HOLOGIC, INC. MARLBOROUGH, Mass., Nov. 8, 2017 /PRNewswire/ -- Hologic, Inc. (Nasdaq: HOLX) announced today the Company's financial results for the fiscal fourth quarter ended September 30, 2017.
Revenue of $802.9 million increased 10.5%, or 9.9% in constant currency, compared to the prior year period. Excluding the net impact of the Cynosure acquisition and blood screening divestiture, fourth-quarter revenue increased 5.0%, or 4.4% in constant currency.
GAAP diluted earnings per share (EPS) of $0.29 decreased (12.1%) compared to the prior year period, while non-GAAP diluted EPS of $0.50 decreased (3.8%).
"We finished a successful and productive fiscal year with a strong performance in the fourth quarter, as revenue exceeded our guidance and sales growth, net of acquisitions and divestitures, accelerated on a sequential basis versus the third quarter," said Steve MacMillan, Hologic's Chairman, President and Chief Executive Officer. "All our legacy divisions grew on a global basis net of divestitures, while our international and molecular diagnostics franchises delivered double-digit growth. For the full year, we met our financial commitments and strengthened our future by shifting our portfolio toward higher-growth markets, and by advancing our research and development pipelines."
Key financial results for the fiscal fourth quarter were:
GAAP Non-GAAP
---- --------
Q4'17 Q4'16 Change Q4'17 Q4'16 Change
Increase Increase
(Decrease) (Decrease)
--------- ---------
Revenues $802.9 $726.8 10.5% $802.9 $726.8 10.5%
-------- ------ ------ ---- ------ ------ ----
Gross Margin 52.0% 55.9% (390 bps) 64.1% 65.7% (160 bps)
------------ ---- ---- -------- ---- ---- --------
Operating Expenses $308.5 $259.0 19.1% $275.8 $235.5 17.1%
------------------ ------ ------ ---- ------ ------ ----
Operating Margin 13.6% 20.2% (660 bps) 29.8% 33.3% (350 bps)
---------------- ---- ---- -------- ---- ---- --------
Net Margin 10.3% 12.7% (240 bps) 17.8% 20.0% (220 bps)
---------- ---- ---- -------- ---- ---- --------
Diluted EPS $0.29 $0.33 (12.1%) $0.50 $0.52 (3.8%)
----------- ----- ----- ------ ----- ----- -----
Throughout this press release, all dollar figures are in millions, except EPS. Some totals may not foot due to rounding. Unless otherwise noted, all results are compared to the corresponding prior year period. Non-GAAP results exclude a number of cash and non-cash items as discussed under "Use of Non-GAAP Financial Measures."
Revenue Detail
$s in millions Q4'17 Q4'16 Reported Constant Currency
Change Change
--- ------ ------
Cytology & Perinatal $120.2 $121.0 (0.7%) (1.4%)
Molecular
Diagnostics $153.5 $134.3 14.3% 13.8%
Blood Screening $18.0 $56.6 (68.2%) (68.2%)
Total Diagnostics $291.7 $311.9 (6.5%) (7.0%)
----------------- ------ ------ ----- -----
Total Diagnostics
ex. Blood $273.7 $255.3 7.2% 6.6%
----------------- ------ ------ --- ---
Breast Imaging $255.5 $248.8 2.7% 2.2%
Interventional
Breast Solutions $42.3 $40.9 3.6% 3.1%
Other $3.1 $2.6 15.3% 9.3%
----- ---- ---- ---- ---
Total Breast Health $300.9 $292.3 2.9% 2.4%
------------------- ------ ------ --- ---
Body $22.2 - - -
Skin $32.6 - - -
Women's Health/
Other $26.6 - - -
--------------- ----- --- --- ---
Total Medical
Aesthetics $81.4 - - -
------------- ----- --- --- ---
GYN Surgical $104.7 $101.5 3.2% 2.7%
------------ ------ ------ --- ---
Skeletal Health $24.2 $21.2 14.2% 12.9%
--------------- ----- ----- ---- ----
Total $802.9 $726.8 10.5% 9.9%
----- ------ ------ ---- ---
Quarterly revenue highlights:
-- U.S. revenue of $613.0 million increased 6.1%, and international revenue
of $189.9 million increased 27.5%, or 24.7% in constant currency.
Excluding blood screening and Medical Aesthetics, U.S. revenue increased
1.4%, while international revenues increased 20.8%, or 17.5% in constant
currency.
-- In Diagnostics:
-- Molecular diagnostics sales of $153.5 million increased 14.3%, or
13.8% in constant currency, driven primarily by continued strength
across Aptima® women's health products globally.
-- Cytology and perinatal sales of $120.2 million decreased (0.7%), or
(1.4%) in constant currency, due primarily to lower sales of
perinatal products.
-- Breast Health revenue totaled $300.9 million, an increase of 2.9%, or
2.4% in constant currency, faster growth than in the third quarter.
Revenue in the United States decreased (1.2%), as changes in product mix
were partially offset by increases in service and new product revenue.
International revenue increased 24.1%, or 20.6% in constant currency.
