Hologic Announces Financial Results for First Quarter of Fiscal 2018
MARLBOROUGH, Mass., Feb. 8, 2018 /PRNewswire/ -- Hologic, Inc. (Nasdaq: HOLX) announced today the Company's financial results for the fiscal first quarter ended December 30, 2017.
Revenue of $791.1 million increased 7.7%, or 6.7% in constant currency, compared to the prior year period. Excluding the acquired medical aesthetics and divested blood screening businesses, revenue increased 2.7%, or 1.5% in constant currency. Revenue growth rates in the first quarter were negatively affected by four extra selling days in the prior year period, which Hologic estimates added more than $20 million to revenue a year ago.
GAAP diluted earnings per share (EPS) of $1.45 increased 383.3% compared to the prior year period. GAAP results include a one-time tax provision net benefit of $329.2 million associated with the recent enactment of tax reform legislation in the U.S. Non-GAAP diluted EPS of $0.55 increased 5.8% compared to the prior year period.
"We are pleased with our first quarter results," said Steve MacMillan, Hologic's Chairman, President and Chief Executive Officer. "We posted solid revenue just above our guidance range, driven by strength in our breast health, molecular diagnostics and international businesses. In addition, U.S. tax reform is helping us increase our earnings guidance for the year, while simultaneously re-investing in the business to drive future growth."
Key financial results for the fiscal first quarter were:
GAAP Non-GAAP
---- --------
Q1'18 Q1'17 Change Q1'18 Q1'17 Change
Increase Increase
(Decrease) (Decrease)
--------- ---------
Revenues $791.1 $734.4 7.7% $791.1 $734.4 7.7%
-------- ------ ------ --- ------ ------ ---
Gross Margin 53.7% 55.1% (140 bps) 63.8% 65.2% (140 bps)
------------ ---- ---- -------- ---- ---- --------
Operating Expenses $290.4 $258.8 12.2% $271.8 $231.1 17.6%
------------------ ------ ------ ---- ------ ------ ----
Operating Margin 17.0% 19.9% (290 bps) 29.4% 33.7% (430 bps)
---------------- ---- ---- -------- ---- ---- --------
Net Margin 51.4% 11.8% 3,960 bps 19.4% 20.2% (80 bps)
---------- ---- ---- --------- ---- ---- -------
Diluted EPS $1.45 $0.30 383.3% $0.55 $0.52 5.8%
----------- ----- ----- ----- ----- ----- ---
Throughout this press release, all dollar figures are in millions, except EPS. Some totals may not foot due to rounding. Unless otherwise noted, all results are compared to the corresponding prior year period. Non-GAAP results exclude certain cash and non-cash items as discussed under "Use of Non-GAAP Financial Measures."
Revenue Detail
As previously mentioned, revenue growth rates in the first quarter were negatively affected by four extra selling days in the prior year period, which Hologic estimates added more than $20 million to revenue a year ago, primarily in the U.S.
$s in millions Q1'18 Q1'17 Reported Constant Currency
Change Change
--- ------ ------
Cytology & Perinatal $123.4 $120.3 2.6% 0.9%
Molecular
Diagnostics $148.6 $139.9 6.2% 5.3%
Blood Screening $12.6 $65.2 (80.7%) (80.7%)
Total Diagnostics $284.6 $325.4 (12.5%) (13.5%)
----------------- ------ ------ ------ ------
Total Diagnostics
ex. Blood $272.0 $260.2 4.5% 3.3%
----------------- ------ ------ --- ---
Breast Imaging $233.6 $226.7 3.1% 1.9%
Interventional
Breast Solutions $52.1 $44.6 16.9% 16.1%
Other $2.3 $2.0 10.5% 1.7%
----- ---- ---- ---- ---
Total Breast Health $288.0 $273.3 5.4% 4.2%
------------------- ------ ------ --- ---
Body $21.9 - - -
Skin $40.6 - - -
Women's Health/
Other $28.8 - - -
--------------- ----- --- --- ---
Total Medical
Aesthetics $91.3 - - -
------------- ----- --- --- ---
GYN Surgical $107.5 $114.8 (6.4%) (7.1%)
------------ ------ ------ ----- -----
Skeletal Health $19.7 $20.9 (6.0%) (7.3%)
--------------- ----- ----- ----- -----
Total $791.1 $734.4 7.7% 6.7%
----- ------ ------ --- ---
Quarterly revenue highlights:
-- U.S. revenue of $597.2 million increased 4.1%. Excluding the acquired
medical aesthetics and divested blood screening businesses, U.S. revenue
decreased (0.8%).
