TORONTO, June 11 /PRNewswire-FirstCall/ -- MDS Inc. (TSX: MDS;
NYSE: MDZ), a leading provider of products and services to the
global life sciences markets, today reported financial results for
the three-month period ended April 30, 2009. On a GAAP basis, MDS
reported total revenue of $282 million, a net loss of $17 million
and a loss per share of $0.15 for the second quarter of 2009. These
results include a non-cash asset write-down of $16 million. Net
revenue was $257 million and adjusted EBITDA was $31 million,
compared with $326 million and $34 million in the prior year,
respectively. For the quarter, the Company announced adjusted
earnings per share of $0.03, compared with $0.08 in the
corresponding period a year ago. Quarterly Highlights - Net revenue
of $257 million, down 21% from $326 million in the prior year.
Excluding the impact of foreign exchange, acquisitions and
divestitures, net revenue decreased 10%. - Adjusted EBITDA of $31
million with 12% margin, versus $34 million with 10% margin in the
prior year, as $15 million in restructuring and productivity
savings largely offset market declines. - Adjusted earnings per
share of $0.03, compared with $0.08 in the prior year, primarily
driven by lower adjusted EBITDA and higher interest expense. -
Period-end cash position increased $94 million to $243 million. -
New product introductions to provide customers with advanced
technology and improved performance, including the AB SCIEX TOF/TOF
(TM) 5800 system, a new administration system for TheraSphere(R), a
suite of iMethods tests, and MetaXpress(TM) analysis software.
"With a vigilant focus on productivity, we offset declines in a
soft market, and delivered solid margins and strong cash flow
within the quarter," said Stephen P. DeFalco, President and Chief
Executive Officer, MDS Inc. "We continue to maintain a balance of
disciplined cost control and strategic investments to make the
Company more competitive during this challenging economic period."
Operating Segment Results MDS Pharma Services % Change (millions of
U.S. dollars) Q2 2009 Q2 2008 Reported
-------------------------------------------------------------------------
Net Revenue Early Stage $ 56 $ 68 (18%) Late Stage 49 60 (18%)
-------------------------------------------------------------------------
105 128 (18%) Reimbursement revenue 25 24
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ 130 $ 152
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted EBITDA $ 3 $ (1) n.m. 3% (1%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
n.m. - not meaningful For the second quarter, MDS Pharma Services
reported adjusted EBITDA of $3 million, compared with a loss of $1
million last year. This $4 million year-over-year increase was
largely due to productivity gains and restructuring savings,
partially offset by lower volumes. Net revenue decreased 18% over
the prior-year period with foreign exchange negatively impacting
revenue by $9 million. In the second quarter, Late Stage declines
were primarily due to lower demand in Central Labs. In Early Stage,
declines were largely driven by lower revenues in bioanalytical
services. MDS Pharma Services recorded new business wins totaling
$114 million, a sequential increase of 10%, compared with new
business wins in the first quarter, but down 31% compared with $165
million of new business wins last year. The sequential improvement
was primarily driven by solid orders in Phase II-IV and Early Stage
bioanalytical services. The year-over-year decline was largely due
to the impact of foreign exchange and slower market demand as
customers reprioritize their research and development (R&D)
projects. Period-end backlog was $442 million, down 11% from $496
million in the prior year. This decrease is primarily related to
changes in foreign exchange and declines in Late Stage, partially
offset by a 10% increase in Early Stage backlog. As part of the
Company's quarterly balance sheet assessment, a non-cash write-down
of $16 million was recorded in the second quarter to reflect the
current fair value of MDS Pharma Services Central Labs fixed
assets. Subsequent to the quarter, as part of its ongoing strategic
review process, MDS announced that it will strategically focus MDS
Pharma Services on the delivery of Early Stage (Discovery through
Phase IIa) services where the Company has a top-three market
position. As a result, MDS intends to sell its Late Stage (Phase
II-IV and Central Labs) operations. On June 1, 2009, the Company
announced an agreement to sell its Phase II-IV operations to INC
Research, Inc. for approximately $50 million, including certain
transition services and customary post-closing contingencies and
adjustments. This sale is expected to close during MDS's fiscal
third quarter of 2009 (the three months ending July 31, 2009). A
suitable buyer is being sought for Central Labs. To further improve
operating performance in a challenging economic environment, to
sharpen the Company's focus on Early Stage, and to reduce overhead
associated with the exit from Late Stage, MDS Pharma Services has
initiated restructuring actions in the third quarter of 2009. MDS
estimates the cost of this restructuring to be approximately $4
million, impacting some 180 people and generating roughly $9
million in annual savings. As the Company plans to sell these
operations, Late Stage will no longer be classified as part of
continuing operations for financial reporting beginning in the
third quarter of 2009. To further build core competencies in Early
Stage, MDS Pharma Services initiated a project in the second
quarter to renovate and expand its preclinical operations in
Taiwan. The expanded facility will double the previous capacity to
better serve emerging demand for services in the Asia-Pacific
region. MDS Nordion % Change (millions of U.S. dollars) Q2 2009 Q2
2008 Reported
-------------------------------------------------------------------------
Net revenue $ 65 $ 80 (19%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted EBITDA $ 23 $ 24 (4%) 35% 30%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MDS Nordion reported adjusted EBITDA of $23 million in the second
quarter, down 4% compared with last year, and included an embedded
derivative gain of $3 million, versus a gain of $2 million last
year. Excluding divestitures and foreign exchange, adjusted EBITDA
increased 12% compared with last year. Revenue for the second
quarter was $65 million, compared with $80 million last year.