-- GYN Surgical revenue of $104.7 million increased 3.2%, or 2.7% in
constant currency. MyoSure® system revenue of $50.0 million increased
17.3%, or 17.0% in constant currency, while NovaSure® revenue of $54.7
million decreased (6.6%), or (7.2%) in constant currency.
-- In Skeletal Health, revenue of $24.2 million increased 14.2%, or 12.9%
in constant currency, reversing recent declines.
Segment revenue highlights by geography are shown below:
U.S. Change International International Change
Change
(Constant Currency)
(Reported)
---------
Increase (Decrease)
------------------
Diagnostics (2.1%) (19.2%) (21.3%)
----------- ----- ------ ------
Diagnostics ex. Blood 3.9% 19.5% 16.5%
--------------------- --- ---- ----
Breast Health (1.2%) 24.1% 20.6%
------------- ----- ---- ----
Medical Aesthetics - - -
------------------ --- --- ---
GYN Surgical 1.9% 11.1% 7.9%
------------ --- ---- ---
Skeletal Health 7.5% 26.2% 22.6%
--------------- --- ---- ----
Total Revenues 6.1% 27.5% 24.7%
-------------- --- ---- ----
Total Revenues ex. Blood and Medical Aesthetics 1.4% 20.8% 17.5%
----------------------------------------------- --- ---- ----
Expense Detail
Gross margin was 52.0% on a GAAP basis, and 64.1% on a non-GAAP basis. GAAP gross margin declined by 390 basis points, while non-GAAP gross margin declined by 160 basis points. These declines were primarily related to sales mix associated with the divestiture of the higher-margin blood screening business and sales of lower-margin Cynosure products. These factors were partially offset by manufacturing efficiencies, an increase in high-margin royalty revenue, and favorable foreign exchange rates.
Operating expenses were $308.5 million on a GAAP basis, and $275.8 million on a non-GAAP basis. GAAP operating expenses increased 19.1% and non-GAAP operating expenses increased 17.1% primarily due to the inclusion of Cynosure expenses.
The quarterly effective tax rate was a benefit of (14.2%) on a GAAP basis, and a provision of 30.5% on a non-GAAP basis. The difference in these rates was primarily due to the income tax effect of statutes of limitations expiring and audit settlements related to prior years not reflected in the non-GAAP results.
Other Key Financial Results
GAAP net income for the fourth quarter was $82.7 million, a decrease of (10.3%). Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter was $262.7 million, a decrease of (0.5%).
Operating cash flow for the fourth quarter was $166.5 million. Free cash flow, defined as operating cash flow less capital expenditures, was $132.9 million.
During the fourth quarter, Hologic repurchased $85.9 million in principal of its 2012 and 2013 convertible notes for a total of $106.1 million. The Company also repurchased 5.3 million shares of its common stock for $200.1 million.
Total debt outstanding at the end of the quarter was $3.3 billion. The company ended the quarter with cash and equivalents of $0.5 billion, and a net leverage ratio (net debt over adjusted EBITDA) of 2.7 times.
On a trailing 12 months basis, adjusted ROIC of 12.6% declined 10 basis points compared to the prior year period.
Financial Guidance for Fiscal 2018
"We expect to post solid, mid-single-digit organic revenue growth in fiscal 2018," said Bob McMahon, Hologic's Chief Financial Officer. "At the same time, after adjusting for the blood screening divestiture, we anticipate much faster EPS growth driven by healthy operating margin expansion."
For fiscal 2018, "organic revenue" is defined as total revenue less blood screening revenue for the full year and medical aesthetics revenue for the first two quarters of fiscal 2018. Medical aesthetics revenue is included in organic revenue for the third and fourth quarters of fiscal 2018. In addition, organic revenue growth rates adjust for the extra selling days in Hologic's 2017 fiscal year, and non-recurring royalty revenue in Diagnostics. Together, these two non-recurring factors are estimated to contribute approximately 100 basis points to organic growth.
Hologic's financial guidance for fiscal 2018 is shown in the two tables immediately below. As a reminder, percentage changes versus the prior year are affected by the blood screening divestiture and the Cynosure acquisition, both of which closed in the second quarter of fiscal 2017. The guidance is based on a full year non-GAAP tax rate of approximately 31% and diluted shares outstanding of 284 million for the full year. Constant currency guidance assumes that foreign exchange rates are the same in fiscal 2018 as in fiscal 2017. Current guidance assumes that recent foreign exchange rates persist for all of fiscal 2018.
GAAP
----
Revenue EPS
------- ---
Reported % Increase Guidance $ Reported % Increase
(Decrease) (Decrease)
Guidance $
--- ----------
Current Guidance for 4.6% to 7.2% $3,200 to $3,280 (53.8%) to (51.9%) $1.22 to $1.27
Fiscal 2018 million
----------- ----------- ---
Non-GAAP
--------
Revenue EPS
------- ---
Constant Reported % Guidance $ Reported % Increase
Currency % Increase (Decrease)
Increase (Decrease) Guidance $
(Decrease)
---------
Current Guidance for 4.0% to 6.6% 4.6% to 7.2% $3,200 to 3.4% to 5.9% $2.10 to $2.15
Fiscal 2018 $3,280 million
----------- --- ---
Hologic's financial guidance for the first quarter of fiscal 2018 is shown in the two tables immediately below. As a reminder, percentage changes versus the prior year period are affected by the blood screening divestiture and the Cynosure acquisition, both of which closed in the second quarter of fiscal 2017. In addition, Hologic's first quarter of fiscal 2018 includes four fewer shipping days than the prior year period.
