Hologic Announces Financial Results for Third Quarter of Fiscal 2018
MARLBOROUGH, Mass., July 31, 2018 /PRNewswire/ -- Hologic, Inc. (Nasdaq: HOLX) announced today the Company's financial results for the fiscal third quarter ended June 30, 2018.
"We posted good financial results in the third quarter, with both revenue and EPS exceeding our guidance," said Steve MacMillan, Hologic's Chairman, President and Chief Executive Officer. "Our Breast Health and international businesses continued their strong recent performance. And Surgical and Cynosure both showed sequential improvement, in line with our expectations."
Recent Highlights
-- Global revenue growth was driven by the Breast Health and international
businesses.
-- Breast health revenue of $307.9 million increased 8.5%, or 7.4% in
constant currency, compared to the prior year period.
-- International revenue, excluding the acquired Cynosure business,
increased 20.2%, or 14.5% in constant currency, to $163.8 million.
-- Completed today the acquisition of Faxitron Bioptics, a privately-held
leader in digital specimen radiography, for approximately $85 million.
-- Announced that Chief Financial Officer Bob McMahon will depart to join
Agilent; Chief Accounting Officer Karleen Oberton promoted to CFO.
-- Continued to advance research and development pipeline, launching
several new products; ThinPrep® Integrated Imager in the United States;
Panther Fusion® MRSA assay in Europe; Panther Fusion respiratory assays
in Canada; and TempSure(TM) Vitalia in North America.
-- Repurchased 2.2 million shares of common stock for $80.8 million. The
Company's Board of Directors also approved a new $500 million share
repurchase plan to replace the previous authorization.
Key financial results for the fiscal third quarter are shown in the table below.
GAAP Non-GAAP
---- --------
Q3'18 Q3'17 Change Q3'18 Q3'17 Change
Increase Increase
(Decrease) (Decrease)
--------- ---------
Revenues $824.0 $806.1 2.2% $824.0 $806.1 2.2%
Gross Margin 52.9% 50.8% 210 bps 62.6% 63.1% (50 bps)
Operating Expenses $302.9 $294.6 2.8% $279.0 $274.9 1.5%
Operating Margin 16.2% 14.3% 190 bps 28.8% 29.0% (20 bps)
Net Margin 13.7% 7.4% 630 bps 19.3% 18.0% 130 bps
Diluted EPS $0.41 $0.21 95.2% $0.58 $0.50 16.0%
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." Constant currency percentage changes show current period revenue results as if the foreign exchange rates were the same as those in the prior year period.
Revenue Detail
Increase (Decrease)
------------------
$ in millions Q3'18 Q3'17 Global Global US International International
Reported Constant Reported Reported Constant
Change Currency Change Currency
Change Change Change
--- ------ ------ ------
Cytology & Perinatal $121.1 $121.0 0.1% (1.8%)
Molecular Diagnostics $154.5 $144.1 7.3% 6.3%
Blood Screening $18.6 $19.0 (2.2%) (2.2%)
----- ----- ----- -----
Total Diagnostics $294.3 $284.1 3.6% 2.3% 0.6% 14.6% 8.5%
Total Diagnostics ex. Blood $275.6 $265.1 4.0% 2.6% 0.8% 14.7% 8.5%
Breast Imaging $254.3 $236.5 7.5% 6.5%
Interventional Breast Solutions $51.0 $45.0 13.3% 12.4%
Other $2.6 $2.2 18.2% 8.7%
---- ---- ---- ---
Total Breast Health $307.9 $283.7 8.5% 7.4% 4.4% 26.1% 20.5%
Body $22.8 $36.7 (37.7%) (37.9%)
Skin $41.2 $45.4 (9.3%) (11.5%)
Women's Health/Other $27.7 $28.0 (1.1%) (2.6%)
----- ----- ----- -----
Total Medical Aesthetics $91.7 $110.0 (16.7%) (18.0%) (17.8%) (15.4%) (18.3%)
Total GYN Surgical $107.7 $106.5 1.1% 0.3% (2.4%) 22.5% 16.5%
Skeletal Health $22.5 $21.8 3.2% 2.1% (3.4%) 18.3% 14.7%
Total $824.0 $806.1 2.2% 1.1% (0.3%) 10.5% 5.5%
Total Revenue ex. Blood $805.4 $787.1 2.3% 1.1% (0.2%) 10.5% 5.5%
Other Financial Highlights
-- U.S. revenue of $616.8 million decreased (0.3%). Total international
revenue of $207.2 million increased 10.5%, or 5.5% in constant currency.