-- International revenue of $193.9 million increased 20.6%, or 15.8% in
constant currency. Excluding the acquired medical aesthetics and
divested blood screening businesses, international revenue increased
17.6%, or 11.6% in constant currency.
-- In Diagnostics:
-- Molecular diagnostics sales of $148.6 million increased 6.2%, or
5.3% in constant currency, driven primarily by continued strength
across Aptima® women's health products globally.
-- Cytology and perinatal sales of $123.4 million increased 2.6%, or
0.9% in constant currency, due primarily to an increase in perinatal
sales.
-- Blood screening sales of $12.6 million decreased (80.7%), as this
business was divested in the second quarter of fiscal 2017.
-- Breast Health revenue totaled $288.0 million, an increase of 5.4%, or
4.2% in constant currency, driven by strong international sales, new
products, and service revenue.
-- Medical Aesthetics revenue was $91.3 million, a 12.2% sequential
increase compared to the fourth quarter of fiscal 2017. The Cynosure
acquisition closed in the second quarter of fiscal 2017.
-- GYN Surgical revenue of $107.5 million decreased (6.4%), or (7.1%) in
constant currency. MyoSure® system revenue of $51.1 million increased
5.8%, or 5.2% in constant currency, while NovaSure® revenue of $56.4
million decreased (15.1%), or (16.0%) in constant currency.
-- In Skeletal Health, revenue of $19.7 million decreased (6.0%), or (7.3%)
in constant currency.
Segment revenue highlights by geography are shown below:
U.S. Change International International Change
Change
(Constant Currency)
(Reported)
---------
Increase (Decrease)
------------------
Diagnostics (5.8%) (30.0%) (33.6%)
----------- ----- ------ ------
Diagnostics ex. Blood 2.4% 12.2% 6.5%
--------------------- --- ---- ---
Breast Health (1.0%) 36.2% 29.2%
------------- ----- ---- ----
Medical Aesthetics - - -
------------------ --- --- ---
GYN Surgical (8.4%) 7.2% 1.3%
------------ ----- --- ---
Skeletal Health 10.2% (29.5%) (32.6%)
--------------- ---- ------ ------
Total Revenues 4.1% 20.6% 15.8%
-------------- --- ---- ----
Total Revenues ex. Blood and Medical Aesthetics (0.8%) 17.6% 11.6%
----------------------------------------------- ----- ---- ----
Expense Detail
Gross margin was 53.7% on a GAAP basis, and 63.8% on a non-GAAP basis. Both GAAP and non-GAAP gross margins declined by 140 basis points primarily due to sales mix associated with the divestiture of the higher-margin blood screening business and sales of lower-margin Cynosure products.
Operating expenses were $290.4 million on a GAAP basis, and $271.8 million on a non-GAAP basis. GAAP operating expenses increased 12.2% and non-GAAP operating expenses increased 17.6%, primarily due to the inclusion of Cynosure expenses.
On December 22, 2017, the legislation commonly known as the Tax Cuts and Jobs Act ("U.S. tax reform") was enacted into law. As a result of U.S. tax reform and based on currently available information, the Company performed preliminary calculations and recorded a discrete net tax benefit of $329.2 million. This discrete net tax benefit primarily results from the re-measurement of U.S. net deferred tax liabilities at a lower corporate income tax rate, partially offset by tax expense from deemed repatriated earnings of foreign subsidiaries. The quarterly effective tax rate was a benefit of (324.5%) on a GAAP basis, and a provision of 23.0% on a non-GAAP basis. The difference in these rates was primarily due to U.S. tax reform, as described above.
Other Key Financial Results
GAAP net income for the first quarter was $406.7 million, an increase of 370.2% due primarily to the effects of U.S. tax reform. Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter was $258.1 million, a decrease of (4.1%).
Operating cash flow for the fourth quarter was $169.1 million. Free cash flow, defined as operating cash flow less capital expenditures, was $147.3 million.