GAAP
----
Revenue EPS
------- ---
Reported % Increase Guidance $ Reported % Increase
(Decrease) (Decrease)
Guidance $
--- ----------
Current Guidance for the First 5.5% to 7.6% $775 to $790 (16.7%) to (10.0%) $0.25 to $0.27
Quarter of Fiscal 2018 million
---------------------- ---------------------- ---
Non-GAAP
--------
Revenue EPS
------- ---
Constant Reported % Guidance $ Reported % Increase
Currency % Increase (Decrease)
Increase (Decrease) Guidance $
(Decrease)
---------
Current Guidance for the First 4.7% to 5.5% to $775 to (7.7%) to (3.8%) $0.48 to $0.50
Quarter of Fiscal 2018 6.7% 7.6% $790 million
---------------------- --- --- ------------
To assist with "apples to apples" analyses of Hologic's ongoing, base business, the historical contributions of blood screening to Hologic's quarterly revenues and EPS are shown below:
GAAP
----
2016 2017
---- ----
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total
--- --- --- --- ----- --- --- --- --- -----
Revenue $60.7 $62.2 $55.9 $56.6 $235.4 $65.2 $38.3 $19.0 $18.0 $140.5
------- ----- ----- ----- ----- ------ ----- ----- ----- ----- ------
EPS $0.06 $0.06 $0.05 $0.05 $0.22 $0.06 $1.62 $0.01 $0.01 $1.70
--- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Non-GAAP
--------
2016 2017
---- ----
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total
--- --- --- --- ----- --- --- --- --- -----
Revenue $60.7 $62.2 $55.9 $56.6 $235.4 $65.2 $38.3 $19.0 $18.0 $140.5
------- ----- ----- ----- ----- ------ ----- ----- ----- ----- ------
EPS $0.10 $0.10 $0.09 $0.09 $0.37 $0.10 $0.04 $0.01 $0.01 $0.16
--- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Use of Non-GAAP Financial Measures
The Company has presented the following non-GAAP financial measures in this press release: constant currency revenues; non-GAAP gross profit; non-GAAP gross margin; non-GAAP operating expenses; non-GAAP income from operations; non-GAAP operating margin; non-GAAP interest expense; non-GAAP pre-tax income; non-GAAP net margin; non-GAAP net income; non-GAAP diluted EPS; adjusted EBITDA; and return on invested capital. Constant currency presentations show reported period operating results as if the foreign exchange rates remain the same as those in effect in the comparable prior year period. The Company defines its non-GAAP net income, EPS, and other non-GAAP financial measures to exclude, as applicable: (i) the amortization of intangible assets; (ii) additional depreciation expense from acquired fixed assets and accelerated depreciation related to business consolidation and closure of facilities; (iii) additional expense resulting from the purchase accounting adjustment to record inventory at fair value; (iv) non-cash interest expense related to amortization of the debt discount from the equity conversion option of the convertible notes; (v) restructuring and divestiture charges, facility closure and consolidation charges and costs incurred to integrate acquisitions (including retention, transaction bonuses, legal and professional consulting services) and separate divested businesses from existing operations; (vi) transaction related expenses for divestitures and acquisitions; (vii) gain on disposal of business; (viii) debt extinguishment losses and related transaction costs; (ix) the unrealized (gains) losses on the mark-to-market of forward foreign currency contracts for which the Company has not elected hedge accounting; (x) litigation settlement charges (benefits) and non-income tax related charges (benefits); (xi) other-than-temporary impairment losses on investments and realized (gains) losses resulting from the sale of investments; (xii) other one-time, non-recurring, unusual or infrequent charges, expenses or gains that may not be indicative of the Company's core business results as detailed in our reconciliations of such adjustments; and (xiii) income taxes related to such adjustments. The Company defines adjusted EBITDA as its non-GAAP net income plus net interest expense, income taxes, and depreciation and amortization expense included in its non-GAAP net income. "Organic" presentations are non-GAAP measures that are adjusted as described under "Financial Guidance for Fiscal 2018."
These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. The company's definition of these non-GAAP measures may differ from similarly titled measures used by others.
The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The company generally uses these non-GAAP financial measures to facilitate management's financial and operational decision-making, including evaluation of Hologic's historical operating results, comparison to competitors' operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the company's operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Hologic's business.
Because non-GAAP financial measures exclude the effect of items that increase or decrease the company's reported results of operations, management strongly encourages investors to review the company's consolidated financial statements and publicly filed reports in their entirety. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this release.
Future Non-GAAP Adjustments
Future GAAP EPS may be affected by changes in ongoing assumptions and judgments, and may also be affected by non-recurring, unusual or unanticipated charges, expenses or gains, which are excluded in the calculation of the Company's non-GAAP EPS guidance as described in this press release.