-- Gross margin was 52.9% on a GAAP basis, and 62.6% on a non-GAAP basis.
GAAP gross margin increased 210 basis points, while non-GAAP declined 50
basis points, primarily due to geographic and product sales mix.
-- GAAP net income of $112.9 million increased 89.7%. Adjusted non-GAAP
earnings before interest, taxes, depreciation and amortization (EBITDA)
was $261.7 million, an increase of 0.4%.
-- Total debt outstanding at the end of the quarter was $3.2 billion. The
Company ended the quarter with cash and equivalents of $575.4 million,
and a net leverage ratio (net debt over adjusted EBITDA) of 2.6 times.
-- On a trailing 12 months basis, adjusted Return on Invested Capital
(ROIC) of 12.4% declined 20 basis points.
Financial Guidance for Fiscal 2018
Based on the Company's strong performance in the fiscal third quarter, Hologic is increasing its full-year 2018 revenue guidance and raising its EPS guidance slightly at the midpoint.
Hologic's financial guidance for the fourth quarter and full fiscal year 2018 is shown in the tables immediately below. The guidance is based on a full year non-GAAP tax rate of approximately 23%, and diluted shares outstanding of approximately 278 to 279 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.
Current Guidance Previous Guidance
---------------- -----------------
Constant Reported % Guidance $ Constant Reported % Guidance $
Currency % Increase Currency % Increase
Increase (Decrease) Increase (Decrease)
(Decrease) Decrease)
--------- --------
Fiscal 2018
-----------
Revenue 3.9% to 4.4% 4.8% to 5.3% $3,205 - $3,220 2.7% to 3.7% 4.0% to 4.9% $3,180 - $3,210
GAAP EPS N.M. $(0.25) - $(0.23) N.M. $(0.34) - $(0.29)
Non-GAAP EPS 10.3% to 11.3% $2.24 - $2.26 9.4% - 11.8% $2.22 - $2.27
Q4 2018
-------
Revenue 0.1% to 1.9% (0.4%) to 1.5% $800 - $815
GAAP EPS 13.8% to 20.7% $0.33 - $0.35
Non-GAAP EPS 16.0% to 20.0% $0.58 - $0.60
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 Q2 Q3
--- --- --- --- ----- --- --- ---
Revenue $65.2 $38.3 $19.0 $18.0 $140.5 $12.6 $11.3 $18.6
EPS $0.06 $1.62 $0.01 $0.01 $1.70 $0.01 $0.01 $0.01
Non-GAAP
--------
2017 2018
---- ----
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3
--- --- --- --- ----- --- --- ---
Revenue $65.2 $38.3 $19.0 $18.0 $140.5 $12.6 $11.3 $18.6
EPS $0.10 $0.04 $0.01 $0.01 $0.16 $0.01 $0.01 $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 tax rate; non-GAAP net margin; non-GAAP net income; non-GAAP diluted EPS; adjusted EBITDA; and adjusted ROIC. 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) impairment of goodwill and intangible assets; (iiI) additional depreciation expense from acquired fixed assets and accelerated depreciation related to business consolidation and closure of facilities; (iv) additional expense resulting from the purchase accounting adjustment to record inventory at fair value; (v) non-cash interest expense related to amortization of the debt discount from the equity conversion option of convertible notes; (vi) 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; (vii) transaction related expenses for divestitures and acquisitions; (viii) gain on disposal of business; (ix) debt extinguishment losses and related transaction costs; (x) the unrealized (gains) losses on the mark-to-market of forward foreign currency contracts for which the Company has not elected hedge accounting; (xi) litigation settlement charges (benefits) and non-income tax related charges (benefits); (xii) other-than-temporary impairment