Excluding the $10 million negative impact of foreign exchange and
$10 million related to the divestiture of certain product lines,
revenue increased by $4 million, or 6% year-over-year. Excluding
the divestitures and foreign exchange, year-over-year improvement
in revenue and adjusted EBITDA was primarily driven by strength in
medical isotopes. During the quarter, MDS Nordion launched an
improved TheraSphere(R) administration system for physicians.
TheraSphere(R) is a targeted internal radiation therapy for
patients with inoperable, primary liver cancer. The new
administration system allows for safer, faster, and more efficient
administration of TheraSphere(R), providing better treatment
delivery for patients. Subsequent to the quarter, MDS Nordion
commenced the manufacture of Cardiogen-82(R) (Rubidium-82
generators) for Bracco Diagnostics Inc. (Part of Bracco Group).
CardioGen-82 is the only generator-based, cardiac Positron Emission
Tomography (PET) perfusion imaging agent approved by the United
States Food and Drug Administration (FDA). PET is a highly
sensitive medical-imaging technique that produces a
three-dimensional image of the functioning heart, allowing the
cardiologist to identify regions of the heart muscle receiving poor
blood flow. After the end of the quarter, in May 2009, Atomic
Energy of Canada Limited (AECL) announced that its National
Research Universal (NRU) reactor would be out of service for at
least three months. Based on historical EBITDA trends related to
NRU-supplied isotopes, MDS expects the financial impact of this
shutdown to reduce MDS Nordion's adjusted EBITDA by approximately
$4 million for every month the NRU is out of service. MDS is
assessing plans to reduce costs over the extended shutdown period.
MDS Nordion continues to deliver positive EBITDA from sterilization
technologies and radiopharmaceutical product and service lines. MDS
continues to work to secure a long-term reliable supply of medical
isotopes. In 1996, MDS Nordion contracted with AECL to complete and
commission the MAPLE reactors, which were intended to replace the
NRU. In May 2008, this project was unilaterally discontinued by
AECL and the Government of Canada. MDS invested over $350 million
in the MAPLE project, and believes that the completion of the MAPLE
reactors is the best solution to provide global medical isotope
supply. More recently, MDS Nordion urged the AECL and Canadian
Government to consult with international experts and obtain their
assistance to activating the MAPLE project to address the current
medical-isotope supply shortage. In addition, MDS Nordion is
examining longer-term supply alternatives and announced in the
second quarter its collaboration with TRIUMF, Canada's national
laboratory for particle and nuclear physics, to study the
feasibility of producing a viable and reliable supply of photo
fission-based Molybdenum-99. MDS Analytical Technologies % Change
(millions of U.S. dollars) Q2 2009 Q2 2008 Reported
-------------------------------------------------------------------------
Net revenue $ 87 $ 118 (26%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted EBITDA $ 13 $ 17 (24%) 15% 14%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
In the second quarter, MDS Analytical Technologies reported $13
million in adjusted EBITDA, compared with $17 million in the
corresponding quarter last year. Excluding $5 million of
unfavorable impact from foreign exchange, primarily as a result of
hedge positions established in 2008, adjusted EBITDA increased $1
million or 4%, driven by restructuring and productivity savings,
which were largely offset by pricing and lower volumes. For the
quarter, MDS Analytical Technologies reported $87 million in
revenue, down 26% from $118 million in the prior year. The effect
of foreign exchange reduced reported revenue by $11 million, or 9%
year-over-year. Including the impact of foreign exchange, total
end-user revenue decreased 13%, with an 11% decline in mass
spectrometry end-user revenue. Soft end-user demand in
pharmaceutical markets for instruments was the primary driver for
the year-over-year decline in volumes across all product lines. The
Company continues to see growth in applied markets, services and
new products - particularly the recently launched 5500 series of
mass spectrometers, which are being well received by customers. In
the second quarter, MDS Analytical Technologies continued to
introduce innovative technologies and products. The Company and its
joint venture partner, Applied Biosystems (a division of Life
Technologies Corporation) launched the AB SCIEX TOF/TOF(TM) 5800
system - the fastest, most sensitive MALDI-based mass spectrometer
ever built. This system is already commercially available and will
help researchers advance the discovery of biomarkers. MDS
Analytical Technologies and Applied Biosystems also introduced a