Conference Call and Webcast
Hologic's management will host a conference call at 4:30 p.m. ET today to discuss its financial results for the fourth quarter of fiscal 2017. Approximately 10 minutes before the call, dial 866-548-4713 (U.S. and Canada) or 323-794-2093 (international) and enter access code 7397739. A replay will be available starting two hours after the call ends through November 24, 2017 at 888-203-1112 (U.S.) or +1 719-457-0820 (international), access code 7397739, Pin 2953. The Company will also provide a live webcast of the call at http://investors.hologic.com.
About Hologic, Inc.
Hologic, Inc. is an innovative medical technology company primarily focused on improving women's health and well-being through early detection and treatment. For more information on Hologic, visit www.hologic.com.
Hologic, Genius 3D Mammography, Aptima, ThinPrep, MyoSure, NovaSure, Panther, Tigris, Cynosure, SculpSure, PicoSure, The Science of Sure, and associated logos are trademarks and/or registered trademarks of Hologic, Inc. and/or its subsidiaries in the United States and/or other countries.
Forward-Looking Statements
This news release contains forward-looking information that involves risks and uncertainties, including statements about the Company's plans, objectives, expectations and intentions. Such statements include, without limitation: financial or other information included herein based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; the Company's strategies, positioning, resources, capabilities, and expectations for future performance; and the Company's outlook and financial and other guidance. These forward-looking statements are based upon assumptions made by the Company as of the date hereof and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.
Risks and uncertainties that could adversely affect the Company's business and prospects, and otherwise cause actual results to differ materially from those anticipated, include without limitation: the ability of the Company to successfully manage leadership and organizational changes, including the ability of the Company to attract, motivate and retain key employees; U.S., European and general worldwide economic conditions and related uncertainties; the Company's reliance on third-party reimbursement policies to support the sales and market acceptance of its products, including the possible adverse impact of government regulation and changes in the availability and amount of reimbursement and uncertainties for new products or product enhancements; uncertainties regarding healthcare reform legislation, including associated tax provisions, or budget reduction or other cost containment efforts; changes in guidelines, recommendations and studies published by various organizations that could affect the use of the Company's products; uncertainties inherent in the development of new products and the enhancement of existing products, including FDA approval and/or clearance and other regulatory risks, technical risks, cost overruns and delays; the risk that products may contain undetected errors or defects or otherwise not perform as anticipated; risks associated with strategic alliances and the ability of the Company to realize anticipated benefits of those alliances; risks associated with acquisitions, including, without limitation, the Company's ability to successfully integrate acquired businesses, the risks that the acquired businesses may not operate as effectively and efficiently as expected even if otherwise successfully integrated, and the risks that acquisitions may involve unexpected costs or unexpected liabilities; the risks of conducting business internationally; the risk of adverse exchange rate fluctuations on the Company's international activities and businesses; manufacturing risks, including the Company's reliance on a single or limited source of supply for key components, the need to comply with especially high standards for the manufacture of many of its products and risks associated with utilizing third party manufacturers; the Company's ability to predict accurately the demand for its products, and products under development, and to develop strategies to address its markets successfully; the early stage of market development for certain of the Company's products; the Company's leverage risks, including the Company's obligation to meet payment obligations and financial covenants associated with its debt; risks related to the use and protection of intellectual property; expenses, uncertainties and potential liabilities relating to litigation, including, without limitation, commercial, intellectual property, employment and product liability litigation; technical innovations that could render products marketed or under development by the Company obsolete; and competition.
The risks included above are not exhaustive. Other factors that could adversely affect the Company's business and prospects are described in the filings made by the Company with the SEC. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements presented herein to reflect any change in expectations or any change in events, conditions or circumstances on which any such statements are based.
Contact
Michael Watts
Vice President, Investor Relations and Corporate Communications
(858) 410-8588
HOLOGIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and per share data)
Three Months Ended Years Ended
September 30, 2017 September 24, 2016 September 30, 2017 September 24, 2016
------------------ ------------------ ------------------ ------------------
