HOLOGIC, INC. BEDFORD, Mass., Jan. 28, 2015 /PRNewswire/ -- Hologic, Inc. (NASDAQ: HOLX) announced today the Company's financial results for the first fiscal quarter ended December 27, 2014.
Revenues for the quarter were $652.8 million, an increase of 6.6% compared to the prior year period. On a constant currency basis, revenues increased 7.7%. Revenues grew in all four business segments:
$s in millions Total Change Change
Revenues (As Reported) (Constant Currency)
--- -------- ------------ ------------------
Diagnostics $304.1 6.4% 7.4%
----------- ------ --- ---
Breast
Health $242.0 6.9% 8.2%
------- ------ --- ---
GYN
Surgical $84.4 7.0% 7.9%
--------- ----- --- ---
Skeletal
Health $22.3 4.5% 6.1%
-------- ----- --- ---
Total $652.8 6.6% 7.7%
----- ------ --- ---
GAAP net income was $29.2 million in the quarter, compared to a net loss of ($5.3 million) in the prior year period. Non-GAAP net income of $111.6 million increased by 18.6% and represented 17.1% of revenues, compared to 15.4% of revenues in the prior year period.
GAAP earnings per share (EPS) were $0.10 on a fully diluted basis in the quarter, compared to a net loss per diluted share of ($0.02) in the prior year period. Non-GAAP EPS were $0.39 on a fully diluted basis in the quarter, an increase of 15.4% compared to the prior year period.
"We posted strong organic revenue and earnings growth across the board in the first quarter," said Steve MacMillan, Hologic's President and Chief Executive Officer. "We are pleased with the pace of progress we have made, as we recorded our fourth consecutive quarter of sequential revenue growth, and our best quarterly growth rate in a number of years. While we realize there is still work to do, this quarter's results show that great products, great people, and new leadership are coming together in a powerful way at the Company. As a result, we are raising our financial outlook for the year."
Revenue Detail
In this section, all revenues are on a reported basis for the first quarter of fiscal 2015, and are compared to the prior year period.
Diagnostics revenues of $304.1 million increased 6.4%. This increase was driven by a 26.3% increase in blood screening revenue from our partner Grifols, mainly from new business with the Japanese Red Cross, and by a 5.6% increase in molecular diagnostics revenue, mainly from the Aptima(®) product line. Revenue from cytology and perinatal products declined by 1.2%, a lower rate of decline than in recent quarters.
Breast Health revenues of $242.0 million grew 6.9%. This increase was primarily driven by a 10.9% increase in breast imaging and service revenue, as customers continued to adopt Hologic 3D mammography((TM)), while interventional breast revenue declined 2.3%.
GYN Surgical revenues of $84.4 million grew 7.0%, driven by a 27.4% increase in MyoSure system sales. NovaSure system sales also increased 0.1% in the quarter, an improvement compared to the declines seen in recent quarters.
Skeletal Health revenues of $22.3 million grew 4.5%, primarily driven by increased sales of the Company's new Horizon((TM)) bone densitometry system.
Balance Sheet and Cash Flows
Hologic continues to focus on reducing its debt. Total debt outstanding at quarter-end was $3,954.8 million, a $312.9 million decrease from the end of fiscal 2014 that resulted primarily from a $300 million voluntary pre-payment of the Term Loan B facility in December. The Company ended the first fiscal quarter with cash and equivalents of $549.1 million.
Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) were $233.1 million in the quarter. Operating cash flow was $153.5 million, while free cash flow, defined as operating cash flow less capital expenditures, was $132.4 million.
Updated Financial Guidance
Based on the Company's strong performance in the first quarter of fiscal 2015, Hologic is raising its full year 2015 revenue and non-GAAP EPS guidance, as shown in the table below. The guidance for reported results is based on recent foreign exchange rates. Percentage changes from the prior year exclude one-time benefits associated with the restructuring of the Roka license, which totaled $20.1 million of revenue and $0.05 of EPS in 2014.
