##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q


|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|  |  | For the quarterly period ended October 31, 2005                                             
|  |  | or                                                                                          
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|  |  | For the transition period
    from           to                                             

Commission file number 0-6715


Analogic Corporation


(Exact name of registrant as specified in its charter)


|                                                                                       |  |                                                   
|-------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Massachusetts(State or other jurisdiction
    of incorporation or organization)        |  | 04-2454372(I.R.S. Employer
    Identification No.)
|                                                                                      
|8 Centennial Drive,
    Peabody, Massachusetts(Address of principal executive offices) |  | 01960(Zip Code)                                   

(978) 977-3000


(Registrants telephone number, including area code)





(Former name, former address and former fiscal year, if
changed since last report.)


þ o


þ o


o þ












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##### 










ANALOGIC CORPORATION


TABLE OF CONTENTS


|                                         |  |                                                                                                              |    |          |       | 
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ | -- | -------- | ----- | 
|                                         |  |                                                                                                              |    | Page No. |      
|                                         |  |                                                                                                              |    |          |      
|Part I. Financial
    Information       
|Item 1.                                  |  | Financial Statements                                                                                         |    |          |       | 
|                                         |  | Unaudited Consolidated Balance Sheets as of
    October 31, 2005 and July 31, 2005                           |    |          | 3     | 
|                                         |  | Unaudited Consolidated Statements of
    Operations for the Three Months Ended October 31, 2005 and
    2004 |    |          | 4     | 
|                                         |  | Unaudited Consolidated Statements of Cash
    Flows for the Three Months Ended October 31, 2005 and
    2004 |    |          | 5     | 
|                                         |  | Notes to Unaudited Consolidated Financial
    Statements                                                     |    |          | 6-18  | 
|Item 2.                                  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                    |    |          | 19-29 | 
|Item 3.                                  |  | Quantitative and Qualitative Disclosures
    about Market Risk                                               |    |          | 29-30 | 
|Item 4.                                  |  | Controls and Procedures                                                                                      |    |          | 30-32 | 
|                                        
|Part II. Other Information              
|Item 2.                                  |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                              |    |          | 32    | 
|Item 6.                                  |  | Exhibits                                                                                                     |    |          | 32    | 
|Signatures                               |  |                                                                                                              | 33 |         
|Exhibit Index                            |  |                                                                                                              | 34 |         
|Ex-31.1 Section 302 Certification of CEO
|Ex-31.2 Section 302 Certification of CFO
|Ex-32.1 Section 906 Certification of CEO
|Ex-32.2 Section 906 Certification of CFO



2



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##### Table of Contents






Part I. FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements

ANALOGIC CORPORATION





CONSOLIDATED BALANCE SHEETS


(Unaudited)


(In thousands, except per share data)


|                                                    |                                                                                                                                          |                                            |        |         |          |  |        |         |         | 
|--------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------- | -------- |  | ------ | ------- | ------- | 
|                                                    |                                                                                                                                          | October 31,                                |        |         | July 31, | 
|                                                    |                                                                                                                                          | 2005                                       |        |         | 2005     | 
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|ASSETS                                             
|Current assets:                                     |                                                                                                                                          |                                            |        |         |          |  |        |        
|                                                    | Cash and cash equivalents                                                                                                                |                                            | $      | 207,189 |          |  | $      | 208,116 |        
|                                                    | Marketable securities, at fair value                                                                                                     |                                            |        | 10,921  |          |  |        | 12,338  |        
|                                                    | Accounts and notes receivable, net of allowance for doubtful
    accounts of $1,164 at October 31, 2005, and $1,973 at
    July 31, 2005 |                                            |        | 45,849  |          |  |        | 50,978  |        
|                                                    | Inventories                                                                                                                              |                                            |        | 68,509  |          |  |        | 63,604  |        
|                                                    | Costs related to deferred revenue                                                                                                        |                                            |        | 918     |          |  |        | 1,300   |        
|                                                    | Refundable and deferred income taxes                                                                                                     |                                            |        | 12,895  |          |  |        | 11,657  |        
|                                                    | Other current assets                                                                                                                     |                                            |        | 6,964   |          |  |        | 6,729   |        
|                                                    | Current assets of discontinued operations (Note 2)                                                                                       |                                            |        | 41,364  |          |  |        | 41,939  |        
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|                                                    |                                                                                                                                          | Total current assets                       |        |         | 394,609  |  |        |         | 396,661 | 
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|Property, plant and equipment, net                  |                                                                                                                                          |                                            | 79,191 |         |          |  | 79,442 |        
|Investments in and advances to affiliated companies |                                                                                                                                          |                                            | 413    |         |          |  | 983    |        
|Capitalized software, net                           |                                                                                                                                          |                                            | 8,347  |         |          |  | 8,463  |        
|Intangible assets, net                              |                                                                                                                                          |                                            | 3,293  |         |          |  | 3,688  |        
|Other assets                                        |                                                                                                                                          |                                            | 5,310  |         |          |  | 5,579  |        
|Deferred income taxes                               |                                                                                                                                          |                                            | 2,851  |         |          |  | 1,889  |        
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|                                                    |                                                                                                                                          | Total Assets                               |        | $       | 494,014  |  |        | $       | 496,705 | 
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|                                                   
|LIABILITIES AND STOCKHOLDERS EQUITY               
|Current liabilities:                                |                                                                                                                                          |                                            |        |         |          |  |        |        
|                                                    | Accounts payable, trade                                                                                                                  |                                            | $      | 26,596  |          |  | $      | 20,833  |        
|                                                    | Accrued liabilities                                                                                                                      |                                            |        | 18,352  |          |  |        | 19,620  |        
|                                                    | Deferred revenue                                                                                                                         |                                            |        | 7,464   |          |  |        | 6,114   |        
|                                                    | Advance payments                                                                                                                         |                                            |        | 1,313   |          |  |        | 8,273   |        
|                                                    | Accrued income taxes                                                                                                                     |                                            |        | 8,313   |          |  |        | 11,167  |        
|                                                    | Current liabilities of discontinued operations (Note 2)                                                                                  |                                            |        | 29,795  |          |  |        | 30,627  |        
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|                                                    |                                                                                                                                          | Total current liabilities                  |        |         | 91,833   |  |        |         | 96,634  | 
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|Long-term liabilities:                              |                                                                                                                                          |                                            |        |         |          |  |        |        
|                                                    | Deferred income taxes                                                                                                                    |                                            |        | 1,366   |          |  |        | 914     |        
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|                                                    |                                                                                                                                          | Total long-term liabilities                |        |         | 1,366    |  |        |         | 914     | 
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|Commitments and guarantees (Note 14)                |                                                                                                                                          |                                            |        |         |          |  |        |        
|Stockholders equity:                               |                                                                                                                                          |                                            |        |         |          |  |        |        
|                                                    | Common stock, $.05 par value                                                                                                             |                                            |        | 715     |          |  |        | 715     |        
|                                                    | Capital in excess of par value                                                                                                           |                                            |        | 48,736  |          |  |        | 47,057  |        
|                                                    | Retained earnings                                                                                                                        |                                            |        | 348,735 |          |  |        | 348,499 |        
|                                                    | Accumulated other comprehensive income                                                                                                   |                                            |        | 2,629   |          |  |        | 2,886   |        
|                                                    |                                                                                                                                          | Total stockholders equity                 |        |         | 400,815  |  |        |         | 399,157 | 
|                                                    |                                                                                                                                          |                                            |        |         |          | 
|                                                    |                                                                                                                                          | Total Liabilities and Stockholders Equity |        | $       | 494,014  |  |        | $       | 496,705 | 
|                                                    |                                                                                                                                          |                                            |        |         |          | 



