UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(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, 1996
--------------
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, 1996, 8,470,540 shares of the registrant's Common Stock,
$0.01 par value, were outstanding.
LUNAR CORPORATION AND SUBSIDIARIES
FORM 10-Q/A
AMENDMENT NO. 1
For the quarterly period ended March 31, 1996
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial statements
Consolidated Balance Sheets
March 31, 1996, and June 30, 1995. . . . . . . . . . . . . .3
Consolidated Statements of Income
Three and Nine Months Ended March 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . .6
Notes to Consolidated Financial Statements . . . . . . . . .7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . .9
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
- ----------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------
March 31, June 30,
1996 1995
(Unaudited) (Audited)
- ----------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 9,851,222 $ 2,577,655
Marketable securities 6,408,077 11,647,041
Accounts receivable:
Trade, less allowance for doubtful accounts
of $1,864,000 at March 31, 1996
and $1,150,000 at June 30, 1995 24,700,816 19,109,561
Other 328,360 422,728
- ----------------------------------------------------------------------------
25,029,176 19,532,289
Inventories 9,729,336 6,650,726
Deferred income taxes 1,629,000 1,180,000
Other 311,526 156,451
- ----------------------------------------------------------------------------
Total current assets 52,958,337 41,744,162
Property, plant and equipment--at cost:
Buildings and improvements 2,228,013 2,219,148
Furniture and fixtures 641,784 582,206
Machinery and other equipment 3,472,619 3,043,258
- ----------------------------------------------------------------------------
6,342,416 5,844,612
Less accumulated depreciation and amortization 3,021,471 2,456,356
- ----------------------------------------------------------------------------
3,320,945 3,388,256
Land 138,858 138,858
- ----------------------------------------------------------------------------
3,459,803 3,527,114
Long-term trade accounts receivable 6,377,150 4,496,457
Long-term marketable securities 1,555,050 4,322,629
Excess of cost over fair value of net assets
of subsidiary acquired, net of accumulated
amortization of $531,150 at March 31, 1996
and $464,064 at June 30, 1995 828,767 895,853
Patent fees and other intangibles, net of
accumulated amortization of $983,775 at
March 31, 1996 and $682,995 at June 30, 1995 1,305,366 1,371,269
Other 401,070 342,484
- ----------------------------------------------------------------------------
$66,885,543 $56,699,968
============================================================================
See accompanying notes to consolidated financial statements
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
- -----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- -----------------------------------------------------------------------------
March 31, June 30,
1996 1995
(Unaudited) (Audited)
- -----------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 2,338,037 $ 2,258,695
Customer advances and deferred income 504,407 462,050
Income taxes payable 1,158,454 2,201,898
Accrued liabilities:
Commission payable 1,792,577 1,767,139
Compensation payable 383,186 89,532
Property, payroll, and other taxes 112,747 146,219
Accrued warranty and installation expenses 1,975,000 1,555,000
Other 221,090 123,669
- -----------------------------------------------------------------------------
Total current liabilities 8,485,498 8,604,202
Minority interest in subsidiary 87,091 -
Shareholders' equity:
Common stock--authorized 25,000,000 shares
of $.01 par value; issued and outstanding
8,305,085 shares at March 31, 1996 and
7,988,190 at June 30, 1995 83,051 53,255
Capital in excess of par value 19,417,471 15,438,402
- -----------------------------------------------------------------------------
19,500,522 15,491,657
Retained earnings 38,782,059 32,622,240
Unrealized appreciation in
marketable securities 31,569 -
Cumulative translation adjustment (1,196) (18,131)
- -----------------------------------------------------------------------------
58,312,954 48,095,766
- -----------------------------------------------------------------------------
$66,885,543 $56,699,968
=============================================================================
See accompanying notes to consolidated financial statements
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
- -----------------------------------------------------------------------------
Three months ended Nine months ended
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------
REVENUES
Equipment sales and
other revenue $17,287,382 $12,230,814 $46,581,656 $31,794,322
- ----------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales 7,881,762 5,687,011 20,933,828 13,408,128
