Revenues and Performance In-Line with Guidance
BEDFORD, Mass., May 4 /PRNewswire-FirstCall/ -- Hologic, Inc. (Hologic or the Company) , a leading developer, manufacturer and supplier of premium diagnostics, medical imaging systems and surgical products dedicated to serving the healthcare needs of women, today announced its results for the quarter ended March 28, 2009.
Highlights of the quarter include:
Second quarter fiscal 2009 revenues totaled $402.0 million, a 6.7% decrease when compared to revenues of $431.0 million in the second quarter of fiscal 2008. The decrease was primarily attributable to the year-over-year decline in sales of Selenia systems. We believe this decline was primarily attributable to the current economic environment which has resulted in delays and reductions in hospital capital spending and longer sales cycles. The decline in Selenia sales was partially offset by: (i) growth in Diagnostics and Surgical product sales of $11.9 million as compared to the second quarter of fiscal 2008; (ii) an $8.7 million, or 21%, increase in service and other revenues primarily related to our Selenia full field digital mammography units sold; and (iii) revenues of $8.9 million from our acquisition of Third Wave in July 2008.
For the second quarter of fiscal 2009, Hologic reported a net loss of $2.3 billion, or $8.97 per diluted share, compared with net income of $56.0 million, or $0.22 per diluted share, in the second quarter of fiscal 2008. Included in second quarter fiscal 2009 results were charges of $2.34 billion for the impairment of goodwill relating to reporting units acquired from Cytyc, $4.1 million attributable to the write-off of certain intangible assets acquired from Third Wave, and $44.7 million attributable to the amortization of intangibles relating to the Cytyc merger and the Third Wave acquisition. Also included were a full quarter of operating expenses of $11.4 million from Third Wave, including $0.3 million relating to the write-up of inventory acquired in the Third Wave acquisition. Included in the second quarter of fiscal 2008 results were charges relating to the Cytyc merger of $25.1 million attributable to the amortization of intangibles and $0.8 million attributable to the increase in cost of revenues relating to the write-up of acquired inventory to fair market value. There were no expenses attributable to Third Wave in the second quarter of fiscal 2008.
Based on a combination of factors, including the deterioration in the macro-economic environment, declines in the stock market and the decline in the price of the Company's common stock, the Company has experienced a significant decline in its market capitalization. As a result, the Company completed a goodwill impairment analysis using the two-step approach as required under Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" in the second quarter of fiscal 2009 and determined that a portion of its goodwill was impaired. As a result, in the second quarter of fiscal 2009, the Company recorded a non-cash charge of $2.34 billion within operating (loss) income in the Company's Condensed Consolidated Statements of Operations. In addition, the Company also recorded a charge of $4.1 million for the write-off of certain intangibles and recorded such charge within cost of revenues in the Company's Condensed Consolidated Statements of Operations. These non-cash charges do not impact the non-GAAP financial information presented in this release. A further discussion of our non-GAAP fiscal 2009 results and guidance is included in the attachment to this press release.
The Company's non-GAAP adjusted net income for the second quarter of fiscal 2009 decreased 2.7% to $74.1 million compared to $76.2 million in the second quarter of fiscal 2008. The Company's fiscal 2009 second quarter non-GAAP adjusted net income primarily excludes the $2.34 billion goodwill impairment charges and $4.1 million write-off of intangible assets discussed above, $50.2 million of amortization of the intangible assets acquired from Third Wave, Cytyc, AEG, BioLucent, Fischer, R2 and Suros, and $0.3 million attributable to the increase in cost of revenues relating to the write-up of Third Wave inventory to fair value. The Company's fiscal 2008 second quarter non-GAAP adjusted net income primarily excludes $30.8 million of amortization of the intangible assets acquired from Cytyc, AEG, BioLucent, Fischer, R2 and Suros and the $0.8 million increase in cost of revenues relating to the write-up of acquired inventory to fair market value.
Non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted share (EPS), and adjusted EBITDA are non-GAAP financial measures. The Company's definitions of these non-GAAP financial measures, and the reconciliations of these measures to the Company's comparable GAAP financial measures for the second quarter of fiscal years 2009 and 2008, are set forth in the supplemental information attached to this press release. When analyzing the Company's operating performance, investors should not consider these non-GAAP measures as a substitute for net (loss) income and (loss) earnings per share prepared in accordance with GAAP.