During the first quarter, Hologic repurchased or redeemed $202 million in principal of its 2013 convertible notes for a total of $244 million. In addition, the Company repurchased $39 million in principal of its 2012 convertible notes for a total of $53 million.
Total debt outstanding at the end of the quarter was $3.3 billion. The company ended the quarter with cash and equivalents of $0.7 billion, and a net leverage ratio (net debt over adjusted EBITDA) of 2.6 times.
On a trailing 12 months basis, adjusted ROIC of 12.4% declined 70 basis points compared to the prior year period.
Financial Guidance for Fiscal 2018
"We are reiterating our full-year revenue guidance and increasing our EPS forecast based mainly on our solid first-quarter results and the beneficial effects of U.S. tax reform," said Bob McMahon, the Company's chief financial officer.
Hologic's financial guidance for fiscal 2018 is shown in the two tables immediately below. The guidance is based on a full year non-GAAP tax rate of approximately 23% and diluted shares outstanding of approximately 283 million for the full year. As a reminder, percentage changes versus the prior year are affected by the blood screening divestiture and the Cynosure acquisition, both of which closed in the second quarter of fiscal 2017. Constant currency guidance assumes that foreign exchange rates are the same in fiscal 2018 as in fiscal 2017. Current guidance assumes that recent foreign exchange rates persist for all of fiscal 2018.
GAAP
----
Revenue EPS
------- ---
Reported % Guidance $ Reported % Increase
Increase (Decrease) (Decrease)
Guidance $
----------
Current Guidance for 4.6% to 7.2% $3,200 to $3,280 (10.6%) to (8.7%) $2.36 to $2.41
Fiscal 2018 million
----------- -------
Previous Guidance for 4.6% to 7.2% $3,200 to $3,280 (53.8%) to (51.9%) $1.22 to $1.27
Fiscal 2018 million
----------- -------
Non-GAAP
--------
Revenue EPS
------- ---
Constant Reported % Guidance $ Reported %
Currency % Increase Increase
Increase (Decrease) (Decrease) Guidance $
(Decrease)
---------
Current Guidance 3.9% to 6.5% 4.6% to 7.2% $3,200 to $3,280 9.4% to 11.8% $2.22 to $2.27
for Fiscal 2018 million
--------------- --- ---
Previous Guidance 4.0% to 6.6% 4.6% to 7.2% $3,200 to $3,280 3.4% to 5.9% $2.10 to $2.15
for Fiscal 2018 million
--------------- --- ---
Hologic's financial guidance for the second quarter of fiscal 2018 is shown in the two tables immediately below. As a reminder, percentage changes versus the prior year period are affected by the blood screening divestiture and the Cynosure acquisition, both of which closed in the second quarter of fiscal 2017.
GAAP
----
Revenue EPS
------- ---
Reported % Guidance $ Reported %
Increase Increase Guidance $
(Decrease) (Decrease)
--------- ---------
Guidance for the Second 7.6% to 9.7% $770 to $785 (85.3%) to (84.8%) $0.27 to $0.28
Quarter of Fiscal 2018 million
---------------------- -------
Non-GAAP
--------
Revenue EPS
------- ---
Constant Reported % Guidance $ Reported %
Currency % Increase Increase
Increase (Decrease) (Decrease) Guidance $
(Decrease)
---------
Guidance for the Second 6.5% to 8.6% 7.6% to 9.7% $770 to $785 6.0% to 8.0% $0.53 to $0.54
Quarter of Fiscal 2018 million
---------------------- --- ---
To assist with "apples to apples" analyses of Hologic's ongoing, base business, the historical contributions of blood screening to Hologic's quarterly revenues and EPS are shown below:
GAAP
----
2017 2018
---- ----
Q1 Q2 Q3 Q4 Total Q1
--- --- --- --- ----- ---
Revenue $65.2 $38.3 $19.0 $18.0 $140.5 $12.6
------- ----- ----- ----- ----- ------ -----
EPS $0.06 $1.62 $0.01 $0.01 $1.70 $0.01
--- ----- ----- ----- ----- ----- -----
Non-GAAP
--------
2017 2018
---- ----
Q1 Q2 Q3 Q4 Total Q1
--- --- --- --- ----- ---
Revenue $65.2 $38.3 $19.0 $18.0 $140.5 $12.6
------- ----- ----- ----- ----- ------ -----
EPS $0.10 $0.04 $0.01 $0.01 $0.16 $0.01
--- ----- ----- ----- ----- ----- -----
Use of Non-GAAP Financial Measures
