MDS Reports Third Quarter 2009 Financial Results



    TORONTO, Sept. 10 /CNW/ - 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 July 31, 2009. MDS
reported total revenue of $199 million, a net loss of $62 million and a loss
per share of $0.51 for the third quarter of 2009, compared with $252 million
in total revenue, a net loss of $10 million and a loss per share of $0.08 for
the same period last year. Current quarter results include non-cash
write-downs for goodwill and fixed assets of $37 million and $7 million, of
which $12 million was reported in discontinued operations. From continuing
operations, MDS reported a net loss of $48 million and a loss per share of
$0.40, versus a net loss of $5 million and a loss per share of $0.04 in 2008.

    
    Quarterly Highlights

    -   Net revenue of $192 million, down 21% from $244 million in the prior
        year. Excluding the impact of foreign exchange and acquisitions, net
        revenue decreased 16%.
    -   Adjusted EBITDA of $8 million, versus $42 million in the prior year.
        Adjusted EBITDA includes an embedded derivative gain of $11 million,
        partially offset by a negative $3 million year-over-year impact of
        foreign exchange.
    -   Adjusted loss per share of $0.15, compared with earnings per share of
        $0.07 in the prior year, primarily driven by lower adjusted EBITDA.
    -   Period-end cash position increased $55 million to $298 million as of
        the end of the third quarter.
    -   Continued actions in an attempt to establish a long-term supply
        solution for Molybdenum-99 include (i) feasibility studies in a
        collaboration with TRIUMF, Canada's national laboratory for particle
        and nuclear physics; (ii) an agreement with the Karpov Institute of
        Physical Chemistry in Russia to assess capability as a potential
        supplier; and (iii) submission to the Government of Canada's Expert
        Review Panel on Medical Isotopes and Technetium-99m to receive
        expertise and guidance from the South African Nuclear Energy
        Corporation to bring the MAPLE reactors online.
    

    "The economic downturn, further softening in demand for contract research
organization services and the unexpected and prolonged shutdown of AECL's
National Research Universal (NRU) reactor created significant challenges for
our business," said Stephen P. DeFalco, President and Chief Executive Officer,
MDS Inc. "We believe the announced strategic repositioning of MDS will unlock
the value of our businesses in the near-term, and provide greater
opportunities for each of our businesses going forward."

    Strategic Repositioning

    On September 2, 2009, MDS announced it had entered into an agreement to
sell its MDS Analytical Technologies business to Danaher Corporation (NYSE:  
DHR) for $650 million in cash, and that it currently intends to return
approximately $400 million to $450 million of the sale proceeds to its
shareholders. Transaction and restructuring costs, associated with the sale,
are expected to be in the range of $45 million to $55 million on a pre-tax
basis, and no cash income taxes are expected. The completion of the sale is
subject to shareholder and regulatory approval, and other closing conditions.
In addition, the Company also announced that it intends to sell its MDS Pharma
Services business, and upon the completion of these transactions would be
focused solely on its MDS Nordion business.
    These decisions follow a comprehensive strategic review by a Special
Committee of independent directors working with Management and financial and
legal advisors. The MDS Inc. Board of Directors believes these actions are in
the best interests of the Company and its shareholders, and unanimously
recommends that shareholders vote in favor of the sale of MDS Analytical
Technologies. A Special Meeting of Shareholders to seek approval of the
proposed sale will be held on October 20, 2009 in Toronto. MDS anticipates
that a management proxy circular will be mailed later this month to
shareholders of record, as of September 14, 2009.


    
    Operating Segment Results

    MDS Pharma Services

                                                        Q3 2008(1)  % Change
    (millions of U.S. dollars)                 Q3 2009   Restated   Reported
    -------------------------------------------------------------------------
    Net revenue                                $    49    $    68       (28%)
    Reimbursement revenue                            7          8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total revenue                              $    56    $    76
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted EBITDA                            $   (14)   $     1       n.m.
                                                  (29%)        1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    n.m. - not meaningful
    (1) The comparative figures have been restated to conform to the current
        year's presentation of discontinued operations.
    