For the six months ended March 28, 2009, revenues totaled $831.2 million, a 3.6% increase when compared to revenues of $802.5 million in the six months ended March 29, 2008. The increase was primarily attributable to the inclusion of two full quarters (26 weeks) of revenues from the Diagnostics, GYN Surgical and MammoSite product lines acquired in the merger with Cytyc on October 22, 2007 compared to 23 weeks in the first two quarters of fiscal 2008. Also contributing to the increase in revenues was a $21.2 million, or 27.1%, increase in service and other revenues primarily related to our Selenia full field digital mammography units sold, as well as revenues of $17.4 million from our acquisition of Third Wave in July 2008. Partially offsetting these increases was the year-over-year decline in sales of Selenia systems sold, reflecting the more difficult economic and capital spending environment.
For the six months ended March 28, 2009, Hologic reported a net loss of $2.25 billion, or $8.79 per diluted share, compared with a net loss of $302.6 million, or $1.28 per diluted share, for the comparable six-month period in fiscal 2008. Included in the first six months of fiscal 2009 results were charges of $2.34 billion for the impairment of goodwill relating to reporting units acquired from Cytyc, $4.1 million attributable to the write-off of certain intangible assets, $89.2 million attributable to the amortization of intangibles relating to the Cytyc merger and the Third Wave acquisition, and $0.8 million attributable to the increase in cost of revenues relating to the write-up of Third Wave inventory to fair value. Also included were two full quarters of operating expenses of $22.8 million from Third Wave. Included in the first six months of fiscal 2008 results were charges relating to the Cytyc merger of $370.0 million attributable to acquired in-process research and development costs, $42.3 million attributable to the increase in cost of revenues relating to the write-up of acquired inventory to fair market value, and $45.5 million attributable to the amortization of intangibles. There were no Third Wave expenses in the comparable six-month period in fiscal 2008.
As of March 28, 2009, total backlog for all products was $339 million.
"This year continues to be challenging given the current conditions of the economic environment and as a result, many drivers of our business continue to remain uncertain," said Jack Cumming, Chairman and Chief Executive Officer. "The decline in demand for capital equipment has impacted sales of our Selenia digital mammography systems among our hospital customers, but were in-line with our expectations. We are pleased with the performance of our Diagnostics and GYN Surgical product lines and we are extremely excited to have received FDA approval of not only our Cervista HPV HR test, but also our Cervista HPV 16/18 test. These state-of-the art diagnostic tests should help solidify our leadership in cervical cancer screening. In addition, we remain focused on developing new products to complement our current lines and fortify our long-term growth objectives. Finally, our cash flows from operations and balance sheet remain strong."
Second quarter revenue overview by segment:
FDA Approval of our Two Human Papillomavirus (HPV) Products:
On March 13, 2009, we announced the FDA approved the Company's PMA applications for both the Cervista HPV HR and the Cervista HPV 16/18 tests. Cervista HPV HR, designed to detect the 14 high-risk types of HPV known to cause cervical cancer, is the first HPV DNA test approved by the FDA in more than 10 years. Cervista HPV 16/18 is the first HPV test approved for genotyping for HPV types 16 and 18, known to be associated with approximately 70% of all cervical cancers in the United States. The Cervista HPV HR and Cervista HPV 16/18 tests are based on Invader chemistry, a patented technology owned by Hologic through its acquisition of ThirdWave in July 2008 and well established in other areas of molecular testing. Both tests are approved for use utilizing the sample collected with the ThinPrep Pap Test, offering additional convenience for the healthcare provider. We have since commenced marketing the HPV HR test in the U.S. and plan to begin commercialization of the HPV 16/18 test later this month.
On April 1, 2009, the United States Court of Appeals for the Federal Circuit issued its ruling rejecting Qiagen's (formerly Digene Corporation) appeal and affirming the judgment of the United States District Court for the Western District of Wisconsin that Third Wave's HPV products do not infringe Qiagen's patent. The Court's ruling should end a patent lawsuit filed by Digene in January of 2007 against Third Wave alleging infringement of a Digene patent by Third Wave's HPV ASR product. "We are obviously pleased with this ruling," said Jack Cumming. "Our assessment of the merits of this lawsuit and the underlying technology during due diligence of Third Wave were confirmed by the Court's ruling."