losses on investments and realized (gains) losses resulting from the sale of investments; (xiii) the one-time discrete impact of tax reform primarily related to remeasuring net deferred tax liabilities and providing taxes for the deemed repatriation of foreign earnings (xiv) 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 (xv) 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 third quarter of fiscal 2018. Approximately 10 minutes before the call, dial 888-224-1005 (in the U.S.) or +1 323-794-2551 (international) and enter access code 9960251. A replay will be available approximately two hours after the call ends through Friday, August 24, 2018. The replay numbers are 888-203-1112 (U.S.) or +1 719-457-0820 (international), access code 9960251. 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, Aptima, MyoSure, NovaSure, Cynosure, 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 OPERATIONS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and per share data)
Three Months Ended Nine Months Ended
June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017
------------- ------------ ------------- ------------
Revenues:
Product $677.9 $674.1 $1,973.7 $1,882.3
Service and other 146.1 132.0 430.8 373.6
----- ----- ----- -----
Total revenues 824.0 806.1 2,404.5 2,255.9
----- ----- ------- -------
Cost of revenues:
Product 226.1 249.3 656.9 648.1
Amortization of acquired intangible assets 79.4 79.1 239.0 217.9
Service and other 82.5 68.1 232.9 186.8
---- ---- ----- -----
Gross profit 436.0 409.6 1,275.7 1,203.1
----- ----- ------- -------
Operating expenses:
Research and development 54.4 62.5 166.0 172.3
Selling and marketing 141.1 145.4 411.1 358.8
General and administrative 86.3 65.5 248.0 252.7
Amortization of acquired intangible assets 15.3 15.2 44.4 47.3
Impairment of intangible asset - - 46.0 -
Impairment of goodwill - - 685.7 -
Gain on sale of business - - - (899.7)
Restructuring charges 5.8 6.0 11.4 10.8
Total operating expenses 302.9 294.6 1,612.6 (57.8)
----- ----- ------- -----
Income (loss) from operations 133.1 115.0 (336.9) 1,260.9
Interest income 1.5 1.1 4.4 3.3
Interest expense (34.5) (39.1) (114.4) (117.1)
Debt extinguishment losses - (2.6) (45.9) (2.6)
Other income, net 5.2 0.1 2.9 13.7
--- --- --- ----
Income (loss) before income taxes 105.3 74.5 (489.9) 1,158.2
Provision (benefit) for income taxes (7.6) 15.0 (328.1) 485.4
---- ---- ------ -----
Net income (loss) $112.9 $59.5 $(161.8) $672.8
====== ===== ======= ======
Net income (loss) per common share:
Basic $0.41 $0.21 $(0.59) $2.40
===== ===== ====== =====
Diluted $0.41 $0.21 $(0.59) $2.35
===== ===== ====== =====
Weighted average number of shares outstanding:
Basic 273,729 280,824 275,900 279,901
======= ======= ======= =======
Diluted 275,569 287,638 275,900 285,957
======= ======= ======= =======
HOLOGIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
June 30, 2018 September 30, 2017
------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $575.4 $540.6
Accounts receivable, net 551.7 533.5
Inventories 370.5 331.6
Other current assets 97.8 72.9
Total current assets 1,595.4 1,478.6
------- -------
Property, plant and equipment, net 461.5 472.8
Goodwill and intangible assets, net 4,942.4 5,943.5
Other assets 92.1 84.7
Total assets $7,091.4 $7,979.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $525.2 $1,150.8
Accounts payable and accrued liabilities 533.9 543.5
Deferred revenue 176.1 171.2
Total current liabilities 1,235.2 1,865.5
