Hologic, Inc. Announces First Quarter Fiscal 2011 Operating Results

BEDFORD, Mass., Jan. 31, 2011 /PRNewswire/ -- Hologic, Inc. (Hologic or the Company) (Nasdaq: HOLX), a leading developer, manufacturer and supplier of premium diagnostics products, medical imaging systems and surgical products dedicated to serving the healthcare needs of women, today announced its results for the first fiscal quarter ended December 25, 2010.

Highlights of the quarter include:

• Revenues of $432.6 million.
• Net income was $10.9 million, or $0.04 per diluted share, calculated in accordance with U.S. generally accepted accounting principles (GAAP).
• Non-GAAP adjusted net income was $79.9 million, or $0.30 per diluted share, and adjusted EBITDA (non-GAAP adjusted earnings before interest, taxes, depreciation and amortization) was $147.9 million. A reconciliation of GAAP to non-GAAP results is included as an attachment to this press release.
• Receipt of approvable letter in November from the U.S. Food and Drug Administration (FDA) for Dimensions three-dimensional (3-D) digital breast tomosynthesis system.
• Signing of an exclusive partnership agreement in November with SuperSonic Imagine, S.A., an innovative developer and manufacturer of diagnostic ultrasound technology.
• Exchange of $450 million of Convertible Notes for new notes, extending the earliest put date by three years to December 2016.

Highlight subsequent to quarter-end:

• Acquisition of Interlace Medical, Inc. on January 6, 2011, the developer, manufacturer and supplier of the MyoSure hysteroscopic uterine fibroid tissue removal system.

First quarter fiscal 2011 revenues totaled $432.6 million, an increase of 4.9% compared to revenues of $412.4 million in the first quarter of fiscal 2010. The increase was primarily attributable to: (i) growth in Breast Health revenues of $16.3 million, or 9.1%, driven by an increase in service revenue primarily related to our increased installed base of digital mammography systems of $12.7 million, or 24.2%; (ii) an increase in GYN Surgical revenues of $4.2 million, or 5.9%; and (iii) an increase in Skeletal Health revenues of $0.9 million, or 4.3%. Slightly offsetting these increases was a decrease in Diagnostics revenues of $1.3 million, or 0.9%, due to a decline in ThinPrep revenues that was partially offset by an increase in revenues from our Molecular Diagnostics product lines.

For the first quarter of fiscal 2011, Hologic reported net income of $10.9 million, or $0.04 per diluted share, compared with net income of $26.1 million, or $0.10 per diluted share, in the first quarter of fiscal 2010. The Company’s non-GAAP adjusted net income increased 7.1% to $79.9 million in the first quarter of fiscal 2011 compared to $74.6 million for the same period in the prior year. The Company’s fiscal 2011 and 2010 first quarter non-GAAP adjusted net income primarily excludes: (i) a charge of $56.6 million and $57.1 million, respectively, attributable to the amortization of intangible assets; and (ii) a non-cash interest expense charge of $18.5 million and $17.8 million, respectively, related to the Company’s Convertible Notes. The Company’s fiscal 2011 first quarter non-GAAP adjusted net income also primarily excludes: (i) a $29.9 million non-cash loss on exchange of Convertible Notes; and (ii) $3.1 million of acquisition-related costs and charges.

Non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted share (non-GAAP adjusted 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 periods presented, 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 the comparable financial measures prepared in accordance with GAAP.

As of December 25, 2010, total backlog for all products was $275.5 million.

“We are off to a great start to fiscal 2011, reporting both revenues and operating performance that exceeded our guidance,” said Rob Cascella, President and Chief Executive Officer. “We continue to make progress in executing our key strategic initiatives. This quarter we maintained a positive growth trend for our Adiana and Cervista HPV product lines, realized share gains in our breast biopsy business, saw stabilizing ThinPrep volume and experienced attractive uptake in our 2-D and 3-D Dimensions digital mammography systems. Importantly, we also closed on our Interlace acquisition, which adds a complementary new product to our GYN Surgical portfolio.”