The Company has presented the following non-GAAP financial measures in this press release: constant currency revenues; non-GAAP gross profit; non-GAAP gross margin; non-GAAP operating expenses; non-GAAP income from operations; non-GAAP operating margin; non-GAAP interest expense; non-GAAP pre-tax income; non-GAAP net margin; non-GAAP net income; non-GAAP diluted EPS; adjusted EBITDA; and return on invested capital. Constant currency presentations show reported period revenue results as if the foreign exchange rates were the same as those in effect in the comparable prior year period. The Company defines its non-GAAP net income, EPS, and other non-GAAP financial measures to exclude, as applicable: (i) the amortization of intangible assets; (ii) additional depreciation expense from acquired fixed assets and accelerated depreciation related to business consolidation and closure of facilities; (iii) additional expense resulting from the purchase accounting adjustment to record inventory at fair value; (iv) non-cash interest expense related to amortization of the debt discount from the equity conversion option of the convertible notes; (v) restructuring and divestiture charges, facility closure and consolidation charges and costs incurred to integrate acquisitions (including retention, transaction bonuses, legal and professional consulting services) and separate divested businesses from existing operations; (vi) transaction related expenses for divestitures and acquisitions; (vii) gain on disposal of business; (viii) debt extinguishment losses and related transaction costs; (ix) the unrealized (gains) losses on the mark-to-market of forward foreign currency contracts for which the Company has not elected hedge accounting; (x) litigation settlement charges (benefits) and non-income tax related charges (benefits); (xi) other-than-temporary impairment losses on investments and realized (gains) losses resulting from the sale of investments; (xii) the one-time discrete impact of tax reform primarily related to remeasuring of net deferred tax liabilities and providing taxes for the deemed repatriation of foreign earnings (xiii) other one-time, non-recurring, unusual or infrequent charges, expenses or gains that may not be indicative of the Company's core business results as detailed in our reconciliations of such adjustments; and (xiv) income taxes related to such adjustments. 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.
These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. The company's definition of these non-GAAP measures may differ from similarly titled measures used by others.
The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The company generally uses these non-GAAP financial measures to facilitate management's financial and operational decision-making, including evaluation of Hologic's historical operating results, comparison to competitors' operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the company's operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Hologic's business.
Because non-GAAP financial measures exclude the effect of items that increase or decrease the company's reported results of operations, management strongly encourages investors to review the company's consolidated financial statements and publicly filed reports in their entirety. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this release.
Future Non-GAAP Adjustments
Future GAAP EPS may be affected by changes in ongoing assumptions and judgments, and may also be affected by non-recurring, 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.
Conference Call and Webcast
Hologic's management will host a conference call at 4:30 p.m. ET today to discuss its financial results for the first quarter of fiscal 2018. Approximately 10 minutes before the call, dial 800-281-7973 (in the U.S.) or +1 323-794-2093 (international) and enter access code 4501215. A replay will be available approximately two hours after the call ends through Friday, March 2, 2018. The replay numbers are 888-203-1112 (U.S.) or +1 719-457-0820 (international), access code 4501215, Pin 2953. The Company will also provide a live webcast of the call at http://investors.hologic.com.
About Hologic, Inc.
Hologic, Inc. is an innovative medical technology company primarily focused on improving women's health and well-being through early detection and treatment. For more information on Hologic, visit www.hologic.com.