3



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##### Table of Contents



ANALOGIC CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


(In thousands, except per share data)


|                                                                                                                             |                                                 |                                                                 |        |        |        |   |        |        |        |  
|---------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | --------------------------------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                                                                                             |                                                 | Three Months Ended                                              |       
|                                                                                                                             |                                                 | October 31,                                                     |       
|                                                                                                                             |                                                 |                                                                 |       
|                                                                                                                             |                                                 | 2005                                                            |        |        | 2004   |  
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Net revenue:                                                                                                                 |                                                 |                                                                 |        |        |        |   |        |       
|                                                                                                                             | Product                                         |                                                                 | $      | 79,721 |        |   | $      | 67,125 |       
|                                                                                                                             | Engineering                                     |                                                                 |        | 3,812  |        |   |        | 5,240  |       
|                                                                                                                             | Other                                           |                                                                 |        | 2,877  |        |   |        | 2,765  |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Total net revenue                                                                                                            |                                                 |                                                                 | 86,410 |        |        |   | 75,130 |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Cost of sales:                                                                                                               |                                                 |                                                                 |        |        |        |   |        |       
|                                                                                                                             | Product                                         |                                                                 |        | 49,002 |        |   |        | 41,848 |       
|                                                                                                                             | Engineering                                     |                                                                 |        | 5,733  |        |   |        | 4,062  |       
|                                                                                                                             | Other                                           |                                                                 |        | 1,386  |        |   |        | 1,438  |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Total cost of sales                                                                                                          |                                                 |                                                                 | 56,121 |        |        |   | 47,348 |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Gross margin                                                                                                                 |                                                 |                                                                 | 30,289 |        |        |   | 27,782 |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Operating expenses:                                                                                                          |                                                 |                                                                 |        |        |        |   |        |       
|                                                                                                                             | Research and product development                |                                                                 |        | 13,027 |        |   |        | 11,674 |       
|                                                                                                                             | Selling and marketing                           |                                                                 |        | 7,354  |        |   |        | 6,719  |       
|                                                                                                                             | General and administrative                      |                                                                 |        | 8,664  |        |   |        | 9,215  |       
|                                                                                                                             | Restructuring and asset impairment charges      |                                                                 |        | 1,025  |        |   |        |       |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|                                                                                                                             |                                                 |                                                                 | 30,070 |        |        |   | 27,608 |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Income from operations                                                                                                       |                                                 |                                                                 | 219    |        |        |   | 174    |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Other (income) expense:                                                                                                      |                                                 |                                                                 |        |        |        |   |        |       
|                                                                                                                             | Interest income                                 |                                                                 |        | (2,033 | )      |   |        | (864   | )     
|                                                                                                                             | Interest expense                                |                                                                 |        |       |        |   |        | 2      |       
|                                                                                                                             | Equity (gain) loss in unconsolidated affiliates |                                                                 |        | 570    |        |   |        | (127   | )     
|                                                                                                                             | Other                                           |                                                                 |        | 157    |        |   |        | (608   | )     
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|                                                                                                                             |                                                 |                                                                 | (1,306 | )      |        |   | (1,597 | )     
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Income from continuing operations before income taxes and
    cumulative effect of change in accounting principle            |                                                 |                                                                 | 1,525  |        |        |   | 1,771  |       
|Provision for income taxes                                                                                                   |                                                 |                                                                 | 462    |        |        |   | 293    |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Income from continuing operations before discontinued operations
    and cumulative effect of change in accounting principle |                                                 |                                                                 | 1,063  |        |        |   | 1,478  |       
|Income (loss) from discontinued operations (net of income taxes
    (benefit) of $126 in 2005, and ($274) in 2004.)          |                                                 |                                                                 | 159    |        |        |   | (1,313 | )     
|Cumulative effect of change in accounting principle (net of
    income tax of $61 in 2005.)                                  |                                                 |                                                                 | 120    |        |        |   |       |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Net income                                                                                                                   |                                                 | $                                                               | 1,342  |        |        | $ | 165    |       
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Basic earnings (loss) per share:                                                                                             |                                                 |                                                                 |        |        |        |   |        |       
|                                                                                                                             |                                                 | Income from continuing operations                               |        | $      | 0.08   |   |        | $      | 0.11   |  
|                                                                                                                             |                                                 | Income (loss) from discontinued operations, net of tax          |        |        | 0.01   |   |        |        | (0.10  | )
|                                                                                                                             |                                                 | Cumulative effect of change in accounting principle, net of tax |        |        | 0.01   |   |        |        |       |  
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|                                                                                                                             |                                                 | Net Income                                                      |        | $      | 0.10   |   |        | $      | 0.01   |  
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Diluted earnings (loss) per share:                                                                                           |                                                 |                                                                 |        |        |        |   |        |       
|                                                                                                                             |                                                 | Income from continuing operations                               |        | $      | 0.08   |   |        | $      | 0.11   |  
|                                                                                                                             |                                                 | Income (loss) from discontinued operations, net of tax          |        |        | 0.01   |   |        |        | (0.10  | )
|                                                                                                                             |                                                 | Cumulative effect of change in accounting principle, net of tax |        |        | 0.01   |   |        |        |       |  
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|                                                                                                                             |                                                 | Net Income                                                      |        | $      | 0.10   |   |        | $      | 0.01   |  
|                                                                                                                             |                                                 |                                                                 |        |        |        |  
|Weighted average shares outstanding:                                                                                         |                                                 |                                                                 |        |        |        |   |        |       
|                                                                                                                             |                                                 | Basic                                                           |        |        | 13,631 |   |        |        | 13,521 |  
|                                                                                                                             |                                                 | Diluted                                                         |        |        | 13,734 |   |        |        | 13,546 |  



4



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##### Table of Contents



ANALOGIC CORPORATION





CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


(In thousands)