new suite of iMethod tests that simplify the use of mass
spectrometry for food and water quality testing, forensic
toxicology and clinical research, and MetaXpressPowerCore(TM) and
MetaXpress(R) 3.0 image acquisition and analysis software, which
are designed to accelerate the throughput of high content screening
and expand toxicity applications. Corporate and Other % Change
(millions of U.S. dollars) Q2 2009 Q2 2008 Reported
-------------------------------------------------------------------------
Selling, general and administration $ (7) $ (7) -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted EBITDA $ (8) $ (6) (33%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Corporate selling, general and administration expenses were $7
million in the second quarter of 2009, level compared with the
second quarter of 2008. These expenses included $3 million in
corporate development costs primarily associated with the sale of
MDS Pharma Services' Phase II-IV operations, which were offset by a
$2 million recovery in stock-based compensation expense. Relative
to cash performance, as of the end of the second quarter, MDS
reported $243 million in cash and cash equivalents, which is
approximately equivalent to the Company's debt position of $276
million minus a government loan of $39 million, which is entirely
offset by a corresponding financial instrument. New Disclosure and
Delivery Method for Reporting Financial Results In the fourth
quarter of 2008, MDS adopted a new approach to releasing quarterly
financial results. The Company no longer uses the newswires to
issue its quarterly Management Discussion and Analysis (MD&A),
and financial statements and notes. For the Company's first, second
and third quarters, the respective MD&A, and financial
statements and notes, which are assessable through this link:
http://www.mdsinc.com/investors/financial_results.asp, will be
posted, concurrently with the press release announcing quarterly
results, to the Company's Website at mdsinc.com, and filed with
Canadian and U.S. securities regulators. For fourth quarter
results, a press release will be issued with expanded disclosure.
However, fourth quarter results will no longer be accompanied by an
MD&A, and financial statements and notes. A comprehensive
MD&A, with financial statements and notes, will be provided on
a year-end basis with the Company's Annual Report, Annual
Information Form and Proxy Circular filings - all of which will
also be posted to mdsinc.com. Conference Call MDS will hold a
conference call today at 9:30 a.m. EDT to discuss second quarter
2009 results. The call will be Webcast live at
http://www.mdsinc.com/ and will also be available in archived
format at
http://www.mdsinc.com/investors/webcasts_presentations.asp after
the call. About MDS MDS Inc. (TSX: MDS; NYSE: MDZ) is a global life
sciences company that provides market-leading products and services
that our customers need for the development of drugs and diagnosis
and treatment of disease. We are a leading global provider of
pharmaceutical contract research, medical isotopes for molecular
imaging, radiotherapeutics, and analytical instruments. MDS has
more than 5,000 highly skilled people in 29 countries. Find out
more at http://www.mdsinc.com/ or by calling 1-888-MDS-7222, 24
hours a day. Caution Concerning Forward-Looking Statements This
document contains forward-looking statements. Some forward-looking
statements may be identified by words like "expects",
"anticipates", "plans", "intends", "indicates" or similar
expressions. The statements are not a guarantee of future
performance and are inherently subject to risks and uncertainties.
MDS's actual results could differ materially from those expressed
in the forward-looking statements due to these risks and a number
of other factors, including, but not limited to, successful
implementation of structural changes, including restructuring plans
and acquisitions, technical or manufacturing or distribution
issues, the competitive environment for MDS's products and
services, the degree of market penetration of its products and
services, the ability to secure a reliable supply of raw materials,
the impact of our clients' exercising rights to delay or cancel
certain contracts, the strength of the global economy, the
stability of global equity markets, the availability and cost of
financing, the impact of the movement of the U.S. dollar relative
to other currencies, particularly the Canadian dollar and the euro,
uncertainties associated with critical accounting assumptions and
estimates, and other factors set forth in reports and other
documents filed by MDS with Canadian and U.S. securities regulatory
authorities from time to time, including MDS's quarterly and annual
MD&A, Annual Information Form, and Annual Report on Form 40-F
for the fiscal year ended October 31, 2008, filed with the U.S.
