ALPHARETTA, Ga., May 2, 2017 /PRNewswire/ -- Halyard Health, Inc. (NYSE: HYH) today reported first quarter 2017 results and maintains its full-year 2017 adjusted diluted earnings per share outlook.
Executive Summary
- First quarter 2017 net sales totaled $396 million, a 3 percent increase from the same period last year.
- Net income for the first quarter 2017 was $13 million compared to net income of $14 million in the first quarter a year ago. First quarter adjusted net income was $23 million compared to adjusted net income of $25 million in the prior year.
- First quarter diluted earnings per share were $0.27 compared to $0.30 diluted earnings per share in the first quarter 2016. Adjusted diluted earnings per share in the quarter were $0.48, compared to adjusted diluted earnings per share of $0.53 in the prior year.
"I'm pleased with our start to the year, as we delivered solid earnings and are on track to achieve our 2017 goals," said Robert Abernathy, Halyard Chairman and CEO. "Our balance sheet remains strong and we are well-positioned to continue executing our transformation into a leading Medical Devices company by generating organic growth and pursuing M&A opportunities."
First Quarter 2017 Operating Results
Net sales increased 3 percent to $396 million, including more than $15 million of Corpak-related sales, compared to the prior year. Including Corpak, volume increased 5 percent, which was partially offset by 3 percent lower selling price.
Operating profit was $26 million in the first quarter of 2017 versus $33 million in 2016. On an adjusted basis, operating profit was $42 million compared to $45 million in the prior year. Lower selling prices in Surgical and Infection Prevention (S&IP), higher selling, general and administrative expense, and higher commodity costs were partially offset by increased volume, favorable currency exchange rates and manufacturing cost savings.
Adjusted results for 2017 exclude $1 million spin-related transition charges, $2 million for acquisition-related charges, $8 million for litigation matters, and $6 million of intangible amortization expense.
Adjusted EBITDA for the first quarter, excluding spin-related transition charges, acquisition-related charges and litigation expenses was $53 million, compared to $55 million a year ago.
First Quarter 2017 Business Segment Results
Medical Devices
Net sales of Medical Devices in the first quarter 2017 totaled $146 million, a 15 percent increase compared to the first quarter 2016. Organic sales volumes increased 4 percent and Corpak-related sales contributed an additional 12 percent of volume growth.
Performance was driven by higher volume across all product categories.
Operating profit for Medical Devices was $38 million in the first quarter 2017, compared to $30 million in the prior year. Performance was driven by higher sales volumes, partially offset by increased selling, general and administrative expense.
Surgical and Infection Prevention
S&IP net sales were $247 million, a 3 percent decrease compared with the first quarter of 2016. Volumes increased 1 percent, driven by continued demand for exam gloves and demand for facial protection, due to the timing of the cold and flu season. Volume growth was offset by 4 percent lower selling price, primarily in exam gloves.
S&IP operating profit for the quarter was $18 million compared to $25 million in the first quarter of 2016. The decrease was due to increased price loss and higher commodity costs, which was partially offset by favorable currency exchange rates and manufacturing cost savings.
Balance Sheet and Cash Flow
Total debt at the end of the first quarter 2017 was $579 million, consisting of a secured term loan and unsecured notes, even with total debt at the end of 2016.
Cash from operations less capital expenditures, or free cash flow, for the first quarter was $27 million compared to $35 million a year ago. Capital spending for the first quarter increased to $10 million compared to $8 million in 2016. The company's cash balance was $143 million at the end of the first quarter 2017, compared to $114 million at the end of 2016.
2017 Outlook and Key Planning Assumptions
The company maintains its full-year 2017 adjusted diluted earnings per share outlook of $1.70 to $2.00. Additionally, the key planning assumptions that it provided on its Year-End 2016 conference call, on February 27, remain unchanged.
Non-GAAP Financial Measures
This press release and the accompanying tables include the following financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and are therefore referred to as non-GAAP financial measures:
- Net sales on a constant currency basis
- Adjusted net income
- Adjusted diluted earnings per share
- Adjusted gross and operating profit
- Adjusted effective tax rate
- Adjusted EBITDA
- Free cash flow
These non-GAAP financial measures exclude the following items, as applicable, for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures:
- Transition costs relating to the separation from Kimberly-Clark, which include costs to establish Halyard Health's capabilities as a stand-alone entity. These costs are related primarily to the transition services the company receives from Kimberly-Clark, as well as the rebranding and other supply chain transition costs, and are expected to continue through 2017.
- Expenses associated with the amortization of intangible assets associated with prior business acquisitions.
- The positive or negative effect of changes in currency exchange rates during the year.
- Expenses associated with certain litigation matters.
- Certain acquisition and integration charges related to the acquisition of CORPAK MedSystems, Inc.
- Prior periods impact of tax regulatory changes.
The company provides these non-GAAP financial measures as supplemental information to our GAAP financial measures. Management and the company's Board of Directors use net sales on a constant currency basis, adjusted net income, adjusted diluted earnings per share, adjusted operating profit, adjusted EBITDA, and free cash flow to (a) evaluate the company's historical and prospective financial performance and its performance relative to its competitors, (b) allocate resources and (c) measure the operational performance of the company's business units and their managers. Management also believes that the use of an adjusted effective tax rate provides improved insight into the tax effects of our ongoing business operations.
Additionally, the Compensation Committee of the company's Board of Directors will use certain of the non-GAAP financial measures when setting and assessing achievement of incentive compensation goals. These goals are based, in part, on the company's net sales on a constant currency basis, adjusted diluted earnings per share and adjusted EBITDA, which will be determined by excluding certain items that are used in calculating these non-GAAP financial measures.
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