|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |         |         |   |        |        |  
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | - | ------ | ------- | ------- | - | ------ | ------ | -
|                                                                                              |                                                                                       | Three Months Ended                                                                           |                                                                                                   
|                                                                                              |                                                                                       | October 31,                                                                                  |                                                                                                   
|                                                                                              |                                                                                       |                                                                                              |                                                                                                   
|                                                                                              |                                                                                       | 2005                                                                                         |                                                                                                    |   | 2004   |        
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|OPERATING ACTIVITIES:                                                                         |                                                                                       |                                                                                              |                                                                                                    |   |        |         |         |  
|Net income                                                                                    |                                                                                       | $                                                                                            | 1,342                                                                                              |   |        | $       | 165     |  
|Income (loss) from discontinued operations                                                    |                                                                                       |                                                                                              | 159                                                                                                |   |        |         | (1,313  | )
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|Income from continuing operations and cumulative effect of
    change in accounting principle |                                                                                       |                                                                                              | 1,183                                                                                              |   |        |         | 1,478   |  
|                                                                                              | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                                              |                                                                                                    |   |        |         |         |   |       
|                                                                                              |                                                                                       |                                                                                              | Deferred income taxes                                                                              |   |        | 3,214   |         |   |        | 244    |  
|                                                                                              |                                                                                       |                                                                                              | Depreciation and amortization                                                                      |   |        | 3,948   |         |   |        | 4,203  |  
|                                                                                              |                                                                                       |                                                                                              | Cumulative effect of change in accounting principle                                                |   |        | (120    | )       |   |        |       |  
|                                                                                              |                                                                                       |                                                                                              | Allowance for doubtful accounts                                                                    |   |        | 30      |         |   |        | 49     |  
|                                                                                              |                                                                                       |                                                                                              | (Gain) loss on sale of property, plant, and equipment                                              |   |        | 5       |         |   |        | (1     | )
|                                                                                              |                                                                                       |                                                                                              | Equity (gain) loss in unconsolidated affiliates                                                    |   |        | 570     |         |   |        | (127   | )
|                                                                                              |                                                                                       |                                                                                              | Equity loss in unconsolidated affiliate classified as research
    and product development expense |   |        |        |         |   |        | 759    |  
|                                                                                              |                                                                                       |                                                                                              | Restructuring and asset impairment charges                                                         |   |        | 2,204   |         |   |        |       |  
|                                                                                              |                                                                                       |                                                                                              | Non-cash share-based compensation expense                                                          |   |        | 954     |         |   |        | 526    |  
|                                                                                              |                                                                                       |                                                                                              | Excess tax benefit from share-based compensation                                                   |   |        | (17     | )       |   |        |       |  
|                                                                                              |                                                                                       |                                                                                              | Net changes in operating assets and liabilities (Note 11)                                          |   |        | (10,271 | )       |   |        | 12,652 |  
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|NET CASH PROVIDED BY CONTINUING OPERATIONS                                                    |                                                                                       |                                                                                              | 1,700                                                                                              |   |        |         | 19,783  |  
|NET CASH PROVIDED BY DISCONTINUED OPERATIONS                                                  |                                                                                       |                                                                                              | 385                                                                                                |   |        |         | 4,595   |  
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                                     |                                                                                       |                                                                                              | 2,085                                                                                              |   |        |         | 24,378  |  
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|INVESTING ACTIVITIES:                                                                         |                                                                                       |                                                                                              |                                                                                                    |   |        |         |         |  
|                                                                                              |                                                                                       | Investments in and advances to affiliated companies                                          |                                                                                                    |   | (216   | )       |         |   | (607   | )     
|                                                                                              |                                                                                       | Additions to property, plant and equipment                                                   |                                                                                                    |   | (3,168 | )       |         |   | (3,149 | )     
|                                                                                              |                                                                                       | Capitalized software                                                                         |                                                                                                    |   | (250   | )       |         |   | (1,578 | )     
|                                                                                              |                                                                                       | Proceeds from sale of property, plant and equipment                                          |                                                                                                    |   | 71     |         |         |   | (1     | )     
|                                                                                              |                                                                                       | Maturities of marketable securities                                                          |                                                                                                    |   | 1,360  |         |         |   | 5,345  |       
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|NET CASH (USED FOR) PROVIDED BY CONTINUING OPERATIONS                                         |                                                                                       |                                                                                              | (2,203                                                                                             | ) |        |         | 10      |  
|NET CASH USED FOR DISCONTINUED OPERATIONS                                                     |                                                                                       |                                                                                              | (478                                                                                               | ) |        |         | (653    | )
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|NET CASH USED FOR INVESTING ACTIVITIES                                                        |                                                                                       |                                                                                              | (2,681                                                                                             | ) |        |         | (643    | )
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|FINANCING ACTIVITIES:                                                                         |                                                                                       |                                                                                              |                                                                                                    |   |        |         |         |  
|                                                                                              |                                                                                       | Issuance of stock pursuant to exercise of stock options and
    employee stock purchase plan |                                                                                                    |   | 798    |         |         |   | 228    |       
|                                                                                              |                                                                                       | Excess tax benefit from share-based compensation                                             |                                                                                                    |   | 17     |         |         |   |       |       
|                                                                                              |                                                                                       | Dividends paid to shareholders                                                               |                                                                                                    |   | (1,106 | )       |         |   |       |       
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|NET CASH (USED FOR) PROVIDED BY CONTINUING OPERATIONS                                         |                                                                                       |                                                                                              | (291                                                                                               | ) |        |         | 228     |  
|NET CASH USED FOR DISCONTINUED OPERATIONS                                                     |                                                                                       |                                                                                              |                                                                                                   |   |        |         | (743    | )
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|NET CASH USED FOR FINANCING ACTIVITIES                                                        |                                                                                       |                                                                                              | (291                                                                                               | ) |        |         | (515    | )
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH OF CONTINUING OPERATIONS                              |                                                                                       |                                                                                              | (64                                                                                                | ) |        |         | (700    | )
|EFFECT OF EXCHANGE RATE CHANGES ON CASH OF DISCONTINUED
    OPERATIONS                        |                                                                                       |                                                                                              | 24                                                                                                 |   |        |         | 98      |  
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|                                                                                              |                                                                                       |                                                                                              | (40                                                                                                | ) |        |         | (602    | )
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                          |                                                                                       |                                                                                              | (927                                                                                               | ) |        |         | 22,618  |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                |                                                                                       |                                                                                              | 208,116                                                                                            |   |        |         | 149,549 |  
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                      |                                                                                       | $                                                                                            | 207,189                                                                                            |   |        | $       | 172,167 |  
|                                                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |        
|Cash paid during the period for:                                                              |                                                                                       |                                                                                              |                                                                                                    |   |        |         |         |  
|                                                                                              |                                                                                       | Income taxes, net                                                                            |                                                                                                    | $ | 6,450  |         |         | $ | 886    |       
|                                                                                              |                                                                                       | Interest                                                                                     |                                                                                                    |   | 4      |         |         |   | 16     |       



5



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##### Table of Contents



ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars in thousands, except share and per share data)




|   |                       
|-- | ----------------------
|1. | Basis of presentation:







|   |                         
|-- | ------------------------
|2. | Discontinued operations:

Accounting for the Impairment
or Disposal of Long-Lived Assets,






|                                           |  |             |        |  |          |   |        | 
|------------------------------------------ |  | ----------- | ------ |  | -------- | - | ------ | 
|                                           |  | October 31, |        |  | July 31, |  
|                                           |  | 2005        |        |  | 2005     |  
|                                           |  |             |        |  |          |  
|Current assets of discontinued operations: |  |             |        |  |          |   |        | 
|Accounts receivable, net                   |  | $           | 5,723  |  |          | $ | 5,635  | 
|Inventories                                |  |             | 6,036  |  |          |   | 6,422  | 
|Costs related to deferred revenue          |  |             | 10,912 |  |          |   | 11,771 | 
|Deferred income taxes                      |  |             | 4,086  |  |          |   | 3,271  | 
|Other current assets                       |  |             | 685    |  |          |   | 651    | 
|Property, plant and equipment, net         |  |             | 7,737  |  |          |   | 8,112  | 
|Capitalized software, net                  |  |             | 4,365  |  |          |   | 4,048  | 
|Goodwill                                   |  |             | 746    |  |          |   | 746    | 
|Intangible assets, net                     |  |             | 1,074  |  |          |   | 1,283  | 
|                                           |  |             |        |  |          |  
|                                           |  | $           | 41,364 |  |          | $ | 41,939 | 
|                                           |  |             |        |  |          |  

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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)


|                                                |  |             |        |  |          |   |        | 
|----------------------------------------------- |  | ----------- | ------ |  | -------- | - | ------ | 
|                                                |  | October 31, |        |  | July 31, |  
|                                                |  | 2005        |        |  | 2005     |  
|                                                |  |             |        |  |          |  
|Current liabilities of discontinued operations: |  |             |        |  |          |   |        | 
|Note payable                                    |  | $           | 42     |  |          | $ | 42     | 
|Obligations under capital leases                |  |             | 121    |  |          |   | 162    | 
|Account payable, trade                          |  |             | 2,138  |  |          |   | 1,699  | 
|Accrued liabilities                             |  |             | 3,129  |  |          |   | 2,824  | 
|Deferred revenue                                |  |             | 21,406 |  |          |   | 22,667 | 
|Advance payments                                |  |             | 2,017  |  |          |   | 1,950  | 
|Accrued income taxes                            |  |             | 12     |  |          |   |       | 
|Deferred income taxes                           |  |             | 486    |  |          |   | 850    | 
|Accumulated other comprehensive income          |  |             | 444    |  |          |   | 433    | 
|                                                |  |             |        |  |          |  
|                                                |  | $           | 29,795 |  |          | $ | 30,627 | 
|                                                |  |             |        |  |          |  



|   |                     
|-- | --------------------
|3. | Share-based payment:

Share-Based Payment, Accounting for
Stock Issued to Employees, Accounting for Stock-Based
Compensation




|                                 |                                             |                    |     |     | 
|-------------------------------- | ------------------------------------------- | ------------------ | --- | --- | 
|                                 |                                             | Three Months Ended |    
|                                 |                                             | October 31,        |    
|                                 |                                             | 2005               |    
|                                 |                                             |                    |    
|Cost of product sales            |                                             | $                  | 80  |    
|Research and product development |                                             |                    | 280 |    
|Selling and marketing            |                                             |                    | 67  |    
|General and administrative       |                                             |                    | 527 |    
|                                 |                                             |                    |    
|                                 | Share-based compensation expense before tax |                    |     | 954 | 
|Provision for income tax         |                                             |                    | 166 |    
|                                 |                                             |                    |    
|                                 | Net share-based compensation expense        |                    | $   | 788 | 
|                                 |                                             |                    |    



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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)










|                               |  |                    |            |  
|------------------------------ |  | ------------------ | ---------- | -
|                               |  | Three Months Ended |           
|                               |  | October 31,        |           
|                               |  | 2005               |           
|                               |  |                    |           
|Expected option term(1)        |  |                    | 5.25 years |  
|Expected volatility factor(2)  |  |                    | 30         | %
|Risk-free interest rate(3)     |  |                    | 3.94       | %
|Expected annual dividend yield |  |                    | .7         | %






|    |                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The option life was determined using the simplified method for
    estimating expected option life, which qualify as
    plain-vanilla options.                                                                                                                                                        
|   
|(2) | The stock volatility for each grant is determined based on the
    review of the experience of the weighted average of historical
    weekly price changes of the Companys common stock over the
    most recent five years, which approximates the expected option
    life of the grant of 5.25 years,
|   
|(3) | The risk-free interest rate for periods equal to the expected
    term of the share option is based on the U.S. Treasury yield
    curve in effect at the time of grant.                                                                                                                                 





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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)


Accounting for Stock-Based Compensation 
Transition and Disclosure


|                                                                                                 |  |                    |        |  
|------------------------------------------------------------------------------------------------ |  | ------------------ | ------ | -
|                                                                                                 |  | Three Months Ended |       
|                                                                                                 |  | October 31,        |       
|                                                                                                 |  | 2004               |       
|                                                                                                 |  |                    |       
|Net income from continuing operations, as reported:                                              |  | $                  | 1,478  |  
|Add: Employee compensation expense for options included in
    reported net income               |  |                    | 472    |  
|Less: Total employee compensation expense for options determined
    under the fair value method |  |                    | (1,199 | )
|                                                                                                 |  |                    |       
|Pro forma net income from continuing operations                                                  |  | $                  | 751    |  
|                                                                                                 |  |                    |       
|Earnings per share from continuing operations:                                                   |  |                    |        |  
|Basic  as reported                                                                              |  | $                  | 0.11   |  
| pro forma                                                                                      |  |                    | 0.06   |  
|Diluted  as reported                                                                            |  | $                  | 0.11   |  
| pro-forma                                                                                      |  |                    | 0.05   |  



|                        |  |                    |         |  
|----------------------- |  | ------------------ | ------- | -
|                        |  | Three Months Ended |        
|                        |  | October 31,        |        
|                        |  | 2004               |        
|                        |  |                    |        
|Expected term           |  |                    | 5 years |  
|Volatility              |  |                    | 40      | %
|Risk-free interest rate |  |                    | 3.23    | %
|Dividend yield          |  |                    | .8      | %



| |                      
| | ---------------------
| | Stock Incentive Plans







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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)








|                        |  |                    |          |  
|----------------------- |  | ------------------ | -------- | -
|                        |  | Three Months Ended |         
|                        |  | October 31,        |         
|                        |  | 2005               |         
|                        |  |                    |         
|Expected term           |  |                    | .5 years |  
|Volatility              |  |                    | 25       | %
|Risk-free interest rate |  |                    | 3.94     | %
|Dividend yield          |  |                    | .7       | %





|                                |  |                     |         |                  |                    |  |           |             |  |  |           |          |  |            |         |   |  |  |       | 
|------------------------------- |  | ------------------- | ------- | ---------------- | ------------------ |  | --------- | ----------- |  |  | --------- | -------- |  | ---------- | ------- | - |  |  | ----- | 
|                                |  |                     |         | Restricted Stock |                   
|                                |  | Options Outstanding |         |                  | Grants Outstanding | 
|                                |  |                     |         |                  |                    | 
|                                |  |                     |         | Weighted         |                    |  |          
|                                |  |                     |         | Weighted         |                    |  | Average   |             |  |  |           | Weighted | 
|                                |  |                     |         | Average          |                    |  | Remaining |             |  |  |           | Average  | 
|                                |  | Number of           |         |                  | Exercise           |  |           | Contractual |  |  | Number of |          |  | Grant Date |        
|                                |  | Shares              |         |                  | Price              |  |           | Term        |  |  | Shares    |          |  | Fair Value |        
|                                |  |                     |         |                  |                    |  |           |             |  |  |           |          |  |            |        
|Outstanding at July 31, 2005    |  |                     | 678,324 |                  |                    |  | 41.71     |             |  |  | 4.31      |          |  |            | 188,345 |   |  |  | 43.36 | 
|Granted                         |  |                     | 13,600  |                  |                    |  | 48.54     |             |  |  |           |          |  |            |         |   |  |  |       | 
|Exercised                       |  |                     | (20,201 | )                |                    |  | 37.20     |             |  |  |           |          |  |            |         |   |  |  |       | 
|Vesting of restricted stock     |  |                     |         |                  |                    |  |           |             |  |  |           |          |  |            | (2,833  | ) |  |  | 51.27 | 
|Cancelled                       |  |                     | (3,000  | )                |                    |  | 46.92     |             |  |  |           |          |  |            |         |   |  |  |       | 
|Outstanding at October 31, 2005 |  |                     | 668,723 |                  |                    |  | 41.96     |             |  |  | 4.17      |          |  |            | 185,512 |   |  |  | 43.48 | 

10



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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)




|                         |  |                     |         |          |                |  |      |                |  |   |             |  |         |          |         |  |  |   |       | 
|------------------------ |  | ------------------- | ------- | -------- | -------------- |  | ---- | -------------- |  | - | ----------- |  | ------- | -------- | ------- |  |  | - | ----- | 
|                         |  | Options Outstanding |         |          | Vested Options | 
|                         |  |                     |         |          |                | 
|                         |  |                     |         | Weighted |                |  |      |                |  |   | Weighted    | 
|                         |  | Number of           |         |          | Average of     |  |      | Weighted       |  |   |             |  | Average |         
|                         |  | Shares              |         |          | Remaining      |  |      | Average        |  |   | Number      |  |         | Exercise |        
|Range of Exercise Prices |  | Outstanding         |         |          | Contract Life  |  |      | Exercise Price |  |   | Exercisable |  |         | Price    |        
|                         |  |                     |         |          |                |  |      |                |  |   |             |  |         |          |        
|$27.75 - $40.39          |  |                     | 215,914 |          |                |  | 2.79 |                |  | $ | 36.88       |  |         |          | 163,152 |  |  | $ | 35.99 | 
|40.95 -  42.04           |  |                     | 177,500 |          |                |  | 5.52 |                |  |   | 41.33       |  |         |          | 24,251  |  |  |   | 41.19 | 
|42.48 -  47.00           |  |                     | 170,559 |          |                |  | 3.83 |                |  |   | 43.73       |  |         |          | 90,299  |  |  |   | 43.62 | 
|48.54 -  52.20           |  |                     | 104,750 |          |                |  | 5.25 |                |  |   | 50.58       |  |         |          | 20,745  |  |  |   | 51.09 | 
|                         |  |                     |         |          |                |  |      |                |  |   |             |  |         |          |        
|27.75 -  52.20           |  |                     | 668,723 |          |                |  | 4.17 |                |  |   | 41.96       |  |         |          | 298,447 |  |  |   | 39.77 | 