Hologic, Genius 3D Mammography, Aptima, ThinPrep, MyoSure, NovaSure, Panther, Tigris, Cynosure, SculpSure, PicoSure, The Science of Sure, 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 recently passed U.S. tax reform legislation; 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, the need to comply with especially high standards for the manufacture of many of its products and risks associated with utilizing third party manufacturers; 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 INCOME
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and per share data)
Three Months Ended
December 30, December 31,
2017 2016
---- ----
Revenues:
Product $650.7 $613.4
Service and other 140.4 121.0
----- -----
Total revenues 791.1 734.4
----- -----
Cost of revenues:
Product 213.7 198.3
Amortization of acquired
intangible assets 79.8 73.5
Service and other 73.1 57.8
---- ----
Gross profit 424.5 404.8
----- -----
Operating expenses:
Research and development 54.8 54.4
Selling and marketing 139.5 110.0
General and administrative 77.9 69.8
Amortization of acquired
intangible assets 14.4 21.4
Restructuring charges 3.8 3.2
Total operating expenses 290.4 258.8
----- -----
Income from operations 134.1 146.0
Interest income 0.8 0.3
Interest expense (41.0) (40.4)
Debt extinguishment loss (1.0) -
Other income, net 2.9 10.2
--- ----
Income before income taxes 95.8 116.1
(Benefit) provision for income
taxes (310.9) 29.6
------ ----
Net income $406.7 $86.5
====== =====
Net income per common share:
Basic $1.47 $0.31
===== =====
Diluted $1.45 $0.30
===== =====
Weighted average number of shares
outstanding:
Basic 276,856 278,663
======= =======
Diluted 280,802 284,224
======= =======
HOLOGIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
December 30, September 30,
2017 2017
------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $664.4 $540.6
Accounts receivable, net 548.0 533.5
Inventories 358.2 331.6
Other current assets 67.8 72.9
Total current assets 1,638.4 1,478.6
------- -------
Property, plant and equipment,
net 467.1 472.8
Goodwill and intangible assets 5,858.0 5,943.5
Other assets 84.8 84.7
Total assets $8,048.3 $7,979.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt $572.1 $1,150.8
Accounts payable and accrued
liabilities 574.6 543.5
Deferred revenue 163.2 171.2
Total current liabilities 1,309.9 1,865.5
------- -------
Long-term debt, net of current
portion 2,757.7 2,172.1
Deferred income taxes 586.4 973.6
Other long-term liabilities 200.3 183.7
Total stockholders' equity 3,194.0 2,784.7
Total liabilities and
stockholders' equity $8,048.3 $7,979.6
======== ========
HOLOGIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
Three Months Ended
December 30, December 31,
2017 2016
---- ----
OPERATING ACTIVITIES
Net income $406.7 $86.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 27.0 20.4
Amortization of acquired intangibles 94.2 94.9
Non-cash interest expense 8.7 14.3
Stock-based compensation expense 16.4 19.2
Deferred income taxes (390.7) (24.6)
Debt extinguishment loss 1.0 -
Other adjustments and non-cash items 1.2 (6.0)
Changes in operating assets and liabilities, excluding the effect of acquisitions:
Accounts receivable (6.4) 21.5
Inventories (23.3) (20.7)
Prepaid income taxes 8.1 (0.8)
Prepaid expenses and other assets (5.0) (17.4)
Accounts payable (7.1) (17.8)
Accrued expenses and other liabilities 48.9 14.6
Deferred revenue (10.6) (14.5)
Net cash provided by operating activities 169.1 169.6
----- -----
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (4.1) -
Capital expenditures (10.2) (11.5)
Increase in equipment under customer usage agreements (11.6) (13.2)
Proceeds from sale of available-for-sale marketable securities 0.1 0.4
Other activity (0.4) (0.9)
Net cash used in investing activities (26.2) (25.2)
----- -----
FINANCING ACTIVITIES
Repayment of long-term debt (1,331.3) (18.8)
Proceeds from long-term debt 1,500.0 -
Repayment of amounts borrowed under accounts receivable securitization program - (12.0)
Proceeds from senior notes 350.0 -
Payments to extinguish convertible notes (296.9) (6.4)
Proceeds from amounts borrowed under revolving credit line 495.0 -
Repayments of amounts borrowed under revolving credit line (720.0) -