First quarter fiscal 2011 revenue overview by segment:

• Breast Health revenues, which include the Company’s mammography, Computer-Aided Detection (CAD), breast biopsy, Magnetic Resonance Imaging (MRI) breast coil, MammoSite and AEG products, increased to $195.4 million for the first quarter compared to $179.1 million for the same period in fiscal 2010, an increase of 9.1%, primarily due to the increases in revenues from: (i) our 2-D/3-D Dimensions product; (ii) service related to our increased installed base of digital mammography systems; (iii) the inclusion of Sentinelle, which we acquired in August 2010; and (iv) our Eviva breast biopsy product. These increases in units and revenues were partially offset by a reduction in the number of Selenia systems sold.

• Diagnostics revenues, which include the Company’s ThinPrep products, Rapid Fetal Fibronectin test, Cervista HPV tests, and other Molecular Diagnostics products, totaled $139.1 million for the first quarter compared to $140.4 million for the same quarter of fiscal 2010, a slight decrease of 0.9%. While we experienced a solid increase in revenues from our Cervista HPV tests and, to a lesser extent, the Company’s other Molecular Diagnostics product lines, these increases were offset primarily by a reduction in ThinPrep volume and, to a lesser extent, an unfavorable foreign currency impact. The lower ThinPrep volume when compared to the first quarter of prior year primarily reflected the continued decline in year-over-year patient visits. However, we have seen stabilizing in such patient volumes from last quarter.

• GYN Surgical revenues, which include the Company’s NovaSure endometrial ablation system (NovaSure) and Adiana permanent contraception system (Adiana), totaled $75.7 million for the first quarter compared to $71.4 million for the first quarter of fiscal 2010, an increase of 5.9%. This increase was primarily due to growth in sales of Adiana devices and, to a lesser extent, an increase in the number of NovaSure devices sold worldwide.

• Skeletal Health revenues, which include the Company’s osteoporosis assessment and mini C-arm product lines, totaled $22.4 million for the first quarter compared to $21.5 million for the first quarter of fiscal 2010, an increase of 4.3%. This increase was primarily the result of an increase in bone densitometry unit sales.

Exchange of Convertible Senior Notes:

On November 18, 2010, the Company entered into separate, privately-negotiated exchange agreements under which it retired $450 million in aggregate principal of the Company’s outstanding 2.00% Convertible Senior Notes due 2037 (“Original Notes”) and in exchange, issued $450 million in aggregate principal of new 2.00% Convertible Exchange Senior Notes due 2037 (“Exchange Notes”). In doing so, the first date on which holders of the Exchange Notes may require the Company to purchase the notes outstanding was extended three years to December 2016 in order to provide us with additional flexibility relative to our future liquidity needs. In return, the holders of the Exchange Notes received a lower conversion price. Following these transactions, approximately $1.275 billion in principal amount of the Original Notes remain outstanding, with an aggregate principal balance of total Notes outstanding remaining at $1.725 billion.

FDA Approvable Letter Received for Dimensions 3-D Digital Mammography System:

On November 22, 2010, the Company received an approvable letter from the FDA for the Dimensions 3-D tomosynthesis system. Final approval of the Company’s pre-market approval (PMA) application for the system remains subject to the FDA’s final review procedures. The Company is working closely with the FDA to assist with this process.

Exclusive U.S. Breast Ultrasound Partnership Agreement with SuperSonic Imagine, S.A. (Supersonic):

On November 23, 2010, the Company announced the signing of an exclusive partnership agreement with SuperSonic, a developer and manufacturer of diagnostic ultrasound technology. Under the terms of the agreement, the Company is selling, installing and servicing SuperSonic’s Aixplorer ultrasound technology platform to the breast care community in the United States. This partnership provides the Company with another leading-edge technology to offer to clinicians to help detect breast cancer in its early stages.

Acquisition of Interlace Medical, Inc.:

On January 6, 2011, the Company acquired Interlace Medical, Inc. (Interlace), the developer, manufacturer and supplier of the MyoSure hysteroscopic tissue removal system. Interlace, headquartered in Framingham, Massachusetts, is dedicated to developing innovative technologies to treat common gynecological diseases for improved patient outcomes while simplifying physician adoption and reducing the cost of healthcare. The purchase price for the transaction was $128.9 million in cash, plus two annual contingent payments. The contingent payments will be payable in cash and each will be calculated as a multiple of the incremental revenue growth over the prior year.