|                               |  |                    |         |              |            |                       |          |           |         |  |            |   |  |  |       | 
|------------------------------ |  | ------------------ | ------- | ------------ | ---------- | --------------------- | -------- | --------- | ------- |  | ---------- | - |  |  | ----- | 
|                               |  |                    |         |              |            | Non-Vested Restricted |         
|                               |  |                    |         | Stock Grants |           
|                               |  | Non-Vested Options |         |              |            |                      
|                               |  |                    |         |              |            |                       | Weighted |          
|                               |  |                    |         | Weighted     |            |                       |          |           | Average | 
|                               |  | Number of          |         |              | Average    |                       |          | Number of |         |  | Grant Date |  
|                               |  | Shares             |         |              | Fair Value |                       |          | Shares    |         |  | Fair Value |  
|                               |  |                    |         |              |            |                       |          |           |         |  |            |  
|Non-vested at July 31, 2005    |  |                    | 425,409 |              |            |                       | 16.97    |           |         |  | 188,345    |   |  |  | 43.36 | 
|Granted                        |  |                    | 13,600  |              |            |                       | 15.53    |           |         |  |            |   |  |  |       | 
|Vested                         |  |                    | (65,983 | )            |            |                       | 16.88    |           |         |  | (2,833     | ) |  |  | 51.27 | 
|Forfeited                      |  |                    | (2,750  | )            |            |                       | 17.63    |           |         |  |            |   |  |  |       | 
|                               |  |                    |         |              |            |                       |          |           |         |  |            |  
|Non-vested at October 31, 2005 |  |                    | 370,276 |              |            |                       | 16.91    |           |         |  | 185,512    |   |  |  | 43.48 | 
|                               |  |                    |         |              |            |                       |          |           |         |  |            |  







|   |                                            
|-- | -------------------------------------------
|4. | Restructuring and asset impairment charges:



|                             |                           |                              |       |     |     | 
|---------------------------- | ------------------------- | ---------------------------- | ----- | --- | --- | 
|                             |                           | Three Months Ended           |      
|                             |                           | October 31,                  |      
|                             |                           | 2005                         |      
|                             |                           |                              |      
|Medical Technology Products: |                           |                              |       |    
|                             | Medical Imaging Products: |                              |       |     |    
|                             |                           | PhotoDetection Systems, Inc. |       | $   | 216 | 
|Corporate and other:         |                           |                              |       |    
|                             | SKY Computers, Inc.       |                              |       | 809 |    
|                             |                           |                              |      
|Total                        |                           | $                            | 1,025 |    
|                             |                           |                              |      

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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)




| |                            
| | ---------------------------
| | PhotoDetection Systems Inc.

Whether an Investor
Should Apply the Equity Method of Accounting to Investments
Other Than Common Stock. Accounting for Certain Investments in Debt and Equity
Security




| |                    
| | -------------------
| | SKY Computers, Inc.

Accounting for Costs Associated with Exit Disposal
Activities,




|                 |  |                                     |     |  |                |   |     |           |  |           |            |  |  |       |       |  |  |   |       | 
|---------------- |  | ----------------------------------- | --- |  | -------------- | - | --- | --------- |  | --------- | ---------- |  |  | ----- | ----- |  |  | - | ----- | 
|                 |  | Three Months Ended October 31, 2005 |    
|                 |  |                                     |    
|                 |  | Involuntary                         |     |  | Capital Assets |   |     |           |  | Inventory |            |  | 
|                 |  | Employee Severance                  |     |  | Abandoned      |   |     | Sub-Total |  |           | Impairment |  |  | Total |      
|                 |  |                                     |     |  |                |   |     |           |  |           |            |  |  |       |      
|Expenses:        |  |                                     |     |  |                |   |     |           |  |           |            |  |  |       |       |  |  |   |       | 
|Cash expensed    |  | $                                   | 15  |  |                | $ |    |           |  | $         | 15         |  |  | $     |      |  |  | $ | 15    | 
|Accrual/non-cash |  |                                     | 484 |  |                |   | 310 |           |  |           | 794        |  |  |       | 1,179 |  |  |   | 1,973 | 
|                 |  |                                     |     |  |                |   |     |           |  |           |            |  |  |       |      
|Total expense    |  | $                                   | 499 |  |                | $ | 310 |           |  | $         | 809        |  |  | $     | 1,179 |  |  | $ | 1,988 | 
|                 |  |                                     |     |  |                |   |     |           |  |           |            |  |  |       |      





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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)




|   |                           
|-- | --------------------------
|5. | Balance sheet information:



|                     |                                            |             |        |        |          |   |        |        | 
|-------------------- | ------------------------------------------ | ----------- | ------ | ------ | -------- | - | ------ | ------ | 
|                     |                                            | October 31, |        |        | July 31, |  
|                     |                                            | 2005        |        |        | 2005     |  
|                     |                                            |             |        |        |          |  
|Inventories:         |                                            |             |        |        |          |   |        |       
|                     | Raw materials                              |             | $      | 40,070 |          |   | $      | 37,461 | 
|                     | Work-in-process                            |             |        | 16,589 |          |   |        | 15,275 | 
|                     | Finished goods                             |             |        | 11,850 |          |   |        | 10,868 | 
|                     |                                            |             |        |        |          |  
|                     |                                            | $           | 68,509 |        |          | $ | 63,604 |       
|                     |                                            |             |        |        |          |  
|Accrued liabilities: |                                            |             |        |        |          |   |        |       
|                     | Accrued employee compensation and benefits |             | $      | 9,896  |          |   | $      | 9,817  | 
|                     | Accrued warranty                           |             |        | 4,186  |          |   |        | 4,057  | 
|                     | Other                                      |             |        | 4,270  |          |   |        | 5,746  | 
|                     |                                            |             |        |        |          |  
|                     |                                            | $           | 18,352 |        |          | $ | 19,620 |       
|                     |                                            |             |        |        |          |  
|Advance payments:    |                                            |             |        |        |          |   |        |       
|                     | Long-lead time components(A)               |             | $      |       |          |   | $      | 6,170  | 
|                     | Ramp-up funds                              |             |        | 475    |          |   |        | 475    | 
|                     | Customer deposits                          |             |        | 838    |          |   |        | 1,628  | 
|                     |                                            |             |        |        |          |  
|                     |                                            | $           | 1,313  |        |          | $ | 8,273  |       
|                     |                                            |             |        |        |          |  






|    |                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Long-lead time components represents advance payments received
    from L-3 Communications based on certain orders received for the
    Companys EXACT systems.



|   |                                                     
|-- | ----------------------------------------------------
|6. | Investments in and advances to affiliated companies:



|                              |  |                    |        |   |      |   |        | 
|----------------------------- |  | ------------------ | ------ | - | ---- | - | ------ | 
|                              |  | Three Months Ended |       
|                              |  | October 31,        |       
|                              |  |                    |       
|                              |  | 2005               |        |   | 2004 |  
|                              |  |                    |        |   |      |  
|Net revenue                   |  | $                  | 3,830  |   |      | $ | 13,412 | 
|Gross margin                  |  |                    | 1,352  |   |      |   | 8,964  | 
|Income (loss) from operations |  |                    | (909   | ) |      |   | 937    | 
|Net income (loss)             |  |                    | (1,214 | ) |      |   | 1,116  | 



|   |                   
|-- | ------------------
|7. | Intangible assets:



|                      |  |                  |       |             |               |   |       |     |  |   |             |  |  |              |       |  |     |   |       |  |  |   |       | 
|--------------------- |  | ---------------- | ----- | ----------- | ------------- | - | ----- | --- |  | - | ----------- |  |  | ------------ | ----- |  | --- | - | ----- |  |  | - | ----- | 
|                      |  | October 31, 2005 |       |             | July 31, 2005 |  
|                      |  |                  |       |             |               |  
|                      |  |                  |       | Accumulated |               |   |       |     |  |   | Accumulated |  |  |             
|                      |  | Cost             |       |             | Amortization  |   |       | Net |  |   | Cost        |  |  | Amortization |       |  | Net |  
|                      |  |                  |       |             |               |   |       |     |  |   |             |  |  |              |       |  |     |  
|Intellectual Property |  | $                | 8,264 |             |               | $ | 4,971 |     |  | $ | 3,293       |  |  | $            | 8,264 |  |     | $ | 4,576 |  |  | $ | 3,688 | 
|                      |  |                  |       |             |               |   |       |     |  |   |             |  |  |              |       |  |     |  