Research and development 1,489,424 1,085,119 4,360,856 3,089,721
Selling and marketing 3,606,054 2,613,444 9,944,953 7,160,342
General and administrative 835,945 979,877 3,717,517 2,582,883
- ----------------------------------------------------------------------------
13,813,185 10,365,451 38,957,154 26,241,074
- ----------------------------------------------------------------------------
Earnings from operations 3,474,197 1,865,363 7,624,502 5,553,248
- ----------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 409,877 339,997 1,194,127 964,795
Other (121,785) 136,082 (209,654) 271,249
- ----------------------------------------------------------------------------
288,092 476,079 984,473 1,236,044
- ----------------------------------------------------------------------------
Earnings before provision
for income taxes 3,762,289 2,341,442 8,608,975 6,789,292
Provision for income taxes 1,174,000 574,055 2,449,156 1,705,980
- ----------------------------------------------------------------------------
NET INCOME $ 2,588,289 $ 1,767,387 $ 6,159,819 $ 5,083,312
============================================================================
Net income per common and
common-equivalent share $0.28 $0.20 $0.67 $0.58
============================================================================
Weighted average number of
common and common-equivalent
shares 9,393,787 8,839,865 9,239,280 8,773,239
============================================================================
See accompanying notes to consolidated financial statements
LUNAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
- -----------------------------------------------------------------------------
Nine months ended
March 31, March 31,
1996 1995
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net income $6,159,819 $5,083,312
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,101,992 1,071,763
Minority interest in subsidiary 87,091 (38,160)
Changes in assets and liabilities:
Receivables (7,436,166) (7,848,188)
Inventories (3,078,610) (2,735,338)
Prepaid expenses (155,075) 8,203
Deferred income taxes (449,000) (269,000)
Accounts payable 96,277 167,215
Customer advances and deferred income 42,357 131,100
Accrued liabilities 803,041 1,073,402
Income taxes payable (1,043,444) 463,700
- -----------------------------------------------------------------------------
Net cash used in operating activities (3,871,718) (2,891,991)
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of marketable securities - (1,042,910)
Maturities of marketable securities 7,869,100 4,266,129
Additions to property, plant and equipment (497,804) (931,417)
Patent fees (234,877) (183,813)
Distributor fee - (45,200)
- -----------------------------------------------------------------------------
Net cash provided by investing activities 7,136,419 2,062,789
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 1,105,766 368,572
Income tax benefit from stock option exercises 2,903,100 279,511
- -----------------------------------------------------------------------------
Net cash provided by financing activities 4,008,866 648,083
- -----------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 7,273,567 (181,119)
Cash and cash equivalents at beginning of
period 2,577,655 702,581
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of period $9,851,222 $ 521,462
=============================================================================
Supplemental disclosure of cash flow information:
Income taxes paid $1,033,398 $1,101,038
=============================================================================
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 March 31, 1996, the consolidated
statements of income for the three and nine months ended March 31, 1996 and
1995, and the consolidated statements of cash flows for the nine months ended
March 31, 1996 and 1995 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 nine months ended March 31,
1996, 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:
- ---------------------------------------------------------------------------
March 31, June 30,
1996 1995
(Unaudited) (Audited)
- ---------------------------------------------------------------------------
Finished goods and work in progress $5,304,204 $3,661,586
Materials and purchased parts 4,425,132 2,989,140
---------- ----------
$9,729,336 $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 eflect the stock dividend.
(5) TECHNOLOGY TRANSFER AND SPIN-OFF OF SUBSIDIARY
In October 1995, the Company contributed its ownership of Continental
Assays Corporation and certain assets with a book value of $175,867 for
1,698,674 shares of common stock of Bone Care International, Inc. ("Bone
Care"), a subsidiary of the Company. In October 1995, the Company also
exchanged $634,683 of loans receivable from Bone Care for 107,401 shares of
Bone Care common stock. These transactions created a single vitamin D
development business owned by Bone Care.