Revenues:
Product $655.7 $607.5 $2,538.0 $2,379.0
Service and other 147.2 119.3 520.8 453.7
----- ----- ----- -----
Total revenues 802.9 726.8 3,058.8 2,832.7
----- ----- ------- -------
Cost of revenues:
Product 233.7 195.5 881.8 756.8
Amortization of intangible assets 79.2 71.2 297.1 293.4
Service and other 72.1 54.0 258.9 219.2
---- ---- ----- -----
Gross profit 417.9 406.1 1,621.0 1,563.3
----- ----- ------- -------
Operating expenses:
Research and development 60.5 62.5 232.8 232.1
Selling and marketing 139.7 105.8 498.6 415.1
General and administrative 90.6 65.4 343.3 267.3
Amortization of intangible assets 15.2 22.4 62.5 89.7
Gain on sale of business - - (899.7) -
Restructuring and divestiture charges 2.5 2.9 13.3 10.5
--- --- ---- ----
Total operating expenses 308.5 259.0 250.8 1,014.7
----- ----- ----- -------
Income from operations 109.4 147.1 1,370.2 548.6
Interest income 0.5 0.1 3.8 0.7
Interest expense (36.1) (37.9) (153.2) (155.3)
Debt extinguishment loss (0.6) (0.8) (3.2) (5.3)
Other income (expense), net (0.8) (0.9) 12.9 26.6
---- ---- ---- ----
Income before income taxes 72.4 107.6 1,230.5 415.3
Provision (benefit) for income taxes (10.3) 15.4 475.0 84.5
----- ---- ----- ----
Net income $82.7 $92.2 $755.5 $330.8
===== ===== ====== ======
Net income per common share:
Basic $0.30 $0.33 $2.70 $1.18
===== ===== ===== =====
Diluted $0.29 $0.33 $2.64 $1.16
===== ===== ===== =====
Weighted average number of shares outstanding:
Basic 279,543 277,549 279,811 280,213
======= ======= ======= =======
Diluted 284,741 282,494 285,653 286,156
======= ======= ======= =======
HOLOGIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
September 30, 2017 September 24, 2016
------------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $540.6 $548.4
Accounts receivable, net 533.5 447.0
Inventories 331.6 274.7
Other current assets 72.9 56.5
Total current assets 1,478.6 1,326.6
------- -------
Property, plant and equipment, net 491.2 460.2
Goodwill and intangible assets 5,912.8 5,446.5
Other assets 97.0 83.7
Total assets $7,979.6 $7,317.0
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $1,150.8 $296.0
Accounts payable and accrued liabilities 543.5 444.5
Deferred revenue 171.2 161.4
----- -----
Total current liabilities 1,865.5 901.9
------- -----
Long-term debt, net of current portion 2,172.1 3,049.4
Deferred income taxes 973.6 982.6
Other long-term liabilities 183.7 240.4
----- -----
Total liabilities 5,194.9 5,174.3
Total stockholders' equity 2,784.7 2,142.7
Total liabilities and stockholders' equity $7,979.6 $7,317.0
======== ========
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
Years Ended
September 30, 2017 September 24, 2016 (a)
------------------ ------------------ ---
OPERATING ACTIVITIES
Net income $755.5 $330.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 89.6 82.3
Amortization 359.6 383.1
Non-cash interest expense 49.4 52.1
Stock-based compensation expense 68.2 65.4
Deferred income taxes (357.2) (155.8)
Fair value write-up of inventory sold 39.7 -
Gain on sale of investments (5.6) (25.1)
Debt extinguishment losses 3.2 5.3
Equity investment impairment charges - 1.1
Gain on sale of business (899.7) -
Other adjustments and non-cash items 8.8 2.6
Changes in operating assets and liabilities, excluding the effect of
acquisitions and dispositions:
Accounts receivable (41.5) (31.8)
Inventories (11.6) 7.6
Prepaid income taxes (8.7) 4.7
Prepaid expenses and other assets (2.4) (4.9)
Accounts payable (10.6) 40.1
Accrued expenses and other liabilities (17.8) 45.6
Deferred revenue (10.6) (4.9)
Net cash provided by operating activities 8.3 798.2
--- -----
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (1,558.1) -
Proceeds from sale of business 1,865.0 -
Purchase of property and equipment (57.8) (47.3)
Increase in equipment under customer usage agreements (49.8) (47.2)
Proceeds from sale of available-for-sale marketable securities 87.1 31.1
Purchases of insurance contracts - (5.2)
Sales of mutual funds - 5.2
Purchase of intellectual property - (4.0)
Other activity (0.6) (1.0)
Net cash provided by (used in) investing activities 285.8 (68.4)
----- -----
FINANCING ACTIVITIES
Repayment of long-term debt (84.4) (75.0)
Payments to extinguish convertible notes (396.2) (392.8)
Proceeds from amounts borrowed under revolving credit line 345.0 50.0
Repayment of amounts borrowed under revolving credit line - (225.0)
Proceeds from accounts receivable securitization program 48.0 200.0
Repayment of amounts borrowed under accounts receivable securitization program (48.0) -
Repurchase of common stock (200.1) (250.0)
Purchase of interest rate caps (1.9) -
Net proceeds from issuance of common stock pursuant to employee stock plans 49.0 38.5
Payment under capital lease obligation (0.9) -
Payment of minimum tax withholdings on net share settlements of equity awards (19.7) (16.4)
Net cash used in financing activities (309.2) (670.7)
Effect of exchange rate changes on cash and cash equivalents 7.3 (2.0)
Net increase (decrease) in cash and cash equivalents (7.8) 57.1
Cash and cash equivalents, beginning of period 548.4 491.3
Cash and cash equivalents, end of period $540.6 $548.4
====== ======
(a) The statement
of cash flows
for 2016 has
been recasted
to reflect
the adoption
of ASU
2016-09 as
the Company
has
retrospectively
adopted the
presentation
requirement
of the excess
tax benefit
related to
equity
awards. As a
result, cash
provided by
operating
activities
increased
$11.0 million
with a
corresponding
increase in
cash used in
financing
activities.