13



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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)






|                             |  |   |       | 
|---------------------------- |  | - | ----- | 
|2006 (Remaining nine months) |  | $ | 1,230 | 
|2007                         |  |   | 1,643 | 
|2008                         |  |   | 399   | 
|2009                         |  |   | 21    | 
|                             |  |   |      
|                             |  | $ | 3,293 | 
|                             |  |   |      



|   |                      
|-- | ---------------------
|8. | Net income per share:





|                                                                |                                                     |                    |        |      |      |   |        |       |  
|--------------------------------------------------------------- | --------------------------------------------------- | ------------------ | ------ | ---- | ---- | - | ------ | ----- | -
|                                                                |                                                     | Three Months Ended |       
|                                                                |                                                     | October 31,        |       
|                                                                |                                                     |                    |       
|                                                                |                                                     | 2005               |        |      | 2004 |  
|                                                                |                                                     |                    |        |      |      |  
|Income from continuing operations                               |                                                     | $                  | 1,063  |      |      | $ | 1,478  |      
|Income (loss) from discontinued operations, net of tax          |                                                     |                    | 159    |      |      |   | (1,313 | )    
|Cumulative effect of change in accounting principle, net of tax |                                                     |                    | 120    |      |      |   |       |      
|                                                                |                                                     |                    |        |      |      |  
|Net income                                                      |                                                     | $                  | 1,342  |      |      | $ | 165    |      
|                                                                |                                                     |                    |        |      |      |  
|Weighted average number of common shares outstanding-basic      |                                                     |                    | 13,631 |      |      |   | 13,521 |      
|Effect of dilutive securities:                                  |                                                     |                    |        |      |      |   |        |      
|                                                                | Stock options and restricted stock                  |                    |        | 103  |      |   |        | 25    |  
|                                                                |                                                     |                    |        |      |      |  
|Weighted average number of common shares outstanding-diluted    |                                                     |                    | 13,734 |      |      |   | 13,546 |      
|                                                                |                                                     |                    |        |      |      |  
|Basic earnings (loss) per share:                                |                                                     |                    |        |      |      |   |        |      
|                                                                | From continuing operations                          |                    | $      | .008 |      |   | $      | 0.11  |  
|                                                                | From discontinued operations                        |                    |        | 0.01 |      |   |        | (0.10 | )
|                                                                | Cumulative effect of change in accounting principle |                    |        | 0.01 |      |   |        |      |  
|                                                                |                                                     |                    |        |      |      |  
|                                                                |                                                     | $                  | 0.10   |      |      | $ | 0.01   |      
|                                                                |                                                     |                    |        |      |      |  
|Diluted earnings (loss) per share:                              |                                                     |                    |        |      |      |   |        |      
|                                                                | From continuing operations                          |                    | $      | 0.08 |      |   | $      | 0.11  |  
|                                                                | From discontinued operations                        |                    |        | 0.01 |      |   |        | (0.10 | )
|                                                                | Cumulative effect of change in accounting principle |                    |        | 0.01 |      |   |        |      |  
|                                                                |                                                     |                    |        |      |      |  
|                                                                |                                                     | $                  | 0.10   |      |      | $ | 0.01   |      
|                                                                |                                                     |                    |        |      |      |  
|Anti-dilutive shares related to outstanding stock options       |                                                     |                    | 303    |      |      |   | 469    |      



|   |           
|-- | ----------
|9. | Dividends:



14



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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)




|    |                      
|--- | ---------------------
|10. | Comprehensive income:



|                                                                |                                                                                                                                                                  |                    |       |      |      |   |        |       |  
|--------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ----- | ---- | ---- | - | ------ | ----- | -
|                                                                |                                                                                                                                                                  | Three Months Ended |      
|                                                                |                                                                                                                                                                  | October 31,        |      
|                                                                |                                                                                                                                                                  |                    |      
|                                                                |                                                                                                                                                                  | 2005               |       |      | 2004 |  
|                                                                |                                                                                                                                                                  |                    |       |      |      |  
|Income from continuing operations                               |                                                                                                                                                                  | $                  | 1,063 |      |      | $ | 1,478  |      
|Income (loss) from discontinued operations, net of tax          |                                                                                                                                                                  |                    | 159   |      |      |   | (1,313 | )    
|Cumulative effect of change in accounting principle, net of tax |                                                                                                                                                                  |                    | 120   |      |      |   |       |      
|                                                                |                                                                                                                                                                  |                    |       |      |      |  
|                                                                |                                                                                                                                                                  |                    | 1,342 |      |      |   | 165    |      
|Other comprehensive income (loss), net of taxes:                |                                                                                                                                                                  |                    |       |      |      |   |        |      
|                                                                | Unrealized losses from marketable securities, net of tax benefit
    of $22 and $52, for the three months ended October 31, 2005
    and 2004, respectively      |                    |       | (35  | )    |   |        | (81   | )
|                                                                | Foreign currency translation adjustment, net of tax benefit of
    $182 and taxes of $976 for the three months ended
    October 31, 2005 and 2004, respectively |                    |       | (211 | )    |   |        | 1,490 |  
|                                                                |                                                                                                                                                                  |                    |       |      |      |  
|Total comprehensive income                                      |                                                                                                                                                                  | $                  | 1,096 |      |      | $ | 1,574  |      
|                                                                |                                                                                                                                                                  |                    |       |      |      |  



|    |                                                  
|--- | -------------------------------------------------
|11. | Supplemental disclosure of cash flow information:



|                                                |  |                    |         |   |      |   |        |  
|----------------------------------------------- |  | ------------------ | ------- | - | ---- | - | ------ | -
|                                                |  | Three Months Ended |        
|                                                |  | October 31,        |        
|                                                |  |                    |        
|                                                |  | 2005               |         |   | 2004 |  
|                                                |  |                    |         |   |      |  
|Accounts and notes receivable                   |  | $                  | 5,151   |   |      | $ | 4,071  |  
|Refundable income taxes                         |  |                    | (4,918  | ) |      |   |       |  
|Accounts receivable from affiliates             |  |                    | (26     | ) |      |   | 88     |  
|Inventories                                     |  |                    | (6,059  | ) |      |   | (31    | )
|Costs related to deferred revenue               |  |                    | 388     |   |      |   | 103    |  
|Other current assets                            |  |                    | (379    | ) |      |   | (390   | )
|Other assets                                    |  |                    | 5       |   |      |   | 3      |  
|Accounts payable, trade                         |  |                    | 5,741   |   |      |   | 2,079  |  
|Accrued liabilities                             |  |                    | (1,238  | ) |      |   | (241   | )
|Advance payments and deferred revenue           |  |                    | (5,609  | ) |      |   | 6,980  |  
|Accrued income taxes                            |  |                    | (3,327  | ) |      |   | (10    | )
|                                                |  |                    |         |   |      |  
|Net changes in operating assets and liabilities |  | $                  | (10,271 | ) |      | $ | 12,652 |  
|                                                |  |                    |         |   |      |  



|    |       
|--- | ------
|12. | Taxes:



15



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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)




|    |                     
|--- | --------------------
|13. | Segment information:









|                                                                                                                           |                                                      |                          |        |        |        |   |        |        |        |  
|-------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------ | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                                                                                           |                                                      | Three Months Ended       |       
|                                                                                                                           |                                                      | October 31,              |       
|                                                                                                                           |                                                      |                          |       
|                                                                                                                           |                                                      | 2005                     |        |        | 2004   |  
|                                                                                                                           |                                                      |                          |        |        |        |  
|Revenues:                                                                                                                  |                                                      |                          |        |        |        |   |        |       
|                                                                                                                           | Medical technology products from external customers: |                          |        |        |        |   |        |        |       
|                                                                                                                           |                                                      | Medical imaging products |        | $      | 46,315 |   |        | $      | 43,216 |  
|                                                                                                                           |                                                      | B-K Medical              |        |        | 14,885 |   |        |        | 16,341 |  
|                                                                                                                           |                                                      |                          |        |        |        |  
|                                                                                                                           |                                                      |                          | 61,200 |        |        |   | 59,557 |       
|                                                                                                                           | Security technology products from external customers |                          |        | 19,866 |        |   |        | 10,152 |       
|                                                                                                                           | Corporate and other                                  |                          |        | 5,344  |        |   |        | 5,421  |       
|                                                                                                                           |                                                      |                          |        |        |        |  
|                                                                                                                           |                                                      | Total                    |        | $      | 86,410 |   |        | $      | 75,130 |  
|                                                                                                                           |                                                      |                          |        |        |        |  
|Income (loss) from continuing operations before income taxes and
    cumulative effects of change in accounting principle: |                                                      |                          |        |        |        |   |        |       
|                                                                                                                           | Medical technology products:                         |                          |        |        |        |   |        |        |       
|                                                                                                                           |                                                      | Medical imaging products |        | $      | (2,606 | ) |        | $      | (1,145 | )
|                                                                                                                           |                                                      | B-K Medical              |        |        | (761   | ) |        |        | 1,153  |  
|                                                                                                                           |                                                      |                          |        |        |        |  
|                                                                                                                           |                                                      |                          | (3,367 | )      |        |   | 8      |       
|                                                                                                                           | Security technology products                         |                          |        | 4,808  |        |   |        | 1,251  |       
|                                                                                                                           | Corporate and other                                  |                          |        | 84     |        |   |        | 512    |       
|                                                                                                                           |                                                      |                          |        |        |        |  
|                                                                                                                           |                                                      | Total                    |        | $      | 1,525  |   |        | $      | 1,771  |  
|                                                                                                                           |                                                      |                          |        |        |        |  

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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)


|                     |                                         |             |         |         |          |   |         |         | 
|-------------------- | --------------------------------------- | ----------- | ------- | ------- | -------- | - | ------- | ------- | 
|                     |                                         | October 31, |         |         | July 31, |  
|                     |                                         | 2005        |         |         | 2005     |  
|                     |                                         |             |         |         |          |  
|Identifiable assets: |                                         |             |         |         |          |   |         |        
|                     | Medical imaging products                |             | $       | 113,714 |          |   | $       | 106,947 | 
|                     | B-K Medical                             |             |         | 67,934  |          |   |         | 71,143  | 
|                     | Security technology products            |             |         | 16,736  |          |   |         | 15,497  | 
|                     | Corporate and other(A)                  |             |         | 254,266 |          |   |         | 261,179 | 
|                     |                                         |             |         |         |          |  
|                     | Total assets from continuing operations |             |         | 452,650 |          |   |         | 454,766 | 
|                     | Assets of discontinued operations       |             |         | 41,364  |          |   |         | 41,939  | 
|                     |                                         |             |         |         |          |  
|Total                |                                         | $           | 494,014 |         |          | $ | 496,705 |        
|                     |                                         |             |         |         |          |  






|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(A) | Includes cash equivalents and marketable securities of $191,847
    at October 31, 2005, and $195,321 and at July 31, 2005.



|    |                            
|--- | ---------------------------
|14. | Commitments and guarantees:





Guarantors Accounting and Disclosure Requirements
for Guarantees. Including Indirect Guarantees of Indebtedness of
Other, an interpretation of FASB Statements No. 5, 57, and
107 and rescission of FASB Interpretation No. 34
(FIN 45).




17



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ANALOGIC CORPORATION


NOTES TO UNAUDITED CONSOLIDATED
STATEMENTS  (Continued)








|                                                                               |  |                    |        |   |      |   |        |  
|------------------------------------------------------------------------------ |  | ------------------ | ------ | - | ---- | - | ------ | -
|                                                                               |  | Three Months Ended |       
|                                                                               |  | October 31,        |       
|                                                                               |  |                    |       
|                                                                               |  | 2005               |        |   | 2004 |  
|                                                                               |  |                    |        |   |      |  
|Balance at the beginning of the period                                         |  | $                  | 4,057  |   |      | $ | 4,053  |  
|Accrual for warranties issued during the period                                |  |                    | 644    |   |      |   | 705    |  
|Accrual related to pre-existing warranties (including changes in
    estimate) |  |                    | 795    |   |      |   | 617    |  
|Settlements made in cash or in kind during the period                          |  |                    | (1,310 | ) |      |   | (1,121 | )
|                                                                               |  |                    |        |   |      |  
|Balance at the end of the period                                               |  | $                  | 4,186  |   |      | $ | 4,254  |  
|                                                                               |  |                    |        |   |      |  



|    |                   
|--- | ------------------
|15. | Subsequent events:





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Managements Discussion and Analysis of Financial
Condition and Results of Operations






Summary










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Critical Accounting Policies, Judgments, and Estimates






| |                                            
| | -------------------------------------------
| | Revenue Recognition and Accounts Receivable

Revenue Recognition in Financial Statements.


Accounting for Revenue Arrangements with Multiple
Deliverables.


Software Revenue Recognition




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| |            
| | -----------
| | Inventories





| |                             
| | ----------------------------
| | Concentration of Credit Risk





| |                 
| | ----------------
| | Warranty Reserve



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| |                                                    
| | ---------------------------------------------------
| | Investments in and Advances to Affiliated Companies





| |                                              
| | ---------------------------------------------
| | Intangible Assets and Other Long-Lived Assets





| |             
| | ------------
| | Income Taxes



22



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Results of Operations




| |                                                                                
| | -------------------------------------------------------------------------------
| | Three Months Ended October 31, 2005 vs. Three Months
    Ended October 31, 2004

















23



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##### Table of Contents















Liquidity and Capital Resources










24



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##### Table of Contents











|                       |  |       |        |      |        |   |        |           |  |   |           |  |  |         |       |  |  |   |       | 
|---------------------- |  | ----- | ------ | ---- | ------ | - | ------ | --------- |  | - | --------- |  |  | ------- | ----- |  |  | - | ----- | 
|                       |  |       |        | Less |        |   |        |           |  |   | More      | 
|                       |  |       |        | Than |        |   |        |           |  |   | Than      | 
|                       |  | Total |        |      | 1 Year |   |        | 1-3 Years |  |   | 4-5 Years |  |  | 5 Years |      
|                       |  |       |        |      |        |   |        |           |  |   |           |  |  |         |      
|Operating leases       |  | $     | 6,431  |      |        | $ | 1,483  |           |  | $ | 2,040     |  |  | $       | 1,429 |  |  | $ | 1,479 | 
|Purchasing obligations |  |       | 38,434 |      |        |   | 33,647 |           |  |   | 4,787     |  |  |         |      |  |  |   |      | 
|                       |  |       |        |      |        |   |        |           |  |   |           |  |  |         |      
|                       |  | $     | 44,865 |      |        | $ | 35,130 |           |  | $ | 6,827     |  |  | $       | 1,429 |  |  | $ | 1,479 | 
|                       |  |       |        |      |        |   |        |           |  |   |           |  |  |         |      





| |                              
| | -----------------------------
| | New Accounting Pronouncements

Accounting Changes and Error Corrections. Accounting Changes, Reporting Accounting Changes in Interim Financial
Statements.