Financial Guidance:

The Company’s guidance for fiscal 2011 reflects its current core products, including revenues from its recently-completed acquisition of Interlace, but does not reflect any future revenue or earnings from any anticipated acquisition or any product currently before the FDA awaiting approval or clearance.

Second Quarter Fiscal 2011 (Quarter ending March 26, 2011):

• The Company expects second quarter fiscal 2011 revenues to be comparable with the first quarter of fiscal 2011. This reflects an increase in revenues in the Breast Health segment, partially offset by an anticipated decrease in the GYN Surgical segment primarily due to a historically slower quarter for the NovaSure product. Year-over-year, this represents an expected increase in revenues of 3% over the second quarter of fiscal 2010 revenues of $418.1 million.

• The Company expects non-GAAP adjusted EPS to be approximately $0.28.

Fiscal 2011 (Year ending September 24, 2011):

• The Company is reaffirming guidance for fiscal 2011 revenues of $1.73 billion to $1.76 billion, reflecting the current level of capital equipment market stabilization, continued growth in service revenue, the contributions from Sentinelle and Interlace, and the outlook for increased GYN Surgical revenues.

• The Company expects non-GAAP adjusted EPS to be approximately $1.22 to $1.24.

Estimates of certain non-GAAP adjustments that the Company anticipates will be reflected in its non-GAAP fiscal 2011 second quarter and fiscal 2011 year financial performance are included as an attachment to this press release.

Hologic may not generate expected revenues and may incur expenses or charges or realize income or gains in fiscal 2011 that could cause actual results to vary from the guidance above. In addition, the Company is continuing to monitor the effects of the U.S. and general worldwide economic and regulatory conditions and related uncertainties, including the recently enacted and ongoing implementation of healthcare reform legislation and associated tax provisions, as well as foreign currency fluctuations, which, along with other uncertainties facing our business, could adversely affect anticipated results.

Conference Call and Webcast:

Hologic’s management will host a conference call on Monday, January 31, 2011, at 5:00 p.m. (Eastern) to discuss first quarter fiscal 2011 operating results. Interested participants may listen to the call by dialing 877-874-1567 or 719-325-4893 for international callers and referencing code 2737906 approximately 15 minutes prior to the call on January 31. For those unable to participate in the live broadcast, a replay will be available one hour after the call ends through Friday, February 18, 2011, at 888-203-1112 or 719-457-0820 for international callers, access code 2737906. The Company will also provide a live webcast and replay of the call on the investor relations page of the Company’s website at www.hologic.com/investor-overview. A PowerPoint presentation related to the conference call will be posted after the close of the market on Monday, January 31, 2011 on the investor relations page of the Company’s website.

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, breast Magnetic Resonance Imaging, radiation treatment for early-stage breast cancer, cervical cancer screening, treatment for menorrhagia and uterine fibroids, permanent contraception, 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, Cervista, Dimensions, Interlace, MammoSite, MyoSure, NovaSure, Rapid fFN, Selenia, Sentinelle, and 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 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: economic and market trends; the Company’s backlog and any implication that the Company’s backlog may be indicative of future sales; the Company’s anticipated opportunities from its recent acquisitions of Sentinelle and Interlace; any statements regarding the FDA’s approval process of the Dimensions three-dimensional digital breast tomosynthesis system; the Company’s strategic initiatives and the anticipated benefits of those initiatives; any financial or other information included herein based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; 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 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.

The FDA review of the Company’s Dimensions three-dimensional digital breast tomosynthesis system can be modified at any time. The Company is unable to predict the outcome of the FDA review, and there can be no assurance that the FDA will approve the Company’s system for either screening or diagnostics or will do so on a timely basis, if at all. In addition, even if approved, the FDA could impose conditions to such approval that would significantly limit the use or commercialization of the system.

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: U.S. 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 regarding the availability or amount of reimbursement for new products or product enhancements; uncertainties regarding the recently enacted healthcare reform legislation and associated tax provisions; changes in guidelines, recommendations and studies published by various organizations that could affect the use of the Company’s products; 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 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 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; 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 under the Company’s financing arrangements and leases; and the Company’s ability to attract and retain qualified personnel.

The risks and uncertainties 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.