Payment of debt issuance costs (11.9) -
Proceeds from issuance of common stock pursuant to employee stock plans 9.5 13.2
Payments under capital lease obligations (0.4) -
Payment of minimum tax withholdings on net share settlements of equity awards (14.3) (16.4)
Net cash used in financing activities (20.3) (40.4)
Effect of exchange rate changes on cash and cash equivalents 1.2 (6.4)
Net increase in cash and cash equivalents 123.8 97.6
Cash and cash equivalents, beginning of period 540.6 548.4
Cash and cash equivalents, end of period $664.4 $646.0
====== ======
HOLOGIC, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(Unaudited)
(In millions, except earnings per share and margin percentages)
Three Months Ended
December 30, December 31,
2017 2016
---- ----
Gross Profit:
GAAP gross profit $424.5 $404.8
Adjustments:
Amortization of acquired intangible assets (1) 79.8 73.5
Incremental depreciation expense (2) 0.2 0.3
Integration/consolidation costs (3) - 0.1
Non-GAAP gross profit $504.5 $478.7
====== ======
Gross Margin Percentage:
GAAP gross margin percentage 53.7% 55.1%
Impact of adjustments above 10.1% 10.1%
---- ----
Non-GAAP gross margin percentage 63.8% 65.2%
==== ====
Operating Expenses:
GAAP operating expenses $290.4 $258.8
Adjustments:
Amortization of acquired intangible assets (1) (14.4) (21.4)
Incremental depreciation expense (2) (3.5) (0.5)
Transaction expenses (4) (0.4) (2.6)
Non-income tax benefit (9) 4.0 -
Integration/consolidation costs (3) (0.5) -
Restructuring charges (3) (3.8) (3.2)
Non-GAAP operating expenses $271.8 $231.1
====== ======
Operating Margin:
GAAP income from operations $134.1 $146.0
Adjustments to gross profit as detailed above 80.0 73.9
Adjustments to operating expenses as detailed above 18.6 27.7
---- ----
Non-GAAP income from operations $232.7 $247.6
====== ======
Operating Margin Percentage:
GAAP income from operations margin percentage 17.0% 19.9%
Impact of adjustments above 12.4% 13.8%
---- ----
Non-GAAP operating margin percentage 29.4% 33.7%
==== ====
Interest Expense:
GAAP interest expense $41.0 $40.4
Adjustments:
Non-cash interest expense relating to convertible notes (5) (2.9) (5.2)
Debt transaction costs (10) (1.7) -
Non-GAAP interest expense $36.4 $35.2
===== =====
Pre-Tax Income:
GAAP pre-tax earnings $95.8 $116.1
Adjustments to pre-tax earnings as detailed above 103.2 106.8
Debt extinguishment loss (6) 1.0 -
Loss on sale of available-for-sale marketable securities (7) 0.6 0.1
Unrealized gains on forward foreign currency contracts (8) (1.5) (8.4)
---- ----
Non-GAAP pre-tax Income $199.1 $214.6
====== ======
Net income:
GAAP net income $406.7 $86.5
Adjustments:
Amortization of acquired intangible assets (1) 94.2 94.9
Non-cash interest expense relating to convertible notes (5) 2.9 5.2
Restructuring, integration/consolidation costs and transaction expenses (3) (4) 4.7 5.9
Non-income tax (benefit) (9) (4.0) -
Incremental depreciation expense (2) 3.7 0.8
Debt extinguishment loss and related expenses (6) (10) 2.7 -
Loss on sale of available-for-sale marketable securities (7) 0.6 0.1
Unrealized gains on forward foreign currency contracts (8) (1.5) (8.4)
Discrete impact of tax reform (11) (329.2) -
Income tax effect of reconciling items (12) (27.4) (36.9)
----- -----
Non-GAAP net income $153.4 $148.1
====== ======
Net Income Percentage:
GAAP net income percentage 51.4% 11.8%
Impact of adjustments above (32.0)% 8.4%
------ ---
Non-GAAP net income percentage 19.4% 20.2%
==== ====
Earnings per share:
GAAP earnings per share - Diluted $1.45 $0.30
Adjustment to net earnings (as detailed above) (0.90) 0.22
----- ----
Non-GAAP earnings per share - diluted (13) $0.55 $0.52
===== =====
Adjusted EBITDA:
Non-GAAP net income $153.4 $148.1
Interest expense, net, not adjusted above 35.6 35.0
Provision for income taxes 45.8 66.5
Depreciation expense, not adjusted above 23.3 19.5
---- ----
Adjusted EBITDA $258.1 $269.1
====== ======
Explanatory Notes to Reconciliations:
(1) To reflect non-cash expenses
attributable to the amortization of
acquired intangible assets.
(2) 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 and accelerated
depreciation expense related to
facility closure and business
consolidation.
