KNOXVILLE, Tenn., Nov. 16 /PRNewswire-FirstCall/ -- CTI Molecular Imaging, Inc. , a leading provider of positron emission tomography (PET) equipment, molecular biomarkers and related services, today announced financial results for its fourth quarter ended September 30, 2004.
Net revenues for the fourth quarter were $129.6 million, a 7.5% increase from net revenues of $120.6 million for the same period last year. Net income was $9.4 million, or $0.20 per share on a fully-diluted basis, compared to $5.2 million, or $0.11 per share, in the prior fiscal year's fourth quarter. For the full year, net revenues were $401.7 million, a 10.9% increase from net revenues of $362.3 million in 2003. Net income for 2004 was $18.6 million, or $0.40 per share on a fully-diluted basis, versus $20.6 million, or $0.44 per share, in 2003.
"Fiscal 2004 concluded with improved performance across our business units. Our revenue and earnings per share results for the fourth quarter were well ahead of our plan and guidance. This growth was accomplished while maintaining a disciplined cost structure, with gross margins of 39% and operating margins of over 20%," said Ronald Nutt, Ph.D., President and Chief Executive Officer.
During the fourth quarter, on a consolidated basis CTI Molecular Imaging sold 48 scanners. "The level of demand in the North American market for PET and PET/CT equipment has shown some improvement, while the international market continues to experience solid growth. We enter fiscal 2005 with good visibility on the pipeline of transactions for the year. The sales force realignment with Siemens has contributed to our improved outlook, as our closer cooperation has yielded better market intelligence, new incremental scanner sales opportunities, greater cross-sales potential and a more efficient cost structure. We anticipate that this new sales structure will build momentum as the year progresses," continued Dr. Nutt.
The CTI Solutions segment experienced significantly improved financial performance and achieved positive income from operations for the first time in two years. Contributing to this improvement were strong sales of FDG during the quarter. For the fourth quarter, sales of FDG doses increased 45% over the prior year's quarter and 7% sequentially, partially offset by a 3% sequential decline in average price. "The benefits of the sales agency agreement with Siemens were evident in our financial results, as the direct distribution efforts were no longer a drag on the profitability of CTI Solutions," added Dr. Nutt.
The financial results of the company for the fourth quarter were adversely impacted by an arbitration settlement of a dispute with a former supplier. The arbitrator ruled in favor of the former supplier, and as a result, CTI took a one-time, pretax charge of $4.2 million in its Detector Materials business unit during the fourth quarter for settlement payments owed to the former supplier.
On November 3, 2004 the Centers for Medicare and Medicaid Services (CMS) announced the final 2005 Medicare ambulatory payment classification (APC) rates for PET procedures. CMS has adjusted the combined payments for the use of a PET scanner and the administration of FDG to $1,371.11 for 2005, from the level of $1,774.48 in 2004. "We believe that the reduction of reimbursement levels for PET is consistent with the above-mentioned continued growth in PET utilization and expect that it will not have a significant adverse effect on the level of demand for scanners in the U.S. in 2005. These rates directly apply only to the hospital-based imaging center market which represents about 10% to 15% of the PET market in the U.S. In finalizing our budget, we believe that we have taken these reimbursement changes into account in setting our expectations for domestic scanner demand in 2005," continued Dr. Nutt.
Three Months Ended Twelve Months Ended
September 30, September 30,
(in thousands) 2004 2003 2004 2003
CPS $79,627 $96,910 $266,864 $247,739
Detector Materials 4,468 12,874 47,095 55,164
CTI Solutions 63,224 66,197 196,234 192,819
Total $147,319 $175,981 $510,193 $495,722
CPS $(12,764) $(41,712) $(57,258) $(75,726)
Detector Materials (4,216) (12,487) (46,436) (52,312)
CTI Solutions (765) (1,221) (4,751) (5,395)
Total $(17,745) $(55,420) $(108,445) $(133,433)
CPS $66,863 $55,198 $209,606 $172,013
Detector Materials 252 387 659 2,852
CTI Solutions 62,459 64,976 191,483 187,424
Total $129,574 $120,561 $401,748 $362,289
Income (loss) from operations:
CPS $23,124 $18,715 $50,623 $47,984
Detector Materials (2,376) 8,574 19,774 25,889
CTI Solutions 973 (3,773) (11,344) (9,676)
Corporate 4,963 (5,080) (1,049) (6,476)
Total $26,684 $18,436 $58,004 $57,721
Shipments and Backlog:
The company sold 48 scanners during the fourth quarter and 152 scanners for the fiscal year. Backlog on a consolidated basis at September 30, 2004 was $139 million, which includes orders for PET/CT scanners, cyclotrons and service and maintenance contracts, and excludes orders placed for FDG doses.
"With the encouraging results from the fourth quarter and the improved visibility for scanner demand, we are optimistic about our scanner sales forecast for fiscal 2005. We now expect scanner sales of approximately 175 units, reflecting a stable U.S. market and escalating growth in international shipments. Net revenues for the year are anticipated to be in the range of approximately $420 million to $430 million and earnings per share should be approximately $0.50 to $0.52. For the first quarter of 2005, which traditionally is our slowest volume quarter, we expect revenue of approximately $90 million and earnings per share in the range of $0.03 to $0.05," said Dr. Nutt.
Conference Call Information:
The dial-in number for today's earnings call at 9:00 a.m. EST is (706) 643-3432. A replay of the call will be available for one week until November 23, 2004. To hear this replay, please dial (800) 642-1687 and enter the reservation number 1430567. A simultaneous webcast of the call will be accessible via the internet at http://www.ctimi.com/ under the Investor Relations section. A replay of the webcast will also be archived on this site.