On April 18, 1996, the Board of Directors of the Company declared a
dividend, payable to holders of record of its common stock at the close of
business on April 24, 1996 (the "record date"), of one share of Bone Care
common stock for every two shares of the Company's common stock. The
distribution occurred on May 8, 1996 (the "distribution date"). Prior to the
distribution, the Company made a capital contribution of $10,725,000 in
exchange for additional common stock of Bone Care and to pay for federal
income tax benefits received from Bone Care. As a result of the
distribution, the Company's 97.3% ownership of Bone Care's common stock was
distributed to holders of the Company's common stock as of the record date.
Bone Care's total assets as of the distribution date were approximately
$12,650,000.
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Equipment sales and other revenue increased 41% to $17,287,000 in the
three months ended March 31, 1996 from $12,231,000 in the three months ended
March 31, 1995. For the nine months ended March 31, 1996, equipment sales
and other revenue increased 47% to $46,582,000 from $31,794,000 in the nine
months ended March 31, 1995. Sales by product line are broken down as
follows:
Revenues by Product
(000's Omitted)
Three Months Ended Nine Months Ended
-------------------------- --------------------------
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
--------- --------- --------- ---------
EXPERT $ 2,942 $ 1,531 $ 8,651 $ 3,285
DPX 10,848 6,736 26,690 17,664
Achilles 1,003 1,591 4,003 5,311
Artoscan 1,286 1,745 4,299 3,713
Other 1,208 628 2,939 1,821
------- ------- ------- -------
$17,287 $12,231 $46,582 $31,794
======= ======= ======= =======
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 decreased
in the quarter ended March 31, 1996 as compared to the quarter ended March
31, 1995 due to lower sales in Japan.
Cost of sales as a percentage of equipment sales averaged approximately
46% and 45% in the three and nine month periods ended March 31, 1996,
compared to 46% and 42% in the three and nine month periods ended March 31,
1995. 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. The three and nine month periods
ended March 31, 1995 included a special charge of $400,000 to accrue for
upgrading the installed base of EXPERT systems. The cost of sales as a
percentage of equipment sales would have averaged approximately 43% and 41%
in the three and nine month periods ended March 31, 1995 without this special
charge.
Research and development expenditures increased to $1,489,000 in the
three months ended March 31, 1996 from $1,085,000 in the three months ended
March 31, 1995, and to $4,361,000 in the nine months ended March 31, 1996
from 3,090,000 in the nine months ended March 31, 1995. These increases are
primarily attributable to expenditures related to the development of the DPX-
IQ bone densitometer and the ORCA mini C-arm. Bone Care, the Company's 97.3%
owned pharmaceutical development subsidiary, also increased expenditures for
clinical testing of 1-alpha D2 in the treatment of secondary
hyperparathyroidism associated with end-stage renal disease. The Company
spun-off Bone Care to its shareholders in a tax-free distribution on May 8,
1996. The future costs of these clinical trials and any other costs related
to the research and development of vitamin D compounds will therefore no
longer be included in the Company's consolidated net income after the
distribution. Bone Care had a net loss of $762,000 through the nine month
period ended March 31, 1996.
Sales and marketing expenses were $3,606,000 in the three months ended
March 31, 1996 and $2,613,000 in the three months ended March 31, 1995,
representing 21% of equipment sales for both time periods. For the nine
months ended March 31, 1996, sales and marketing expenses were $9,945,000 as
compared to $7,160,000 for the nine months ended March 31, 1995, representing
a decrease to 21% from 23% as a percentage of equipment sales.