HOLOGIC, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS (Unaudited)
(In millions, except earnings per share)
Three Months Ended Years Ended
September 30, September 24, September 30, September 24,
2017 2016 2017 2016
---- ---- ---- ----
Gross Profit:
GAAP gross profit $417.9 $406.1 $1,621.0 $1,563.3
Adjustments:
Amortization of intangible assets (1) 79.2 71.2 297.1 293.4
Incremental depreciation expense (2) 0.2 0.4 1.0 1.8
Integration/consolidation costs (3) 0.1 - 0.9 -
Fair value write-up of acquired inventory (11) 17.4 - 39.7 -
---- --- ---- ---
Non-GAAP gross profit $514.8 $477.7 $1,959.7 $1,858.5
====== ====== ======== ========
Gross Margin Percentage:
GAAP gross margin percentage 52.0% 55.9% 53.0% 55.2%
Impact of adjustments above 12.1% 9.8% 11.1% 10.4%
---- --- ---- ----
Non-GAAP gross margin percentage 64.1% 65.7% 64.1% 65.6%
==== ==== ==== ====
Operating Expenses:
GAAP operating expenses $308.5 $259.0 $250.8 $1,014.7
Adjustments:
Amortization of intangible assets (1) (15.2) (22.4) (62.5) (89.7)
Incremental depreciation expense (2) (2.9) (0.7) (4.6) (3.3)
Transaction expenses (4) (0.5) - (23.2) -
Non-income tax net charges (12) (6.7) - (23.1) -
Integration/consolidation costs (3) (4.9) (0.2) (18.9) (0.9)
Restructuring and divestiture charges (3) (2.5) (2.9) (13.3) (10.5)
Gain on sale of business (10) - - 899.7 -
Other (5) - 2.7 - (3.3)
--- --- --- ----
Non-GAAP operating expenses $275.8 $235.5 $1,004.9 $907.0
====== ====== ======== ======
Operating Margin:
GAAP income from operations $109.4 $147.1 $1,370.2 $548.6
Adjustments to gross profit as detailed above 96.9 71.6 338.7 295.2
Adjustments to operating expenses as detailed 32.7 23.5 (754.1) 107.7
above
Non-GAAP income from operations $239.0 $242.2 $954.8 $951.5
====== ====== ====== ======
Operating Margin Percentage:
GAAP income from operations margin percentage 13.6% 20.2% 44.8% 19.4%
Impact of adjustments above 16.2% 13.1% (13.6)% 14.2%
---- ---- ------ ----
Non-GAAP operating margin percentage 29.8% 33.3% 31.2% 33.6%
==== ==== ==== ====
Interest Expense:
GAAP interest expense $36.1 $37.9 $153.2 $155.3
Adjustments:
Non-cash interest expense relating to convertible (3.4) (5.0) (17.9) (22.3)
notes (6)
Interest expense relating to Cynosure dissenting 1.5 - - -
shareholders (15)
Non-GAAP interest expense $34.2 $32.9 $135.3 $133.0
===== ===== ====== ======
Pre-Tax Income:
GAAP pre-tax earnings $72.4 $107.6 1,230.5 415.3
Adjustments to pre-tax earnings as detailed 131.5 100.1 (397.5) 425.2
above
Debt extinguishment loss (7) 0.6 0.8 3.2 5.3
Gain on sale of investments (8) (2.0) - (5.6) (25.1)
Equity investment impairment charge - 1.1 - 1.1
Unrealized losses on forward foreign currency 3.6 1.6 2.6 1.1
contracts (9)
Non-GAAP pre-tax Income $206.1 $211.2 $833.2 $822.9
====== ====== ====== ======
Net income:
GAAP net income $82.7 $92.2 $755.5 $330.8
Adjustments:
Amortization of intangible assets (1) 94.4 93.6 359.6 383.1
Fair value write-up of acquired inventory (11) 17.4 - 39.7 -
Non-cash interest expense relating to 3.4 5.0 17.9 22.3
convertible notes (6)
Restructuring, divestiture and 7.5 3.1 33.1 11.4
integration/consolidation costs (3)
Non-income tax net charges (12) 6.7 - 23.1 -
Transaction expenses (4) 0.5 - 23.2 -
Incremental depreciation expenses (2) 3.1 1.1 5.6 5.1
Debt extinguishment loss (7) 0.6 0.8 3.2 5.3
Gain on sale of investments (8) (2.0) - (5.6) (25.1)
Equity investment impairment charge - 1.1 - 1.1
Unrealized losses on forward foreign currency 3.6 1.6 2.6 1.1
contracts (9)
Gain on sale of business (10) - - (899.7) -
Interest expense relating to Cynosure dissenting (1.5) - - -
shareholders (15)
Other charges (5) - (2.7) - 3.3
Income tax effect of reconciling items (13) (73.2) (50.1) 220.7 (176.8)
----- ----- ----- ------
Non-GAAP net income $143.2 $145.7 $578.9 $561.6
====== ====== ====== ======
Net Income Percentage:
GAAP net income percentage 10.3% 12.7% 24.7% 11.7%
Impact of adjustments above 7.5% 7.3% (5.8)% 8.1%
--- --- ----- ---
Non-GAAP net income percentage 17.8% 20.0% 18.9% 19.8%
==== ==== ==== ====
Earnings per share:
GAAP earnings per share - Diluted $0.29 $0.33 $2.64 $1.16
Adjustment to net earnings (as detailed above) 0.21 0.19 (0.61) 0.80
---- ---- ----- ----
Non-GAAP earnings per share - diluted (14) $0.50 $0.52 $2.03 $1.96
===== ===== ===== =====
Adjusted EBITDA:
Non-GAAP net income $143.2 $145.7 $578.9 $561.6
Interest expense, net, not adjusted above 33.7 32.8 131.5 132.3
Provision for income taxes 62.9 65.5 254.1 261.3
Depreciation expense, not adjusted above 22.9 19.9 84.0 77.1
---- ---- ---- ----
Adjusted EBITDA $262.7 $263.9 $1,048.5 $1,032.3
====== ====== ======== ========
Explanatory Notes to Reconciliations:
(1) To reflect
non-cash
expenses
attributable
to the
amortization
of intangible
assets.