About CTI Molecular Imaging:
CTI Molecular Imaging, Inc. is a leading supplier of products and services for positron emission tomography (PET), a diagnostic imaging technology used in the detection and treatment of cancer, neurological disorders and cardiac disease. Additional information is available at: http://www.ctimi.com/ .
About PET and PET/CT:
PET images the biology of diseases at the molecular level, often before anatomic changes are visible or, in some cases, before symptoms appear. Diseases are biological processes and it is these processes that PET examines. PET/CT is an imaging technology that combines the biological examination of patients by PET with the CT images of the body's structural detail. PET/CT technology improves the diagnostic accuracy and treatment management of patients by providing surgeons, radiation oncologists and other physicians with precise anatomical landmarks associated with the disease condition as determined by PET.
PET's whole-body imaging capability helps physicians improve their ability to detect and determine the location, extent and stage of cancer, neurological disorders and cardiac disease. By improving diagnosis, PET scans aid physicians in selecting better courses of treatment, as well as assessing whether treatment is effective or should be changed. Recent published clinical trials have shown that in a wide array of cancers, the use of PET has caused the treatment to be changed for 15 to 50% of patients, depending on the specific clinical question. In addition, PET and PET/CT provide both the patient and their physician with a degree of certainty that is often unavailable through other imaging methods.
Certain matters discussed in this press release and the related conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which may be identified by words such as "believe," "expect," "anticipate," "intend," "estimate" or similar expressions, include statements regarding CTI's financial outlook for 2005, the anticipated financial and operational improvements resulting from the new agency agreement with Siemens, future demand for scanners, the impact of reduced reimbursement levels for PET, future pricing trends and any other statements that necessarily depend on future events. Forward-looking statements involve a number of risks and uncertainties and there can be no assurance that any forward-looking statements will prove to be accurate. Important factors that could cause actual results to differ materially from those anticipated in the forward- looking statements include: competition; uncertainties and potential difficulties regarding the implementation of the new agency agreement with Siemens; the seasonality of capital equipment sales; the availability and amount of third-party payor reimbursement for PET procedures; Siemens' option to purchase a majority interest in CPS, CTI's subsidiary that develops and manufactures PET scanners; market adoption of and demand for PET products in general and CTI's products and services in particular; the timing of orders from distribution partners and customers; legislative and regulatory developments; the timing of research and development and marketing expenses; relationships with suppliers and distributors; pricing; customer demand for financing services; and general economic conditions, such as interest rates. CTI undertakes no obligation to update or revise any forward-looking statements. Further information regarding risks, uncertainties and other factors that could adversely affect CTI or cause actual results to differ materially from those anticipated in forward-looking statements are included in CTI's Annual Report on Form 10-K for the fiscal year ended September 30, 2003 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.
CTI Molecular Imaging, Inc
Consolidated Balance Sheets
September 30, September 30,
(in thousands) 2004 2003
Cash and cash equivalents $36,381 $49,978
Accounts receivable -- trade, net 65,707 72,240
Accounts receivable -- related party, net (1) 34,470 42,430
Inventories 92,219 70,852
Deferred tax asset 13,474 17,751
Prepaid expenses and other current assets 8,345 7,691
Total current assets 250,596 260,942
Property and equipment, net 133,074 107,293
Goodwill 46,629 25,040
Other assets 34,915 31,773
Total assets $465,214 $425,048
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable $33,012 $46,507
Current maturities of long-term
debt and capital lease obligations 4,289 5,501
Accrued liabilities 22,059 25,854
Customer advances 9,801 6,863
Income taxes payable 4,472 3,724
Total current liabilities 73,633 88,449
Other long-term liabilities 4,447 2,332
Deferred tax liability 5,013 8,999
Long-term debt and capital lease obligations 12,856 18,688
Total liabilities 95,949 118,468
Minority interest 62,213 46,727
Shareholders' equity 307,052 259,853
Total liabilities and
shareholders' equity $465,214 $425,048
(1) Represent receivables from Siemens Medical Solutions USA, Inc.
CTI Molecular Imaging, Inc.
Consolidated Statements of Operations
Three Months Ended Twelve Months Ended
September 30, September 30,
2004 2003 2004 2003
(In thousands, except
share and per share data)
Revenues $129,574 $120,561 $401,748 $362,289
Cost of revenues 79,316 75,941 242,804 219,127
Gross margin 50,258 44,620 158,944 143,162
Selling, general and
administrative expenses 15,789 15,812 65,047 52,221
development expenses 7,038 8,481 33,363 29,931
Write-off of in process
research and development - 1,380 - 1,380
expense 747 511 2,530 1,909
Total operating expenses 23,574 26,184 100,940 85,441
Income from operations 26,684 18,436 58,004 57,721
Interest expense, net 136 298 1,375 804
Other income (355) (749) (585) (1,968)
Income before income
taxes and minority interest 26,903 18,887 57,214 58,885
Provision for income taxes 9,994 7,706 21,918 22,935
Income before minority
interest 16,909 11,181 35,296 35,950
Amount applicable to minority
interest, net of taxes 7,517 5,996 16,676 15,387
Net income $9,392 $5,185 $18,620 $20,563
Earnings per share
Basic $0.21 $0.12 $0.42 $0.47
Diluted $0.20 $0.11 $0.40 $0.44
Weighted average shares
Basic 44,925,131 44,232,893 44,673,893 43,351,390
Diluted 47,767,417 46,236,820 46,774,504 46,457,355
CTI Molecular Imaging, Inc.