    On June 1, 2009, MDS announced the sale of its Phase II-IV operations to
INC Research, Inc. and its intention to sell the Central Labs operation. As a
result, Late Stage operations were reclassified as part of discontinuing
operations for financial reporting beginning in the third quarter of 2009. As
of the third quarter 2009, MDS Pharma Services results reflect only Early
Stage performance, which now includes certain functional costs previously
allocated to Late Stage operations.
    For the third quarter, MDS Pharma Services reported net revenue of $49
million, a decrease of 28% compared with $68 million last year. The
year-over-year decline was primarily due to lower demand for Phase I and
bioanalytical services as customers continue to reprioritize
research-and-development project pipelines. Adjusted EBITDA was a loss of $14
million. This $15 million year-over-year decrease was driven by a reduction of
revenue and $1 million negative impact from foreign exchange.
    As Early Stage contract research services are shorter term in nature and
do not generate the same degree of backlog as longer term Late Stage
contracts, the Company has discontinued reporting backlog figures. With
respect to orders, MDS Pharma Services recorded new business wins totaling $52
million, a sequential decrease of 15% compared with new business wins in the
second quarter, and down 31% compared with $75 million of new business wins
last year. Sequential and year-over-year declines in new business wins were
primarily due to further softening in customer demand for Phase I services as
customers continue to reprioritize their R&D pipelines in relation to economic
pressures, pharmaceutical company mergers, reduced biotech funding, and
customer concerns regarding uncertainties created by the Company's strategic
review process.
    As part of the Company's quarterly balance sheet assessment, non-cash
write-downs for MDS Pharma Services totaling $32 million were recorded in the
third quarter, which included write-downs for goodwill and fixed assets of $25
million and $7 million, respectively.
    As previously announced, MDS Pharma Services initiated restructuring
actions in the third quarter of 2009, which are expected to impact
approximately 200 people and generate roughly $9 million in annual savings. A
$5 million restructuring charge was recorded in the third quarter. To date,
approximately 50% of the restructuring actions were completed in the third
quarter of 2009. Additional cost reduction and restructuring actions are under
review.
    As part of its strategic repositioning, MDS announced that it is actively
seeking a buyer for its MDS Pharma Services business, which is expected to
provide opportunities to build market leadership and to position the business
to better serve global customers in an increasingly competitive contract
research market. There can be no assurance that MDS will complete a
transaction involving MDS Pharma Services. If MDS determines that there is not
an acceptable transaction for MDS Pharma Services, it intends to retain and
invest in building the business in the attractive market that it serves.


    
    MDS Nordion

                                                                    % Change
    (millions of U.S. dollars)                 Q3 2009    Q3 2008   Reported
    -------------------------------------------------------------------------
    Net revenue                                $    49    $    72       (32%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted EBITDA                            $    21    $    23        (9%)
                                                   43%        32%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    MDS Nordion reported revenue of $49 million in the third quarter, down
32% compared with last year. The year-over-year decline in revenue was
primarily due to the shortage in medical-isotope supply as a result of the
AECL shutdown of the NRU reactor announced May 18, 2009, and the timing of
cobalt shipments. Based on current supply and demand, the Company expects to
see an increase in cobalt volumes in the fourth quarter of 2009. Adjusted
EBITDA for the third quarter was $21 million, including an embedded derivative
gain of $11 million, which resulted from amendments to the Russian Cobalt
Supply contract and the strengthening Canadian dollar this quarter. There was
no impact from embedded derivatives on adjusted EBITDA last year. Excluding
the impact of foreign exchange and the embedded derivative, adjusted EBITDA
decreased $14 million or 61%, compared with last year, driven by the shortfall
in medical isotope and cobalt revenues.
    TheraSphere(R), a targeted internal radiation therapy for patients with
inoperable, primary liver cancer, continued on its growth trajectory
generating 23% year-over-year revenue growth this quarter.
    As part of its strategic repositioning plan, MDS intends to have MDS
Nordion as its sole operating unit with a goal to remain an innovative market
leader delivering strong financial performance.
    As previously reported, AECL announced that its NRU reactor would be out
of service to repair a heavy water leak discovered in May 2009. On August 12,
2009, AECL further clarified that the NRU would be out of service until at
least the first calendar quarter of 2010. 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 Nordion continues to deliver
positive EBITDA from sterilization technologies and radiopharmaceuticals.
    MDS continues to move on alternative paths intended 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
AECL's NRU. In May 2008, this project was unilaterally discontinued by AECL
and the Government of Canada. MDS has 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. MDS Nordion continues to
urge the AECL and Canadian government to consult with international experts
and obtain their assistance to activate the MAPLE reactors. In this regard,
MDS Nordion submitted a proposal to the Government of Canada's Expert Review
Panel on Medical Isotope and Technetium-99m Generator Production. The proposal
outlines how expertise and guidance from the South African Nuclear Energy
Corporation, owner and operator of the SAFARI-I reactor, could help achieve a
technically sound and regulatory-approved solution within an estimated 24
months. In addition, MDS Nordion is examining alternative sources for
long-term supply and announced two new collaborations in the third quarter.
MDS Nordion is working 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 Mo-99. MDS Nordion is also
collaborating with the Karpov Institute of Physical Chemistry in Russia to
study the feasibility of the Karpov Institute providing a viable and reliable
supply of Mo-99.