Initial Guidance Updated Guidance Change vs. Prior Year Change vs. Prior Year
From 11/5/14 (As Reported) (Constant Currency)
------------ ------------ ------------------
Revenues $2.54 to $2.57 billion $2.57 to $2.60 billion 2.4% to 3.6% 4.4% to 5.6%
-------- ---------------------- ---------------------- ----------- -----------
Non-GAAP
EPS $1.50 to $1.54 $1.54 to $1.57 5.5% to 7.5% 8.9% to 11.0%
-------- -------------- -------------- ----------- ------------
Since the Company provided its initial financial guidance on November 5, 2014, the US dollar has strengthened significantly. If the US dollar were at the same level today as it was in early November, the Company's updated revenue guidance would have been approximately $25 million higher, and its updated EPS guidance would have been approximately $0.02 higher.
For the second quarter of fiscal 2015, the Company now expects:
Guidance Change vs. Prior Year Change vs. Prior Year
Period (As Reported) Period (Constant Currency)
------------------- -------------------------
Revenues $640 to $650 million 2.4% to 4.0% 4.5% to 6.1%
-------- -------------------- ----------- -----------
Non-
GAAP
EPS $0.38 to $0.39 2.7% to 5.4% 5.5% to 8.0%
----- -------------- ----------- -----------
Use of Non-GAAP Financial Measures
The Company has presented the following non-GAAP financial measures in this press release: constant currency revenues; net income; EPS; and adjusted EBITDA. 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. The Company defines its non-GAAP net income and EPS to exclude: (i) the amortization of intangible assets and impairment of goodwill and intangible assets; (ii) acquisition-related charges and effects, such as charges for contingent consideration, transaction costs, integration costs including retention, and credits and/or charges associated with the write-up of acquired inventory and fixed assets to fair value; (iii) non-cash interest expense related to amortization of the debt discount from the equity conversion option of the convertible debt securities; (iv) restructuring and divestiture charges; (v) debt extinguishment losses and related transaction costs; (vi) litigation settlement charges (benefits); (vii) other-than-temporary impairment losses on investments; (viii) other one-time, nonrecurring, unusual or infrequent charges, expenses or gains that may not be indicative of the Company's core business results; and (ix) income taxes related to such adjustments.
The Company believes the use of non-GAAP financial measures is useful to investors by eliminating certain of the more significant effects of its acquisitions and related activities, non-cash charges resulting from the application of GAAP to convertible debt instruments with cash settlement features, charges related to debt extinguishment losses, investment impairments, litigation settlements, and restructuring and divestiture initiatives. These non-GAAP measures also reflect how Hologic manages its businesses internally. In addition to the adjustments set forth in the calculation of the Company's non-GAAP net income and EPS, its adjusted EBITDA eliminates the effects of financing, income taxes and the accounting effects of capital spending. As with the items eliminated in its calculation of non-GAAP net income, these items may vary for different companies for reasons unrelated to the overall operating performance of a company's business. When analyzing the Company's operating performance, investors should not consider these non-GAAP financial measures as a substitute for net income prepared in accordance with GAAP.
Future Non-GAAP Adjustments
Future GAAP EPS may be affected by changes in ongoing assumptions and judgments relating to the Company's acquired businesses, and may also be affected by nonrecurring, 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. It is therefore not practicable to reconcile non-GAAP EPS guidance to the most comparable GAAP measure.
Conference Call and Webcast
Hologic's management will host a conference call at 4:30 p.m. ET today to discuss its first quarter fiscal 2015 operating results. Approximately 10 minutes before the call, dial 877-675-4750 (US and Canada) or 719-325-4801 (international) and enter access code 9937337. A replay will be available starting two hours after the call ends through February 18, 2015, at 888-203-1112 or 719-457-0820 for international callers, access code 9937337. The Company will also provide a live webcast of the call at http://investors.hologic.com/investors-overview. A PowerPoint presentation related to the conference call will be posted to the same site.
About Hologic, Inc.
Hologic, Inc. is a leading developer, manufacturer and supplier of premium diagnostic products, medical imaging systems and surgical products. The Company's core business units focus on diagnostics, breast health, GYN surgical, and skeletal health. With a unified suite of technologies and a robust research and development program, Hologic is dedicated to The Science of Sure. For more information on Hologic, visit www.hologic.com.