(3) To reflect restructuring charges, and
certain costs associated with the
Company's integration and facility
consolidation plans, which primarily
include retention and transfer
costs, as well as costs incurred to
integrate acquisitions including
consulting, legal and accounting
fees.
(4) To reflect expenses incurred with
third parties related to
acquisitions and divestitures prior
to when such transactions are
completed. These expenses primarily
comprise broker fees, legal fees,
and consulting and due diligence
fees.
(5) 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.
(6) To reflect debt extinguishment losses
primarily from refinancing the
Company's Credit Agreement.
(7) To reflect a realized loss on the
sale of available-for-sale
marketable securities.
(8) To reflect non-cash unrealized gains
on the mark-to market on
outstanding forward foreign currency
contracts, which do not qualify for
hedge accounting.
(9) To reflect a non-income tax benefit
in the first quarter of fiscal 2018
of $4.0 million as the Company
settled a non-income tax issue
under audit.
(10) To reflect the amount of debt
issuance costs recorded directly to
interest expense as a result of
refinancing the Company's Credit
Agreement.
(11) To reflect the discrete impact of tax
reform to the Company's income tax
provision primarily comprised of a
tax benefit of $355.2 million to
remeasure the Company's net deferred
tax liabilities at the lower federal
income tax rate, partially offset by
the net tax charge of $26.0 million
from deemed repatriated earnings of
foreign subsidiaries.
(12) To reflect an estimated annual
effective tax rate of 23.0% and
31.0% for fiscal 2018 and 2017,
respectively.
(13) Non-GAAP earnings per share was
calculated based on 280,802 and
284,224 weighted average diluted
shares outstanding for the three
months ended December 30, 2017 and
December 31, 2016, respectively.
Reconciliation of GAAP to non-GAAP EPS Guidance:
Guidance Range Guidance Range
-------------- --------------
Quarter Ending Year Ending
September
29, 2018
March 31, 2018
--------------
Low High Low High
--- ---- --- ----
GAAP Net Income
Per Share $0.27 $0.28 $2.36 $2.41
--------------- ----- ----- ----- -----
Amortization of
Intangible
Assets $0.33 $0.33 $1.33 $1.33
--------------- ----- ----- ----- -----
Amortization of
Debt Discount $0.00 $0.00 $0.01 $0.01
--------------- ----- ----- ----- -----
Accelerated
depreciation and
Other Charges $0.02 $0.02 $0.06 $0.06
----------------- ----- ----- ----- -----
Discrete impact
of tax reform $0.00 $0.00 ($1.16) ($1.16)
--------------- ----- ----- ------ ------
Tax Impact of
Exclusions ($0.09) ($0.09) ($0.38) ($0.38)
------------- ------ ------ ------ ------
Non-GAAP Net
Income Per Share $0.53 $0.54 $2.22 $2.27
----------------- ----- ----- ----- -----
Reconciliations of Reported to Constant Currency Revenue:
$s in millions Q1'18 Q1'17 Reported Foreign Currency
Effect Constant
Change Currency
$ % Change
--- --------------- ------
Cytology & Perinatal $123.4 $120.3 2.6% $(1.9) (1.7%) 0.9%
Molecular Diagnostics $148.6 $139.9 6.2% $(1.3) (0.9%) 5.3%
Blood Screening $12.6 $65.2 (80.7%) - - (80.7%)
Total Diagnostics $284.6 $325.4 (12.5%) $(3.3) (1.0%) (13.5%)
----------------- ------ ------ ------ ----- ----- ------
Total Diagnostics ex. Blood $272.0 $260.2 4.5% $(3.3) (1.2%) 3.3%
--------------------------- ------ ------ --- ----- ----- ---
Breast Imaging $233.6 $226.7 3.1% $(2.8) (1.2%) 1.9%
Interventional Breast Solutions $52.1 $44.6 16.9% $(0.4) (0.8%) 16.1%
Other $2.3 $2.0 10.5% $(0.2) (8.8%) 1.7%
----- ---- ---- ---- ----- ----- ---
Total Breast Health $288.0 $273.3 5.4% $(3.3) (1.2%) 4.2%