Inventory Costs


25



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Application of FASB Statement
No. 109, Accounting for Income Taxes, to the Tax Deduction
on Qualified Production Activities by the American Jobs Creation
Act of 2004


Forward-Looking Statements




Risk Factors






| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because a significant portion of our revenue currently
    comes from a small number of customers, any decrease in revenue
    from these customers could harm our operating results.



|                                 |  |             |    |                     |      |  |    |      |  |  |      |   |  |  |    |  
|-------------------------------- |  | ----------- | -- | ------------------- | ---- |  | -- | ---- |  |  | ---- | - |  |  | -- | -
|                                 |  |             |    | Year Ended July 31, |     
|                                 |  | October 31, |    |                     |      | 
|                                 |  | 2005        |    |                     | 2005 |  |    | 2004 |  |  | 2003 |  
|                                 |  |             |    |                     |      |  |    |      |  |  |      |  
|L-3 Communications               |  |             | 22 | %                   |      |  | 16 | %    |  |  | 9    | % |  |  | 47 | %
|Toshiba                          |  |             | 16 | %                   |      |  | 15 | %    |  |  | 14   | % |  |  | 7  | %
|Siemens                          |  |             | 11 | %                   |      |  | 9  | %    |  |  | 10   | % |  |  | 5  | %
|General Electric                 |  |             | 9  | %                   |      |  | 10 | %    |  |  | 9    | % |  |  | 7  | %
|Philips                          |  |             | 6  | %                   |      |  | 7  | %    |  |  | 8    | % |  |  | 4  | %
|Ten largest customers as a group |  |             | 75 | %                   |      |  | 66 | %    |  |  | 68   | % |  |  | 81 | %

26



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| |                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Competition from existing or new companies in the medical
    and security imaging technology industry could cause us to
    experience downward pressure on prices, fewer customer orders,
    reduced margins, the inability to take advantage of new business
    opportunities, and the loss of market share.







| |                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on our suppliers, some of which are the sole
    source for our components, and our production would be
    substantially curtailed if these suppliers are not able to meet
    our demands and alternative sources are not available.





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | If we are left with excess inventory, our operating
    results will be adversely affected.



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| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | Uncertainties and adverse trends affecting our industry or
    any of our major customers may adversely affect our operating
    results.





| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our customers delay or inability to obtain any
    necessary United States or foreign regulatory clearances or
    approvals for their products could have a material adverse
    effect on our business.





| |                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business strategy involves the pursuit of acquisitions
    or business combinations, which may be difficult to integrate,
    disrupt our business, dilute stockholder value or divert
    management attention.



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| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Our annual and quarterly operating results are subject to
    fluctuations, which could affect the market price of our common
    stock.





| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | variations in the timing and volume of customer orders relative
    to our manufacturing capacity;        
|
| |  | introduction and market acceptance of our customers new
    products;                                    
|
| |  | changes in demand for our customers existing products;                                                   
|
| |  | the timing of our expenditures in anticipation of future orders;                                          
|
| |  | effectiveness in managing our manufacturing processes;                                                    
|
| |  | changes in competitive and economic conditions generally or in
    our customers markets;                
|
| |  | changes in the cost or availability of components or skilled
    labor;                                   
|
| |  | foreign currency exposure; and                                                                            
|
| |  | investor and analyst perceptions of events affecting the
    Company, our competitors and/or our industry.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Loss of any of our key personnel could hurt our business
    because of their industry experience and their technological
    expertise.





| |                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to maintain our technological expertise
    in research and product development and manufacturing processes,
    we will not be able to successfully compete.








|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market
    Risk





29



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##### Table of Contents












|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures









30



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| |                               
| | ------------------------------
| | Quarter Ended January 31, 2005



| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Appointment of a President of Camtronics, succeeding the former
    President who left the employ of the Company.                                                  
|
| |  | Appointment of a Controller, replacing Camtronics Vice
    President and Controller who left the employ of the Company.                                           
|
| |  | All subsidiary Controllers, who formerly reported to subsidiary
    General Managers, also now report directly to the Companys
    corporate finance organization.
|
| |  | Detailed quarterly review of all software revenue transactions
    by the Companys corporate finance organization.                                                



| |                             
| | ----------------------------
| | Quarter Ended April 30, 2005



| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Reviewed and revised, as required, Camtronics software
    revenue recognition policies, procedures, and processes to
    ensure compliance with SOP 97-2.                 
|
| |  | Conducted periodic internal audit reviews of Camtronics
    business practices and software revenue recognition policies and
    procedures.                               
|
| |  | Conducted software revenue recognition training for all
    Camtronics personnel who have responsibility for
    generating, administering, and recording software revenue.



| |                            
| | ---------------------------
| | Quarter Ended July 31, 2005



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Completed SOP 97-2 revenue contract checklists for all
    Camtronics recognized system revenue transactions.                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Completed revenue cycle narratives and the Committee of
    Sponsoring Organizations of the Treadway Commission
    (COSO) Matrices for Camtronics software revenue
    cycles. All key controls were identified, documented, and tested
    during the quarters ended April 30, 2005 and July 31,
    2005 to ensure internal controls functioning in compliance with
    stated policies and procedures.                                                                                   
|
| |  | Reviewed and revised Camtronics customer order forms,
    contracts, and invoices, where required to ensure terms and
    conditions were aligned with the revenue recognition
    requirements set forth in SOP 97-2.                                                                                                                                                                                                                                                                       
|
| |  | Reorganized Camtronics customer contract files to ensure
    that all documentation is present to support each revenue
    transaction.                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Implemented requirement that Camtronics salespersons to
    sign letters representing that all terms and conditions of the
    order with the customer have been disclosed to the company and
    included in the customer file.                                                                                                                                                                                                                                                             
|
| |  | Implemented requirement that the President and Controller of
    Camtronics, on a quarterly basis, contact each customer with
    recognized system revenues in the quarterly period in excess of
    $100,000 and complete a standardized checklist for the purpose
    of obtaining assurances from the customer that it has received
    and fully accepted all hardware, software, and other related
    services in accordance with the terms and conditions of the
    customers order.

31



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##### Table of Contents





| |                               
| | ------------------------------
| | Quarter Ended October 31, 2005



| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | Implemented additional controls over the analysis of deferred
    revenue and the timing of revenue recognition of these amounts.










PART II  OTHER INFORMATION







|        |                                                                
|------- | ---------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity Securities and Use of
    Proceeds












|        |         
|------- | --------
|Item 6. | Exhibits

|        |    |             |  |                                                                                                                                              
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description
|        |    |            
|        | 31 | .1          |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)/Rule 15d-15(a) of the Securities
    Exchange Act of 1934, as amended
|       
|        | 31 | .2          |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)/Rule 15d-15(a) of the Securities
    Exchange Act of 1934, as amended
|       
|        | 32 | .1          |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(b)/Rule 15d-15(b) of the Securities
    Exchange Act of 1934, as amended
|       
|        | 32 | .2          |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(b)/Rule 15d-15(b) of the Securities
    Exchange Act of 1934, as amended

32



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SIGNATURES






| |                     
| | --------------------
| | ANALOGIC CORPORATION
| | Registrant          
|
| | /s/ John W. Wood Jr.
| |                     



| |                                      
| | -------------------------------------
| | John W. Wood Jr.                     
| | President and Chief Executive Officer
| | (Principal Executive Officer)        





| |                      
| | ---------------------
| | /s/ John J. Millerick
| |                      



| |                                      
| | -------------------------------------
| | John J. Millerick                    
| | Senior Vice President,               
| | Chief Financial Officer and Treasurer
| | (Principal Financial Officer)        



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EXHIBIT INDEX


|        |    |             |  |                                                                                                                                              
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description
|        |    |            
|        | 31 | .1          |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)/Rule 15d-15(a) of the Securities
    Exchange Act of 1934, as amended
|       
|        | 31 | .2          |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)/Rule 15d-15(a) of the Securities
    Exchange Act of 1934, as amended
|       
|        | 32 | .1          |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(b)/Rule 15d-15(b) of the Securities
    Exchange Act of 1934, as amended
|       
|        | 32 | .2          |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(b)/Rule 15d-15(b) of the Securities
    Exchange Act of 1934, as amended

34