Hologic, Aptima, Horizon, MyoSure, NovaSure, The Science of Sure, ThinPrep 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, and the need to comply with especially high standards for the manufacture of many of its products; 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 OPERATIONS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and per share data)
Three Months Ended
December 27, December 28,
2014 2013
------------- -------------
Revenues:
Product $546.6 $512.4
Service and other 106.2 100.1
----- -----
Total revenues 652.8 612.5
Cost of revenues:
Product 186.7 176.9
Amortization of
intangible assets 73.9 76.7
Service and other 53.6 53.3
---- ----
Total cost of
revenues 314.2 306.9
----- -----
Gross profit 338.6 305.6
Operating expenses:
Research and
development 52.0 48.7
Selling and
marketing 86.0 83.3
General and
administrative 61.3 67.8
Amortization of
intangible assets 27.8 26.2
Restructuring and
divestiture charges 8.0 18.3
Total operating
expenses 235.1 244.3
----- -----
Income from
operations 103.5 61.3
Other expense:
Interest expense (52.5) (61.3)
Other (expense)
income, net (0.2) 1.5
Debt extinguishment
loss (6.7) (2.9)
Total other expense (59.4) (62.7)
Income (loss) before
income taxes 44.1 (1.4)
Provision for income
taxes 14.9 3.9
---- ---
Net income (loss) $29.2 $(5.3)
===== =====
Net income (loss) per common
share:
Basic $0.10 $(0.02)
===== ======
Diluted $0.10 $(0.02)
===== ======
Weighted average number of
shares outstanding:
Basic 278,671 272,708
======= =======
Diluted 283,176 272,708
======= =======
HOLOGIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
December 27, September 27,
2014 2014
------------- --------------
ASSETS
Current assets:
Cash and
cash
equivalents $544.0 $736.1
Restricted
cash 5.1 5.5
Accounts
receivable,
net 400.5 396.0
Inventories 310.3 330.6
Deferred
income
taxes 39.0 39.4
Other
current
assets 37.7 58.2
Total
current
assets 1,336.6 1,565.8
Property,
plant and
equipment,
net 458.2 461.9
Goodwill
and
intangible
assets 6,142.0 6,244.4
Other
assets 141.3 142.6
Total
assets $8,078.1 $8,414.7
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current
portion of
long-term
debt $139.4 $114.5
Accounts
payable
and
accrued
liabilities 320.0 354.2
Deferred
revenue 148.4 150.9
----- -----
Total
current
liabilities 607.8 619.6
Long-term
debt, net
of current
portion 3,815.4 4,153.2
Deferred
income
taxes 1,345.7 1,375.4
Other long-
term
liabilities 206.8 203.5
----- -----
Total
liabilities 5,975.7 6,351.7
Total
stockholders'
equity 2,102.4 2,063.0
Total
liabilities
and
stockholders'
equity $8,078.1 $8,414.7
======== ========
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three Months Ended
December 27, December 28,
2014 2013
------------- -------------
OPERATING ACTIVITIES
Net
income
(loss) $29.2 $(5.3)
Adjustments to
reconcile net income
(loss) to net cash
provided by
operating
activities:
Depreciation 20.3 24.9
Amortization 101.7 102.9
Non-cash
interest
expense 16.7 19.7
Stock-
based
compensation
expense 12.1 13.7
Excess
tax
benefit
related
to
equity
awards (3.0) (3.0)
Deferred
income
taxes (30.5) (125.1)
Asset
impairment
charges - 3.1
Debt
extinguishment
loss 6.7 2.9
Loss on
disposal
of
property
and
equipment 1.7 1.4
Other 1.2 (0.9)
Changes in operating
assets and
liabilities:
Accounts
receivable (9.7) 15.6
Inventories 18.7 (14.1)
Prepaid
income
taxes 22.4 44.7
Prepaid
expenses
and
other
assets (3.0) 2.1
Accounts
payable (24.8) 10.4
Accrued
expenses
and
other
liabilities (5.0) 53.7
Deferred