(2) To reflect
non-cash
fair value
adjustments
for
additional
depreciation
expense
related to
the fair
value write-
up of fixed
assets
acquired in
the Gen-
Probe
acquisition
and
accelerated
depreciation
expense
related to
facility
closure and
business
consolidation.
(3) To reflect
restructuring
and
divestiture
charges, and
certain costs
associated
with the
Company's
integration
and facility
consolidation
plans, which
primarily
include
retention and
transfer
costs, as
well as costs
incurred to
integrate
acquisitions
including
consulting,
legal and
accounting
fees, and
expenses
incurred to
separate the
divested
blood
screening
business from
the molecular
diagnostics
operations.
These costs
do not
include those
incurred to
provide
transition
services to
Grifols, nor
amounts
received from
Grifols under
transition
services
agreements.
(4) To reflect
expenses
incurred with
third parties
related to
acquisitions
and
divestitures
prior to when
such
transactions
are
completed.
These
expenses
primarily
comprise
broker fees,
legal fees,
and
consulting
and due
diligence
fees.
(5) To reflect the
net impact
from
miscellaneous
transactions
during the
period,
including
legal
settlements.
(6) To reflect
certain non-
cash interest
expense
related to
the
amortization
of the debt
discount from
the equity
conversion
option of the
Company's
convertible
notes.
(7) To reflect
losses for
the
repurchases
of $285.9
million
principal
amount of the
2012 and 2013
Convertible
Notes in
fiscal 2017
and $274.3
million
principal
amount of the
2010 and 2012
Convertible
Notes in
fiscal 2016.
(8) To reflect
realized
gains on the
sale of
available-
for-sale
marketable
securities
and a cost-
method
investment.
(9) To reflect
non-cash
unrealized
losses
(gains) on
the mark-to
market on
outstanding
forward
foreign
currency
contracts,
which do not
qualify for
hedge
accounting.
(10) To reflect the
gain realized
on the sale
of the Blood
Screening
business to
Grifols.
(11) To reflect the
fair value
step up of
inventory
sold during
the period
related to
acquisitions.
(12) To reflect a
non-income
tax benefit
in the third
quarter of
fiscal 2017
of $12.4
million, net
from refunds
received from
amending the
Company's
Medical
Device Excise
tax filings,
and charges
recorded in
fiscal 2017
of $35.6
million as
the Company
determined
during the
period that a
loss became
probable
associated
with a non-
income tax
issue
currently
under audit.
(13) To reflect an
estimated
annual
effective tax
rate of
30.50% and
31.75% for
fiscal 2017
and 2016,
respectively,
applied to
Non-GAAP
pretax
income. The
calculation
of this rate
excludes
certain items
that impact
the GAAP
provision for
income taxes
consistent
with the
Company's
exclusion of
items from
pre-tax Non-
GAAP income.
(14) Non-GAAP
earnings per
share was
calculated
based on
284,741 and
285,653
weighted
average
diluted
shares
outstanding
for the three
and twelve
months ended
September 30,
2017 and
282,494 and
286,156 for
the three and
twelve months
ended
September 24,
2016.
(15) Reversal of
interest
accrued
related to
Cynosure
shareholders
who dissented
and
ultimately
tendered
their shares.