------- -------
Long-term debt, net of current portion 2,721.9 2,172.1
Deferred income taxes 494.9 973.6
Other long-term liabilities 189.9 183.7
Total stockholders' equity 2,449.5 2,784.7
Total liabilities and stockholders' equity $7,091.4 $7,979.6
======== ========
HOLOGIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
Nine Months Ended
June 30, 2018 July 1, 2017
------------- ------------
OPERATING ACTIVITIES
Net (loss) income $(161.8) $672.8
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation 77.8 63.5
Amortization of acquired intangibles 283.4 265.2
Non-cash interest expense 13.1 38.9
Stock-based compensation expense 53.1 53.4
Deferred income taxes (470.3) (304.6)
Goodwill impairment charge 685.7 -
Intangible asset impairment charge 46.0 -
Debt extinguishment loss 45.9 2.6
Gain on disposal of business - (899.7)
Fair value write-up of acquired inventory sold - 22.3
Net gains on sale of marketable securities - (3.6)
Other adjustments and non-cash items 6.8 1.8
Changes in operating assets and liabilities, excluding the effect of acquisitions:
Accounts receivable (13.8) (29.7)
Inventories (39.3) (20.2)
Prepaid income taxes (21.9) (4.5)
Prepaid expenses and other assets 0.3 (4.4)
Accounts payable 0.4 (28.3)
Accrued expenses and other liabilities (8.6) 15.4
Deferred revenue 3.7 0.8
Net cash provided by (used in) operating activities 500.5 (158.3)
----- ------
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (4.4) (1,478.9)
Proceeds from sale of business - 1,865.0
Capital expenditures (37.9) (35.8)
Increase in equipment under customer usage agreements (35.6) (38.2)
Proceeds from sale of available-for-sale marketable securities 0.1 87.1
Purchase of cost-method investment (6.0) -
Other activity (3.9) (5.6)
Net cash (used in) provided by investing activities (87.7) 393.6
----- -----
FINANCING ACTIVITIES
Proceeds from long-term debt 1,500.0 -
Repayment of long-term debt (1,350.0) (56.3)
Proceeds from senior notes 1,350.0 -
Repayment of senior notes (1,037.7) -
Payments to extinguish convertible notes (546.2) (290.1)
Proceeds from amounts borrowed under revolving credit line 960.0 125.0
Repayments of amounts borrowed under revolving credit line (1,065.0) -
Repayment of amounts borrowed under accounts receivable securitization program (9.0) (48.0)
Proceeds from accounts receivable securitization agreement 28.8 48.0
Payment of debt issuance costs (23.5) -
Purchase of interest rate caps (3.7) -
Repurchase of common stock (187.3) -
Proceeds from issuance of common stock pursuant to employee stock plans 24.1 42.5
Payments under capital lease obligations (1.3) (0.4)
Payment of minimum tax withholdings on net share settlements of equity awards (16.1) (19.3)
Net cash used in financing activities (376.9) (198.6)
Effect of exchange rate changes on cash and cash equivalents (1.1) 3.3
Net increase in cash and cash equivalents 34.8 40.0
Cash and cash equivalents, beginning of period 540.6 548.4
Cash and cash equivalents, end of period $575.4 $588.4
====== ======
HOLOGIC, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(Unaudited)
(In millions, except earnings per share and margin percentages)
Three Months Ended Nine Months Ended
June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017
------------- ------------ ------------- ------------
Gross Profit:
GAAP gross profit $436.0 $409.6 $1,275.7 $1,203.1
Adjustments:
Amortization of acquired intangible assets (1) 79.4 79.1 239.0 217.9
Incremental depreciation expense (2) 0.2 0.2 0.5 0.8