Securities & Exchange Commission. Also note that all financial
data is now shown on a U.S. GAAP basis. MDS converted to U.S. GAAP
reporting with the filing of the Company's 2007 Annual Report and
financial statements on January 29, 2008. Use of Non-GAAP Financial
Measures Non-GAAP measures, including terms such as net revenue,
adjusted EBITDA, adjusted EPS, new orders and backlog, are used to
explain the operating performance of the Company. These terms are
not defined by GAAP and MDS's use may vary from that of other
companies. MDS uses certain non-GAAP measures so that investors and
analysts have a better understanding of the significant events and
transactions that have had an impact on results, or may have an
impact on MDS's financial outlook. MDS provides a description of
these non-GAAP measures and a reconciliation of these non-GAAP
measures for actual results to GAAP financial results in its
MD&A and Annual Report. MDS Inc. CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION As of As of (UNAUDITED) April 30 October 31
-------------------------------------------------------------------------
(millions of U.S. dollars, except share amounts) 2009 2008
-------------------------------------------------------------------------
ASSETS Current assets Cash and cash equivalents $ 243 $ 117
Accounts receivable, net 223 264 Notes receivable 14 75 Unbilled
revenue 86 86 Inventories, net 88 85 Income taxes recoverable 64 61
Current portion of deferred tax assets 18 20 Prepaid expenses and
other 33 16 Assets held for sale 6 6
-------------------------------------------------------------------------
Total current assets 775 730 Property, plant and equipment, net 278
301 Deferred tax assets 82 95 Long-term investments 25 30 Other
long-term assets 98 108 Intangible assets, net 136 155 Goodwill 455
452
-------------------------------------------------------------------------
Total assets $ 1,849 $ 1,871
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts
payable and accrued liabilities $ 246 $ 266 Current portion of
deferred revenue 93 79 Income taxes payable 9 1 Current portion of
long-term debt 36 19 Current portion of deferred tax liabilities 9
4
-------------------------------------------------------------------------
Total current liabilities 393 369 Long-term debt 240 263 Deferred
revenue 11 10 Other long-term obligations 33 31 Deferred tax
liabilities 81 108
-------------------------------------------------------------------------
Total liabilities 758 781
-------------------------------------------------------------------------
Shareholders' equity Common shares at par - Authorized shares:
unlimited; Issued and outstanding shares: 120,137,229 and
120,137,229 as of April 30, 2009 and October 31, 2008, respectively
489 489 Additional paid-in capital 76 75 Retained earnings 286 301
Accumulated other comprehensive income 240 225
-------------------------------------------------------------------------
Total shareholders' equity 1,091 1,090
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,849 $ 1,871
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MDS Inc. CONSOLIDATED STATEMENTS OF OPERATIONS Three months Six
months (UNAUDITED) ended April 30 ended April 30
-------------------------------------------------------------------------
(millions of U.S. dollars, 2008 2008 except per share amounts) 2009
Restated 2009 Restated
-------------------------------------------------------------------------
Revenues Products $ 135 $ 169 $ 269 $ 320 Services 122 157 245 302
Reimbursement revenues 25 24 43 50
-------------------------------------------------------------------------
Total revenues 282 350 557 672
-------------------------------------------------------------------------
Costs and expenses Direct cost of products 82 106 164 201 Direct
cost of services 77 101 154 193 Reimbursed expenses 25 24 43 50
Selling, general and administration 62 75 122 139 Research and
development 14 22 28 42 Depreciation and amortization 23 23 45 50
Restructuring charges, net - 1 4 1 Change in fair value of embedded
derivatives (3) (3) - 1 Other expenses (income), net 18 (7) 16 (7)
-------------------------------------------------------------------------
Total costs and expenses 298 342 576 670
-------------------------------------------------------------------------
Operating (loss) income (16) 8 (19) 2 Interest expense (5) (3) (10)
(6) Interest income 3 4 6 10 Change in fair value of interest rate
swaps - - - 2 Equity earnings 9 10 15 24
-------------------------------------------------------------------------
(Loss) income before income taxes (9) 19 (8) 32
-------------------------------------------------------------------------
Income tax (expense) recovery - current (2) (3) (12) (25) -
deferred (6) (3) 5 25
-------------------------------------------------------------------------
(8) (6) (7) -
-------------------------------------------------------------------------
Net (loss) income $ (17) $ 13 $ (15) $ 32
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted (loss) earnings per share $ (0.15) $ 0.11 $
(0.13) $ 0.27
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MDS Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS Three months Six