Reconciliation of GAAP to non-GAAP EPS Guidance:
Guidance Range Guidance Range
-------------- --------------
Quarter Ending Year Ending
September 29,
2018
December 30,
2017
-------------
Low High Low High
--- ---- --- ----
GAAP Net Income
Per Share $0.25 $0.27 $1.22 $1.27
--------------- ----- ----- ----- -----
Amortization of
Intangible
Assets $0.33 $0.33 $1.33 $1.33
--------------- ----- ----- ----- -----
Amortization of
Debt Discount $0.01 $0.01 $0.01 $0.01
--------------- ----- ----- ----- -----
Accelerated
depreciation and
Other Charges $0.01 $0.01 $0.04 $0.04
----------------- ----- ----- ----- -----
Tax Impact of
Exclusions ($0.12) ($0.12) ($0.50) ($0.50)
------------- ------ ------ ------ ------
Non-GAAP Net
Income Per Share $0.48 $0.50 $2.10 $2.15
----------------- ----- ----- ----- -----
Reconciliations of Reported to Constant Currency Revenue:
Constant
Reported Foreign Currency
Effect Currency
$s in millions Q4'17 Q4'16 Change $ % Change
-------------- ----- ----- ------ --- --- ------
Cytology & Perinatal $120.2 $121.0 (0.7%) $(0.9) (0.7%) (1.4%)
Molecular Diagnostics $153.5 $134.3 14.3% $(0.7) (0.5%) 13.8%
Blood Screening $18.0 $56.6 (68.2%) - - (68.2%)
Total Diagnostics $291.7 $311.9 (6.5%) $(1.6) (0.5%) (7.0%)
----------------- ------ ------ ----- ----- ----- -----
Total Diagnostics ex. Blood $273.7 $255.3 7.2% $(1.6) (0.6%) 6.6%
--------------------------- ------ ------ --- ----- ----- ---
Breast Imaging $255.5 $248.8 2.7% $(1.4) (0.5%) 2.2%
Interventional Breast Solutions $42.3 $40.9 3.6% $(0.2) (0.5%) 3.1%
Other $3.1 $2.6 15.3% $(0.2) (6.0%) 9.3%
----- ---- ---- ---- ----- ----- ---
Total Breast Health $300.9 $292.3 2.9% $(1.7) (0.5%) 2.4%
------------------- ------ ------ --- ----- ----- ---
Body $22.2 - - - - -
Skin $32.6 - - - - -
Women's Health/Other $26.6 - - - - -
------------------------- ----- --- --- --- --- ---
Total Medical Aesthetics $81.4 - - - - -
------------------------ ----- --- --- --- --- ---
GYN Surgical $104.7 $101.5 3.2% $(0.4) (0.5%) 2.7%
------------ ------ ------ --- ----- ----- ---
Skeletal Health $24.2 $21.2 14.2% $(0.3) (1.3%) 12.9%
--------------- ----- ----- ---- ----- ----- ----
Total $802.9 $726.8 10.5% $(4.3) (0.6%) 9.9%
----- ------ ------ ---- ----- ----- ---
International
International Change
Change Foreign Currency
Effect (Constant
U.S. Change (Reported) $ % Currency)
----------- --------- --- --- --------
Increase (Decrease)
------------------
Diagnostics (2.1%) (19.2%) $(1.6) (2.1%) (21.3%)
----------- ----- ------ ----- ----- ------
Diagnostics ex. Blood 3.9% 19.5% $(1.6) (3.0%) 16.5%
--------------------- --- ---- ----- ----- ----
Breast Health (1.2%) 24.1% $(1.7) (3.5%) 20.6%
------------- ----- ---- ----- ----- ----
Medical Aesthetics - - - - -
------------------ --- --- --- --- ---
GYN Surgical 1.9% 11.1% $(0.4) (3.2%) 7.9%
------------ --- ---- ----- ----- ---
Skeletal Health 7.5% 26.2% $(0.3) (3.6%) 22.6%
--------------- --- ---- ----- ----- ----
Total Revenues 6.1% 27.5% $(4.3) (2.8%) 24.7%
-------------- --- ---- ----- ----- ----
Total Revenues ex. Blood and Medical Aesthetics 1.4% 20.8% $(4.0) (3.3%) 17.5%
----------------------------------------------- --- ---- ----- ----- ----
Trailing Twelve Months
ended
September 30, 2017
------------------
Return on Invested Capital:
Adjusted Net Operating Profit After Tax
Non-GAAP net income $578.9
Non-GAAP provision for income taxes 254.1
Non-GAAP interest expense 135.3
Non-GAAP other income (13.5)
-----
Adjusted net operating profit before tax $954.8
Non-GAAP average effective tax rate (1) 30.50%
-----
Adjusted net operating profit after tax $663.6
======
Average Net Debt plus Average Stockholders' Equity (2)
Average total debt $3,334.1
Less: Average cash, cash equivalents and restricted cash (544.5)
------
Average net debt $2,789.6
Average stockholders' equity (3) $2,495.9
--------
Average net debt plus average stockholders' equity $5,285.5
========
Adjusted ROIC
Adjusted ROIC (adjusted net operating profit after tax 12.6%
above divided by average net debt plus stockholders' equity above)
(1) ROIC is presented on a TTM basis; non-GAAP effective tax rate for the year ended September 30, 2017 was 30.50%.
(2) Calculated using the average of the balances as of September 30, 2017 and September 24, 2016.
(3) Adjusted (increased) to eliminate the effect of the impairment of intangible assets of $32.2 million in fiscal 2014.
As of
September 30, 2017
------------------
Leverage Ratio:
Total principal debt $3,355.1
Total cash (540.6)
------
Net principal debt, as adjusted $2,814.5
EBITDA for the last four quarters $1,048.5
--------
Leverage Ratio 2.7
===
Other Supplemental Information:
Three Months Ended Twelve Months Ended
September 30, September 24, September 30, September 24,
2017 2016 2017 2016
Geographic Revenues
U.S. 76.4% 79.5% 77.6% 78.9%
Europe 10.3% 9.8% 10.0% 10.2%
Asia-Pacific 8.6% 7.8% 8.1% 7.6%
Rest of World 4.7% 2.9% 4.3% 3.3%
Total Revenues 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Revenue Composition
Q4'17
-----
Disposables 52.4%
Capital Equipment 29.3%
Service & Other 18.3%
Total Revenues 100.0%
=====
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SOURCE Hologic, Inc.