    
     MDS Analytical Technologies

                                                                    % Change
    (millions of U.S. dollars)                 Q3 2009    Q3 2008   Reported
    -------------------------------------------------------------------------
    Net revenue                                $    94    $   104       (10%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted EBITDA                            $    13    $    21       (38%)
                                                   14%        20%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For the third quarter, MDS Analytical Technologies reported $94 million
in revenue, a sequential increase of 8%, compared with the second quarter of
2009, driven by the strength of the new AB/SCIEX 5500 series mass
spectrometers. On a year-over-year basis, revenue decreased 10%, compared with
a strong third quarter last year. The effect of foreign exchange reduced
reported revenue by $7 million. Including the impact of foreign exchange,
total end-user revenue decreased 15%. End-user demand for instruments from
pharmaceutical markets remained soft and was the primary driver for the
year-over-year decline in volumes across all product lines. In the third
quarter, MDS Analytical Technologies reported $13 million in adjusted EBITDA,
compared with $21 million in the corresponding quarter last year. Excluding
the $1 million of unfavorable impact from foreign exchange, adjusted EBITDA
decreased 29%, driven by pricing and lower volumes, which were partially
offset by restructuring and productivity savings.
    As part of the strategic repositioning of MDS, the Company has entered
into an agreement to sell MDS Analytical Technologies. Under the terms of the
agreement, Danaher will acquire the MDS Analytical Technologies business,
which includes approximately 1,100 employees operating in 10 countries. MDS is
committed to working with Danaher, a strong company with a track record of
successful acquisitions, to achieve a smooth and timely transition for
customers and employees.


    
    Corporate and Other

                                                        Q3 2008(1)  % Change
    (millions of U.S. dollars)                 Q3 2009   Restated   Reported
    -------------------------------------------------------------------------
    Selling, general and administration        $    (8)   $    (4)      100%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted EBITDA                            $   (12)   $    (3)     (300%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The comparative figures have been restated to conform to the current
        year's presentation of discontinued operations.
    

    Corporate selling, general and administration expenses were $8 million in
the third quarter of 2009, compared with $4 million in the third quarter of
2008. This year-over-year increase was primarily due to $1 million of
stock-based compensation expenses recognized this quarter, versus a reported
credit of $4 million in the previous year quarter, and $1 million of corporate
development costs primarily associated with the ongoing strategic review,
partially offset by $1 million of year-over-year cost productivity. In
addition, a $4 million foreign exchange loss was recognized on the revaluation
of certain assets and liabilities in the quarter.
    MDS delivered another strong quarter of cash performance. As of the end
of the third quarter, MDS reported $298 million in cash and cash equivalents,
up $55 million or 23% sequentially, and up $181 million or 155% year-to-date.
Third quarter cash flow included $35 million in proceeds to date from the sale
of MDS Pharma Services Phase II-IV operations.

    Conference Call

    MDS will hold a conference call today at 9:30 a.m. EDT to discuss third
quarter 2009 results.
    The call will be Webcast live at 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 4,200 highly skilled people in 13 countries. Find out more at
www.mdsinc.com or by calling 1-888-MDS-7222, 24 hours a day.