------------------- ------ ------ --- ----- ----- ---
Body $21.9 - - - - -
Skin $40.6 - - - - -
Women's Health/Other $28.8 - - - - -
------------------------- ----- --- --- --- --- ---
Total Medical Aesthetics $91.3 - - - - -
------------------------ ----- --- --- --- --- ---
GYN Surgical $107.5 $114.8 (6.4%) $(0.9) (0.7%) (7.1%)
------------ ------ ------ ----- ----- ----- -----
Skeletal Health $19.7 $20.9 (6.0%) $(0.3) (1.3%) (7.3%)
--------------- ----- ----- ----- ----- ----- -----
Total $791.1 $734.4 7.7% $(7.7) (1.0%) 6.7%
----- ------ ------ --- ----- ----- ---
U.S. Change International Foreign Currency
Effect International
Change Change
$ %
(Reported) (Constant
Currency)
--------
Increase (Decrease)
------------------
Diagnostics (5.8%) (30.0%) $(3.3) (3.6%) (33.6%)
----------- ----- ------ ----- ----- ------
Diagnostics ex. Blood 2.4% 12.2% $(3.3) (5.7%) 6.5%
--------------------- --- ---- ----- ----- ---
Breast Health (1.0%) 36.2% $(3.3) (7.0%) 29.2%
------------- ----- ---- ----- ----- ----
Medical Aesthetics - - - - -
------------------ --- --- --- --- ---
GYN Surgical (8.4%) 7.2% $(0.9) (5.9%) 1.3%
------------ ----- --- ----- ----- ---
Skeletal Health 10.2% (29.5%) $(0.3) (3.1%) (32.6%)
--------------- ---- ------ ----- ----- ------
Total Revenues 4.1% 20.6% $(7.7) (4.8%) 15.8%
-------------- --- ---- ----- ----- ----
Total Revenues ex. Blood and Medical Aesthetics (0.8%) 17.6% $(7.7) (6.0%) 11.6%
----------------------------------------------- ----- ---- ----- ----- ----
Trailing Twelve Months
ended
December 30, 2017
-----------------
Return on Invested Capital:
Adjusted Net Operating Profit After Tax
Non-GAAP net income $584.2
Non-GAAP provision for income taxes 233.4
Non-GAAP interest expense 136.4
Non-GAAP other income (14.3)
-----
Adjusted net operating profit before tax $939.7
Non-GAAP average effective tax rate (1) 28.5%
----
Adjusted net operating profit after tax $671.8
======
Average Net Debt plus Average Stockholders' Equity (2)
Average total debt $3,326.3
Less: Average cash, cash equivalents and restricted cash (655.2)
------
Average net debt $2,671.1
Average stockholders' equity (3) $2,743.5
--------
Average net debt plus average stockholders' equity $5,414.6
========
Adjusted ROIC
Adjusted ROIC (adjusted net operating profit after tax 12.4%
above divided by average net debt plus stockholders' equity above)
(1) ROIC is presented on a TTM basis;
non-GAAP effective tax rate for
the three months ended April 1,
2017 was 31.0%, the three months
ended July 1, 2017 was 29.5%, the
three months ended September 30,
2017 was 30.5%.and the three
months ended December 30, 2017 was
23.0%.
(2) Calculated using the average of the
balances as of December 30, 2017
and December 31, 2016.
(3) Adjusted (increased) to eliminate
the effect of the impairment of
intangible assets of $32.2 million
in fiscal 2014.
As of
December 30, 2017
-----------------
Leverage Ratio:
Total principal debt $3,366.9
Total cash (664.4)
------
Net principal debt, as
adjusted $2,702.5
EBITDA for the last four
quarters $1,037.5
--------
Leverage Ratio 2.6
===
Other Supplemental Information:
Three Months Ended
December December
30, 31,
2017 2016
---- ----
Geographic Revenues
U.S. 75.5% 77.9%
Europe 11.5% 10.7%
Asia-Pacific 8.7% 8.4%
Rest of World 4.3% 3.0%
Total Revenues 100.0% 100.0%
===== =====
Revenue Composition
Q1'18
-----
Disposables 56.2%
Capital Equipment 26.1%
Service & Other 17.7%
----
Total Revenues 100.0%
=====
View original content:http://www.prnewswire.com/news-releases/hologic-announces-financial-results-for-first-quarter-of-fiscal-2018-300595933.html
SOURCE Hologic, Inc.