Integration/consolidation costs (3) 0.5 0.2 0.5 0.8
Fair value write-up of acquired inventory (15) - 19.9 - 22.3
--- ---- --- ----
Non-GAAP gross profit $516.1 $509.0 $1,515.7 $1,444.9
====== ====== ======== ========
Gross Margin Percentage:
GAAP gross margin percentage 52.9% 50.8% 53.1% 53.3%
Impact of adjustments above 9.7% 12.3% 9.9% 10.7%
--- ---- --- ----
Non-GAAP gross margin percentage 62.6% 63.1% 63.0% 64.0%
==== ==== ==== ====
Operating Expenses:
GAAP operating expenses $302.9 $294.6 $1,612.6 $(57.8)
Adjustments:
Amortization of acquired intangible assets (1) (15.3) (15.2) (44.4) (47.3)
Incremental depreciation expense (2) (1.6) (0.8) (6.7) (1.7)
Transaction expenses (4) (0.6) (0.7) (1.4) (22.7)
Non-income tax (charge) benefit (9) - 12.4 4.0 (16.4)
Integration/consolidation costs (3) (0.6) (9.4) (1.7) (14.0)
Restructuring charges (3) (5.8) (6.0) (11.4) (10.8)
Research and development asset charge (16) - - (1.7) -
Impairment of intangible asset (17) - - (46.0) -
Impairment of goodwill (18) - - (685.7) -
Gain on sale of business (14) - - - 899.7
Non-GAAP operating expenses $279.0 $274.9 $817.6 $729.0
====== ====== ====== ======
Operating Margin:
GAAP income (loss) from operations $133.1 $115.0 (336.9) 1,260.9
Adjustments to gross profit as detailed above 80.1 99.4 240.0 241.8
Adjustments to operating expenses as detailed above 23.9 19.7 795.0 (786.8)
---- ---- ----- ------
Non-GAAP income from operations $237.1 $234.1 $698.1 $715.9
====== ====== ====== ======
Operating Margin Percentage:
GAAP income (loss) from operations margin percentage 16.2% 14.3% (14.0)% 55.9%
Impact of adjustments above 12.6% 14.7% 43.0% (24.2)%
---- ---- ---- ------
Non-GAAP operating margin percentage 28.8% 29.0% 29.0% 31.7%
==== ==== ==== ====
Interest Expense:
GAAP interest expense $34.5 $39.1 $114.4 $117.1
Adjustments:
Non-cash interest expense relating to convertible notes (5) - (4.4) (3.5) (14.4)
Interest expense relating to Cynosure dissenting shareholders (15) - (1.5) - (1.5)
Debt transaction costs (10) - - (4.3) -
Non-GAAP interest expense $34.5 $33.2 $106.6 $101.2
===== ===== ====== ======
Pre-Tax Income (Loss):
GAAP pre-tax earnings (loss) $105.3 $74.5 (489.9) 1,158.2
Adjustments to pre-tax earnings (loss) as detailed above 104.0 125.0 1,042.8 (529.1)
Debt extinguishment losses (6) - 2.6 45.9 2.6
Loss (gain) on sale of available-for-sale marketable securities (7) - - 0.6 (3.7)
Unrealized losses (gains) on forward foreign currency contracts (8) (4.7) 3.5 (4.4) (1.1)
---- --- ---- ----
Non-GAAP pre-tax income $204.6 $205.6 595.0 626.9
====== ====== ===== =====
Net income (loss):
GAAP net income (loss) $112.9 59.5 $(161.8) $672.8
Adjustments:
Amortization of acquired intangible assets (1) 94.7 94.3 283.4 265.2
Fair value write-up of acquired inventory sold (15) - 19.9 - 22.3
Non-cash interest expense relating to convertible notes (5) - 4.4 3.5 14.4
Interest expense relating to Cynosure dissenting shareholders (15) - 1.5 - 1.5
Restructuring, integration/consolidation costs and transaction expenses (3) (4) 7.5 16.3 15.0 48.3
Non-income tax expense (benefit) (9) - (12.4) (4.0) 16.4
Incremental depreciation expense (2) 1.8 1.0 7.2 2.5
Impairment of intangible asset (17) - - 46.0 -
Impairment of goodwill (18) - - 685.7 -
Research and development asset charge (16) - - 1.7 -
Debt extinguishment losses and expenses (6) (10) - 2.6 50.2 2.6
Loss (gain) on sale of available-for-sale marketable securities (7) - - 0.6 (3.7)