Tomosynthesis Update and Pending PMA Approvals:
We have been in discussions with the FDA for well over a year on our Tomosynthesis PMA filing. Over this period of time we have been confronted by an ever-changing landscape of FDA personnel and regulatory requirements, which have created considerable complexity to the approval process. In addition, during this time we have learned a great deal relative to the clinical significance of Tomosynthesis and how to enhance the positioning of the technology to be more consistent with both clinical and current economic dynamics for an improved approach to market adoption.
We met with the FDA in mid-April and discussed their proposed June 2009 panel date for our PMA application. As a result of these discussions, we believe it appropriate to postpone our panel date until such time as both we and the FDA are better prepared to review this potentially life saving technology. Although this will push out our U.S. launch, we believe there are compelling potential benefits to be achieved:
In summary, we believe it appropriate to have multiple, phased clinical indications for use, which may encourage the clinical adoption process. In doing so, we believe we will enhance our market positioning and prevent the early disclosure of confidential strategies. We believe this process will culminate with a version of the product and indications for use with broad clinical utility. In the meantime, we are continuing to sell our Tomosynthesis systems internationally.
Permanent Sterilization - Adiana Update:
We have one other product, the Adiana transcervical sterilization system, also being reviewed by the FDA. On March 3, 2009, we received an approvable letter from the FDA, which is subject to inspection of our manufacturing facility. Since we do not directly control the timing of approval, we are unable to estimate with any certainty if or when we may begin to market these products in the U.S.
Financial Guidance:
Our guidance for fiscal 2009 reflects our current core products, as well as U.S. sales of both Cervista HPV and Adiana, once it is approved, recognizing we are expecting only minimal sales of these products for the remainder of the fiscal year. In addition, certain of our GAAP guidance for fiscal 2009 has been revised from the guidance we previously issued as a result of the impairment charges we recorded during the second quarter (as discussed above). Our non-GAAP adjusted guidance remains essentially unchanged from the guidance we issued on February 2, 2009:
Fiscal 2009 (ending September 26, 2009):
Third Quarter Fiscal 2009 (Quarter ending June 27, 2009):
We may incur charges or realize gains in fiscal 2009 that could cause actual results to vary from the guidance above. In addition, we are continuing to monitor the effects of the U.S. and general worldwide economic conditions and related uncertainties, which, along with other uncertainties facing our business, could adversely affect our anticipated results.
Conference Call and Webcast:
Hologic's management will host a conference call on Monday, May 4, 2009, at 5:00 p.m. (Eastern) to discuss second quarter fiscal 2009 operating results. Interested participants may listen to the call by dialing 877-852-6575 or 719-325-4832 for international callers, and referencing code 809447 approximately 15 minutes prior to the call. For those unable to participate in the live broadcast, a replay will be available one hour after the call ends through Friday, May 15, 2009, at 888-203-1112 or 719-457-0820 for international callers, access code 8094407. The Company will also provide a live webcast of the call on the investor relations page of the Company's website at www.hologic.com/investor. A replay of the call will also be available on the investor relations page of the Company's website at www.hologic.com/investor shortly after the completion of the live broadcast. A power point presentation related to the conference call will be posted after the close of the market on Monday, May 4, 2009, on the investor relations page of the Company's website at www.hologic.com/investor.
About Hologic, Inc.:
Hologic, Inc. is a leading developer, manufacturer and supplier of premium diagnostics products, medical imaging systems and surgical products dedicated to serving the healthcare needs of women. Hologic's core business units are focused on breast health, diagnostics, GYN surgical, and skeletal health. Hologic provides a comprehensive suite of technologies with products for mammography and breast biopsy, radiation treatment for early-stage breast cancer, cervical cancer screening, treatment for menorrhagia, osteoporosis assessment, preterm birth risk assessment, mini C-arm for extremity imaging and molecular diagnostic products including HPV and reagents for a variety of DNA and RNA analysis applications.