revenue (1.2) 2.6
Net cash
provided
by
operating
activities 153.5 149.3
----- -----
INVESTING ACTIVITIES
Net
proceeds
from
sale of
business - 2.4
Purchase
of
property
and
equipment (10.8) (8.4)
Increase
in
equipment
under
customer
usage
agreements (10.3) (8.0)
Net
(purchases)
sales of
insurance
contracts (6.4) 13.8
Purchases
of mutual
funds - (29.7)
Sales of
mutual
funds 6.4 15.9
Increase
in other
assets (0.9) (0.4)
Net cash
used in
investing
activities (22.0) (14.4)
----- -----
FINANCING ACTIVITIES
Repayment
of long-
term debt (328.8) (521.3)
Net
proceeds plans
from
issuance
of
common
stock
pursuant
to
employee
stock 15.2 12.9
Excess
tax
benefit
related
to
equity
awards 3.0 3.0
Payment
of
minimum
tax
withholdings
on net
share
settlements
of
equity
awards (10.6) (9.1)
Net cash
used in
financing
activities (321.2) (514.5)
Effect of
exchange
rate
changes
on cash
and cash
equivalents (2.4) (0.4)
Net
decrease
in cash
and cash
equivalents (192.1) (380.0)
Cash and
cash
equivalents,
beginning
of
period 736.1 822.5
Cash and
cash
equivalents,
end of
period $544.0 $442.5
====== ======
HOLOGIC, INC.
RECONCILIATION OF GAAP EPS AND NET INCOME (LOSS) TO NON-GAAP EPS, NET INCOME
AND ADJUSTED EBITDA
(Unaudited)
(In millions, except earnings per share)
Three Months Ended
------------------
December 27, December 28,
2014 2013
------------- -------------
Earnings (loss) per share:
GAAP earnings (loss)
per share -Diluted $0.10 $(0.02)
Adjustment to net
earnings (loss) (as
detailed below) 0.29 0.36
---- ----
Non-GAAP earnings per
share - diluted $0.39 (1) $0.34 (1)
===== === ===== ===
Net income (loss):
GAAP net income (loss) $29.2 $(5.3)
Adjustments:
Amortization of
intangible assets 101.7 (2) 102.9 (2)
Non-cash interest
expense relating to
convertible notes 8.8 (3) 11.5 (3)
Restructuring,
divestiture and
acquisition-related
charges 8.2 (4) 23.5 (4)
Fair value adjustments 1.4 (5) 3.1 (5)
Debt extinguishment
loss 6.7 (6) 2.9 (6)
Other charges 0.2 (7) 1.2 (7)
Income tax effect of
reconciling items (44.6) (8) (45.7) (8)
----- --- ----- ---
Non-GAAP net income $111.6 $94.1
====== =====
Adjusted EBITDA:
Non-GAAP net income $111.6 $94.1
Interest expense, net,
not adjusted above 43.2 49.4
Provision for income
taxes 59.5 49.6
Depreciation expense,
not adjusted above 18.8 20.4
---- ----
Adjusted EBITDA $233.1 $213.5
====== ======
Explanatory Notes to Reconciliations:
(1) Non-GAAP earnings per share was
calculated based on 283,176 and
275,471 weighted average diluted
shares outstanding for the three
months ended December 27, 2014 and
December 28, 2013, respectively.
(2) To reflect a non-cash charge
attributable to the amortization
of intangible assets.
(3) 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.
(4) To reflect certain costs associated
with the Company's acquisition(s)
and integration plans, which
primarily include retention costs,
transfer costs, and asset
impairments, as well as
restructuring and divestiture
charges.
(5) 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.
(6) To reflect a non-cash loss for
partial extinguishment related to
voluntary prepayments under the
Credit Agreement.
(7) To reflect the net impact from
miscellaneous transactions during
the period.
(8) To reflect an estimated annual
effective tax rate of 34.75% for
the three months ended December
27, 2014 and an annual effective
tax rate of 34.5% for the three
months ended December 28, 2013 on
a non-GAAP basis.
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SOURCE Hologic, Inc.