Unrealized losses (gains) on forward foreign currency contracts (8) (4.7) 3.5 (4.4) (1.1)
Gain on sale of business (14) - - - (899.7)
Discrete impact of tax reform (11) (27.4) - (354.5) -
Income tax effect of reconciling items (12) (25.7) (45.7) (108.9) 294.2
----- ----- ------ -----
Non-GAAP net income $159.1 $144.9 $459.7 $435.7
====== ====== ====== ======
Net Income (Loss) Percentage:
GAAP net income (loss) percentage 13.7% 7.4% (6.7)% 29.8%
Impact of adjustments above 5.6% 10.6% 25.8% (10.5)%
--- ---- ---- ------
Non-GAAP net income percentage 19.3% 18.0% 19.1% 19.3%
==== ==== ==== ====
Earnings (loss) per share:
GAAP earnings (loss) per share - Diluted $0.41 $0.21 $(0.59) $2.35
Adjustment to net earnings (as detailed above) 0.17 0.29 2.24 (0.83)
---- ---- ---- -----
Non-GAAP earnings per share - diluted (13) $0.58 $0.50 $1.65 $1.52
===== ===== ===== =====
Adjusted EBITDA:
Non-GAAP net income $159.1 $144.9 $459.7 $435.7
Interest expense, net, not adjusted above 33.0 32.2 102.2 97.9
Provision for income taxes 45.6 60.6 135.4 191.2
Depreciation expense, not adjusted above 24.0 23.0 70.6 61.0
---- ---- ---- ----
Adjusted EBITDA $261.7 $260.7 $767.9 $785.8
====== ====== ====== ======
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 and dispose
businesses, 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 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 and
Senior Notes.
(7) To reflect realized gains and losses
on the sale of available-for-sale
marketable securities.
(8) To reflect non-cash unrealized gains
and losses 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. To reflect non-income
tax benefit in the third quarter of
fiscal 2017 of $12.4 million from
refunds received from amending the
Company's Medical Device Excise tax
filings and a charge of $28.8
million recorded in the second
quarter of fiscal 2017 as the
Company determined during the second
quarter that a loss became probable
associated with 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 and Senior Notes in the
first and second quarters of fiscal
2018, respectively.
(11) To reflect the discrete impact of tax
reform to the provision for income
taxes effective in the first quarter
of fiscal 2018. The primary benefit
on a year to date basis was
primarily due to re-measuring the
Company's domestic net deferred tax
liabilities at a significantly lower
federal tax rate. The impact to the
third quarter income tax provision
was primarily due to the reversal of
the amount accrued for the
transition tax (i.e., repatriation
of cash held offshore).
(12) To reflect an estimated annual
effective tax rate of 22.75% and
31.0% for fiscal 2018 and 2017,
respectively.
(13) Non-GAAP earnings per share was
calculated based on 275,569 and
278,806 weighted average diluted
shares outstanding for the three and
nine months ended June 30, 2018,
respectively, and 287,638 and
285,957 for the three and nine
months ended July 1, 2017,
respectively.
(14) To reflect the gain realized on the
sale of the Blood Screening business
to Grifols in the second quarter of
fiscal 2017.
(15) To reflect the fair value step up of
inventory sold during the period
related to the Cynosure acquisition.
(16) To reflect the purchase of intangible
assets to be used in a research and
development project that have no
future alternative use.
(17) To reflect the impairment of an IPR&D
asset acquired in the Cynosure
acquisition that was abandoned
during the second quarter of fiscal
2018 due to unsuccessful clinical
results.