months (UNAUDITED) ended April 30 ended April 30
-------------------------------------------------------------------------
2008 2008 (millions of U.S. dollars) 2009 Restated 2009 Restated
-------------------------------------------------------------------------
Operating activities Net (loss) income $ (17) $ 13 $ (15) $ 32
Adjustments to reconcile net (loss) income to cash provided by
(used in) operating activities: Items not affecting current cash
flows 43 (3) 52 22 Changes in non-cash operating assets and
liabilities 71 4 98 (134)
-------------------------------------------------------------------------
Cash provided by (used in) operating activities 97 14 135 (80)
-------------------------------------------------------------------------
Investing activities Purchase of property, plant and equipment (7)
(15) (14) (28) Proceeds on sale of property, plant and equipment -
2 3 3 Proceeds on sale of short-term investments - - - 101 Proceeds
on sale of long-term investment - 4 - 7 Decrease (increase) in
restricted cash - (2) 8 (3) Other - (2) - (2)
-------------------------------------------------------------------------
Cash (used in) provided by investing activities (7) (13) (3) 78
-------------------------------------------------------------------------
Financing activities Repayment of long-term debt (1) (1) (7) (81)
Issuance of shares - 4 - 5 Repurchase of shares - (12) - (17)
-------------------------------------------------------------------------
Cash used in financing activities (1) (9) (7) (93)
-------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash and cash
equivalents 5 3 1 (2)
-------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents during the
period 94 (5) 126 (97) Cash and cash equivalents, beginning of
period 149 130 117 222
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 243 $ 125 $ 243 $ 125
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MDS Inc. Consolidated operating highlights and reconciliation of
consolidated adjusted EBITDA (millions of U.S. dollars) Second
Quarter Year-to-date -------------- --------------- 2009 2008 2009
2008
-------------------------------------------------------------------------
$ 282 $ 350 Total revenues $ 557 $ 672 (25) (24) Reimbursement
revenues (43) (50)
-------------------------------------------------------------------------
$ 257 $ 326 Net revenues $ 514 $ 622
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ (17) $ 13 Net (loss) income $ (15) $ 32 8 6 Income tax expense 7
- 2 (1) Interest expense (income), net 4 (4) - - Change in fair
value of interest rate swaps - (2) 23 23 Depreciation and
amortization 45 50
-------------------------------------------------------------------------
16 41 EBITDA 41 76 - 1 Restructuring charges, net 6 1 16 -
Impairment of property, 16 - plant and equipment, net - 3
Write-down of investments 1 3 and valuation provisions - (10)
Change in FDA estimate - (10) - - Loss on sale of business - 2 (1)
(1) Acquisition integration (1) 2
-------------------------------------------------------------------------
$ 31 $ 34 Adjusted EBITDA $ 63 $ 74
-------------------------------------------------------------------------
-------------------------------------------------------------------------
12% 10% Adjusted EBITDA margin 12% 12%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated operating highlights and reconciliation of
consolidated adjusted Earnings Per Share Second Quarter
Year-to-date
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Basic (loss) earnings per share from operations - as reported $
(0.15) $ 0.11 $ (0.13) $ 0.27 Adjusted for: Restructuring charges,
net - 0.01 0.03 0.01 Write-down of investments and valuation
provisions - 0.03 0.01 0.03 Impairment of property, plant and
equipment, net 0.11 - 0.11 - Change in FDA estimate - (0.06) -
(0.06) Change in fair value of interest rate swaps - - - (0.02)
Acquisition integration (0.01) (0.01) (0.01) 0.01 Write-off of tax
assets 0.08 - 0.08 - Tax rate changes - - - (0.09)
-------------------------------------------------------------------------
Adjusted earnings per share from operations $ 0.03 $ 0.08 $ 0.09 $
0.15
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated operating highlights and reconciliation of
consolidated adjusted Income from Continuing Operations (millions
of U.S. dollars) Second Quarter Year-to-date
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
(Loss) income from operations - as reported $ (17) $ 13 $ (15) $ 32
Adjusted for (after tax): Restructuring charges, net - 1 4 1
Write-down of investments and valuation provisions - 3 1 3
Impairment of property, plant and equipment, net 13 - 13 - Change
in FDA estimate - (7) - (7) Change in fair value of interest rate
swaps - - - (2) Acquisition integration (1) (1) (1) 1 Write-off of
tax assets 9 - 9 - Tax rate changes - - - (11)
-------------------------------------------------------------------------
Adjusted income from operations $ 4 $ 9 $ 11 $ 17
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DATASOURCE: MDS Inc. CONTACT: MEDIA: Janet Ko, (905) 267-4226, ;
INVESTORS: Kim Lee, (905) 267-4230,
Copyright