General and administrative expenses decreased to $836,000 in the three
months ended March 31, 1996 from $980,000 in the three months ended March 31,
1995, and increased to $3,718,000 in the nine months ended March 31, 1996
from $2,583,000 in the nine months ended March 31, 1995. The increase during
the first six months of fiscal 1996 is primarily attributable to higher legal
expenses. Lunar had been involved in several patent lawsuits initiated in
September 1994 with Hologic, Inc., a Massachusetts-based competitor, related
to x-ray and ultrasound densitometers. These lawsuits were settled on
November 22, 1995, resulting in a decrease in general and administration
expenses during the three months ended March 31, 1996.
Interest income was $410,000 in the three months ended March 31, 1996
compared to $340,000 in the three months ended March 31, 1995, and $1,194,000
in the nine months ended March 31, 1996, as compared to $965,000 in the nine
months ended March 31, 1995. These increases are primarily the result of
increases in the amount of financed receivables. The Company expects after-
tax interest income to decline by approximately $96,000 per quarter after the
spinoff of Bone Care, which will include Bone Care's projected cash balances
of approximately $11,400,000.
The effective tax rate averaged 31% and 28% in the three and nine month
periods ended March 31, 1996 compared to 25% in the three and nine month
periods ended March 31, 1995. These rates are below the 34% federal
statutory rate as a result of the tax benefit from the Company's foreign
sales corporation, 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 foreign sales
corporation treatment.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents increased $7,274,000 to $9,851,000 in the nine
months ended March 31, 1996. The Company also has a laddered portfolio of
high-grade municipal bonds with various maturities not exceeding 48 months.
The Company owned approximately $7,963,000 in municipal securities as of
March 31, 1996, which are readily marketable. On May 8, 1996, the Company
contributed $10,725,000 in cash to Bone Care in exchange for additional
common stock of Bone Care and to pay for federal income tax benefits received
from Bone Care.
The Company's accounts receivable increased 31% to $31,406,000 at March
31, 1996 from $24,029,000 at June 30, 1995. This increase is primarily due
to a 35% increase in sales in the third quarter of fiscal year 1996 as
compared to the fourth quarter of fiscal year 1995. Inventories increased
46% to $9,729,000 at March 31, 1996 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. 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 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, 1996.
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: June 5, 1996 Richard B. Mazess
- ------------------ -------------------------------------
Richard B. Mazess
President
(Principal Executive Officer)
Date: June 5, 1996 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 March 31, 1996
No. Description Page
- --- ----------- ----
11 Statement Regarding Computation of Earnings Per Share . . . . . . . 15
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit 11
LUNAR CORPORATION AND SUBSIDIARIES
Statement Regarding Computation of Earnings Per Share
(Unaudited)
Three months ended Nine months ended
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net income $2,588,289 $1,767,387 $6,159,819 $5,083,312
========== ========== ========== ==========
Weighted average shares
outstanding 8,233,533 7,925,123 8,108,221 7,884,878
Stock options calculated
according to the treasury
stock method 1,160,254 914,742 1,131,059 888,362
Weighted average number of
common and common-equivalent
shares outstanding 9,393,787 8,839,865 9,239,280 8,773,239
========= ========= ========= =========
Net income per common and
common-equivalent shares $0.28 $0.20 $0.67 $0.58
===== ===== ===== =====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Form 10-Q for the nine months ended
March 31, 1996, and is qualified in its entirety by
reference to such financial statements.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,851
<SECURITIES> 7,963
<RECEIVABLES> 33,270
<ALLOWANCES> 1,864
<INVENTORY> 9,729
<CURRENT-ASSETS> 52,958
<PP&E> 6,481
<DEPRECIATION> 3,021
<TOTAL-ASSETS> 66,886
<CURRENT-LIABILITIES> 8,485
<BONDS> 0
<COMMON> 83
0
0
<OTHER-SE> 58,230
<TOTAL-LIABILITY-AND-EQUITY> 66,886
<SALES> 46,582
<TOTAL-REVENUES> 46,582
<CGS> 20,934
<TOTAL-COSTS> 38,957
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,609
<INCOME-TAX> 2,449
<INCOME-CONTINUING> 6,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,160
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