(18) To reflect a goodwill impairment
charge in the Medical Aesthetics
reportable segment, which is
comprised solely of the Cynosure
business. The Company identified
impairment indicators in the second
quarter of fiscal 2018 and performed
an interim goodwill impairment test,
which resulted in the fair value of
the reporting unit being
significantly less than its carrying
value. Accordingly, the Company
recorded a goodwill impairment
charge in the second quarter of
fiscal 2018.
Reconciliation of GAAP to non-GAAP EPS Guidance:
Guidance Range Guidance Range
Quarter Ending Year Ending
September 29, 2018 September 29, 2018
Low High Low High
--- ---- --- ----
GAAP Net Income Per Share $0.33 $0.35 $(0.25) $(0.23)
-------------------------
Amortization of intangible assets $0.34 $0.34 $1.36 $1.36
Amortization of debt discount - - $0.01 $0.01
Debt extinguishment losses and transaction costs - - $0.18 $0.18
Restructuring, incremental depreciation and other charges $0.01 $0.01 $0.06 $0.06
Impairment of intangible assets - - $0.17 $0.17
Impairment of goodwill - - $2.46 $2.46
Discrete impact of tax reform - - $(1.27) $(1.27)
Tax Impact of exclusions $(0.10) $(0.10) $(0.48) $(0.48)
------ ------ ------ ------
Non-GAAP Net Income Per Share $0.58 $0.60 $2.24 $2.26
----- ----- ----- -----
Trailing Twelve
Months ended
June 30, 2018
-------------
Return on Invested Capital:
Adjusted Net Operating Profit After Tax
Non-GAAP net income $602.9
Non-GAAP provision for income taxes 198.2
Non-GAAP interest expense 140.7
Non-GAAP other income (4.9)
----
Adjusted net operating profit before tax $936.9
Non-GAAP average effective tax rate (1) 24.7%
----
Adjusted net operating profit after tax $705.2
======
Average Net Debt plus Average Stockholders' Equity (2)
Average total debt $3,234.0
Less: Average cash, cash equivalents and restricted cash (581.9)
------
Average net debt $2,652.1
Average stockholders' equity (3) $3,055.6
--------
Average net debt plus average stockholders' equity $5,707.7
========
Adjusted ROIC
Adjusted ROIC (adjusted net operating profit after tax 12.4%
above divided by average net debt plus average
stockholders' equity)
(1) ROIC is presented on a TTM
basis; non-GAAP effective
tax rate for the three
months ended September 30,
2017 was 30.5%, the three
months ended December 30,
2017 and March 31, 2018 was
23.0% and the three months
ended June 30, 2018 was
22.3%.
(2) Calculated using the average
of the balances as of June
30, 2018 and July 1, 2017.
(3) Adjusted (increased) to
eliminate the effect of the
impairment of intangible
assets of $32.2 million in
fiscal 2014, and the
impairment of goodwill of
$685.7 million and an IPR&D
asset of $46.0 million in
fiscal 2018.
As of
June 30, 2018
-------------
Leverage Ratio:
Total principal debt $3,281.7
Total cash (575.4)
------
Net principal debt, as adjusted $2,706.3
EBITDA for the last four quarters $1,030.6
--------
Leverage Ratio 2.6
===
Other Supplemental Information:
Three Months Ended Nine Months Ended
June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017
------------- ------------ ------------- ------------
Geographic Revenues
U.S. 74.9% 76.7% 75.0% 78.1%
Europe 11.4% 9.4% 11.8% 9.9%
Asia-Pacific 9.0% 8.7% 8.5% 7.9%
Rest of World 4.7% 5.2% 4.7% 4.1%
--- --- --- ---
Total Revenues 100.0% 100.0% 100.0% 100.0%
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View original content:http://www.prnewswire.com/news-releases/hologic-announces-financial-results-for-third-quarter-of-fiscal-2018-300689495.html
SOURCE Hologic, Inc.