Hologic, Adiana, AEG, BioLucent, Cervista, Cytyc, Dimensions, FullTerm, Invader, MammoSite, MammoPad, NovaSure, R2, Selenia, Suros, ThinPrep and Third Wave 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 Statement Disclaimer:
This News Release contains forward-looking information that involves risks and uncertainties, including statements regarding the Company's plans, objectives, expectations and intentions. Such statements include, without limitation, statements regarding: the expected continued market challenges and the Company's response to those challenges; the Company's backlog and any implication that the Company's backlog may be indicative of future sales; the Company's expectations regarding product development, including the FDA approval process; 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.
The Company's backlog consists of purchase orders for which delivery is scheduled within the next twelve months, as specified by the customer. In certain circumstances, orders included in backlog may be canceled or rescheduled by customers without significant penalty. Therefore, backlog as of any particular date should not be relied upon as indicative of the Company's revenues for any future period.
Other 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 continued U.S. and general worldwide economic conditions and related uncertainties, including the recent global financial turmoil and associated economic downturn; 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; the Company's ability to integrate its acquisitions and business combinations effectively; 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 newly introduced products may contain undetected errors or defects or otherwise not perform as anticipated; manufacturing risks, including the Company's reliance on a single 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 risk of adverse events and product liability claims; risks related to the use and protection of intellectual property; expenses and uncertainties relating to litigation; technical innovations that could render products marketed or under development by the Company obsolete; competition; general future legislative, regulatory, or tax changes; the risks of conducting business internationally, including the effect of exchange rate fluctuations on those operations; financing risks, including the Company's obligation to meet financial covenants and payment obligations under the Company's financing arrangements and leases; and the Company's ability to attract and retain qualified personnel.
The risks included above are not exhaustive. Other factors that could adversely affect the Company's business and prospects are described in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based.
Use of Non-GAAP Financial Measures:
The Company has presented the following non-GAAP financial measures in this press release: adjusted net income; adjusted EPS; and adjusted EBITDA. The Company defines its non-GAAP net income to exclude the non-cash amortization of intangible assets acquired by the Company since 2006 or impairment of goodwill and intangible assets, other acquisition-related charges, such as charges associated with the write-off of acquired in-process research and development and the write-up of acquired inventory to fair market value, and other one-time, nonrecurring, unusual or unanticipated charges, expenses or gains. As set forth in the applicable reconciliation tables above, non-GAAP adjusted net income and non-GAAP adjusted EPS for the periods presented exclude the following items from GAAP net (loss) income and EPS: (i) non-cash expenses associated with the Company's recent acquisitions, including the write-off of goodwill and intangible assets, amortization of intangible assets, stock-based compensation expense associated with the termination of acquired employees, acceleration of the vesting or other modification of the terms of equity awards as a result of an acquisition, and the write-off of acquired research and development; (ii) the increase in cost of revenues resulting from the write-up of acquired inventory sold during the applicable period and (iii) restructuring charges. The Company's non-GAAP adjusted EBITDA excludes from its GAAP net (loss) income (i) the items excluded in its calculation of adjusted net income, (ii) interest expense, net, (iii) provision for income taxes, and (iv) depreciation and amortization expense not otherwise excluded in calculating its adjusted net income.
The Company believes the use of non-GAAP adjusted net income and non-GAAP EPS are useful to investors in comparing the results of operations in fiscal 2009 to the comparable period in fiscal 2008 by eliminating certain of the more significant effects of the acquisitions that took place since fiscal 2006. These measures also reflect how the Company manages the business internally and sets operational goals, and forms the basis of certain of its management incentive programs. In addition to the adjustments set forth in the calculation of its adjusted net income, 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 adjusted net income, these items may vary for different companies for reasons unrelated to the overall operating performance of a company's business. The items excluded in its calculation of its adjusted EBITDA presented herein are also excluded in the calculation of its adjusted EBITDA under its senior secured borrowing arrangements and used by the Company and its lenders in determining its compliance with its financial covenants under those arrangements. When analyzing the Company's operating performance, investors should not consider these non-GAAP financial measures as a substitute for net (loss) income or EPS prepared in accordance with GAAP.
CONTACT: Deborah R. Gordon, Vice President, Investor Relations of Hologic,
Inc., +1-781-999-7716
Web site: http://www.hologic.com/
