provisionally dismissed
while the parties finalize terms of the definitive settlement
agreement. The preliminary 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. Management is unable to
predict if a definitive settlement agreement will be reached by
the deadline of November 15, 1995. In the event a final
agreement is not reached, additional litigation could ensue.
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 September 30, 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: November 10, 1995 Richard B. Mazess
- --------------------------- -----------------------------------
Richard B. Mazess
President
(Principal Executive Officer)
Date: November 10, 1995 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, 1995
No. Description Page
- --- ----------- ----
11 Statement Regarding Computation of Earnings Per Share . . . . . . . . 14
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit 11
LUNAR CORPORATION AND SUBSIDIARIES
Computation of Per-Share Earnings
Three months ended
September 30, September 30,
1995 1994
------------- -------------
Net income $1,327,742 $1,564,428
========== ==========
Weighted average shares outstanding 5,332,342 5,232,025
Stock options calculated according
to the treasury stock method 732,999 541,369
Weighted average number of common
and common-equivalent shares
outstanding 6,065,341 5,773,394
========== ==========
Net income per common and common- $0.22 $0.27
equivalent share ===== =====
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<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Form 10-Q for the quarterly period ended
September 30, 1995, and is qualified in its entirety by
reference to such financial statements.
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<PERIOD-TYPE> 3-MOS
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<PERIOD-END> SEP-30-1995
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<OTHER-SE> 49,542
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<SALES> 12,360
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