    Caution Concerning Forward-Looking Statements

    From time to time, we make written or oral forward-looking statements
within the meaning of certain securities laws, including under applicable
Canadian securities laws and the "safe harbour" provisions of the U.S. Private
Securities Litigation Reform Act of 1995. This document contains
forward-looking statements, including statements with respect to the impact of
the proposed sale of MDS Analytical Technologies on the Company's operations
and financial results, the strategy of the continuing businesses, the proposed
use of proceeds from the sale of MDS Analytical Technologies, if completed,
the Company's intention to sell other assets of the Company, as well as
statements with respect to our beliefs, plans, objectives, expectations,
anticipations, estimates and intentions. The words "may", "could", "should",
"would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate",
"expect", "intend", "forecast", "objective", "optimistic", and words and
expressions of similar import, are intended to identify forward-looking
statements.
    By their very nature, forward-looking statements involve inherent risks
and uncertainties, both general and specific, which give rise to the
possibility that predictions, forecasts, projections and other forward-looking
statements will not be achieved. We caution readers not to place undue
reliance on these statements as a number of important factors could cause our
actual results to differ materially from the beliefs, plans, objectives,
expectations, anticipations, estimates and intentions expressed in such
forward-looking statements. These factors include, but are not limited to:
management of operational risks; the strength of the global economy, in
particular the economies of Canada, the U.S., the European Union, Asia, and
the other countries in which we conduct business; the stability of global
equity markets; our ability to complete the proposed sale of MDS Analytical
Technologies and the intended sale of MDS Pharma Services in a timely manner,
or at all; our ability to retain customers as a result of any perceived
uncertainty relating to the proposed sale of MDS Analytical Technologies and
the intended sale of MDS Pharma Services; the fact that our operations will be
substantially reduced as a result of the proposed sale of MDS Analytical
Technologies and the intended sale of MDS Pharma Services; our likely need to
negotiate a new credit agreement which may not be on terms favourable to us;
liabilities that we will retain of businesses sold; our ability to complete
other strategic transactions and to execute them successfully; our ability to
remain in compliance with our senior unsecured notes and credit facilities
covenants; our ability to secure a reliable supply of raw materials,
particularly cobalt and critical medical isotopes; the impact of the movement
of certain currencies relative to other currencies, particularly the U.S.
dollar, Canadian dollar and the Euro; changes in interest rates in Canada, the
U.S., and elsewhere; the effects of competition in the markets in which we
operate; the timing and technological advancement of new products introduced
by us or by our competitors; our ability to manage our research and
development; the impact of changes in laws, trade policies and regulations,
and enforcement thereof; regulatory actions; judicial judgments and legal
proceedings; our ability to maintain adequate insurance; our ability to
successfully realign our organization, resources and processes; our ability to
retain key personnel; our ability to have continued and uninterrupted
performance of our information technology systems; our ability to compete
effectively; the risk of environmental liabilities; our ability to maintain
effectiveness of our clinical trials; new accounting standards that impact the
methods we use to report our financial condition; uncertainties associated
with critical accounting assumptions and estimates; the possible impact on our
businesses from third-party special interest groups, certain of our employees
subject to collective-bargaining, environmental and other regulations; natural
disasters; public-health emergencies and pandemics; international conflicts
and other developments including those relating to terrorism; other risk
factors described in section 3.10 of our AIF; and our success in anticipating
and managing these risks.
    The foregoing list of factors that may affect future results is not
exhaustive. When relying on our forward-looking statements to make decisions
with respect to the Company, investors and others should carefully consider
the foregoing factors and other uncertainties and potential events. We do not
undertake to update any forward-looking statement, whether written or oral,
that may be made from time to time by us or on our behalf, except as required
by law.
    Also note that all financial data is 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

    In addition to measures based on U.S. Generally Accepted Accounting
Principles (GAAP) used in this report, the following terms are also used:
adjusted earnings before interest, taxes, depreciation and amortization
(adjusted EBITDA); adjusted EBITDA margin; adjusted earnings per share;
operating working capital; and net revenue. These terms are not defined by
GAAP and our use of such terms may vary from that of other companies. In
addition, measurement of growth is not defined by GAAP and our use of growth
may vary from that of other companies. Where relevant, and particularly for
earnings-based measures, we provide tables in this document that reconcile the
non-GAAP measures used to amounts reported on the face of the consolidated
financial statements. Our executive management team assesses the performance
of our businesses based on a review of results comprising GAAP measures and
these non-GAAP measures. We also report on our performance to the Company's
Board of Directors based on these GAAP and non-GAAP measures. In fiscal 2009,
net revenues, adjusted EBITDA, and operating working capital are the primary
metrics for our annual incentive compensation plan for senior management. In
fiscal 2008, adjusted EBITDA and operating working capital were the primary
metrics for our annual incentive compensation plan for senior management. We
provide this non-GAAP detail so that readers have a better understanding of
the significant events and transactions that have had an impact on our
results, and so that these events and transactions can be viewed from our
management's perspective.


    
    MDS Inc.

    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

                                                            As of      As of
    (UNAUDITED)                                           July 31 October 31
    -------------------------------------------------------------------------
    (millions of U.S. dollars, except share amounts)         2009       2008
    -------------------------------------------------------------------------
    ASSETS
    Current assets
    Cash and cash equivalents                             $   298    $   117
    Accounts receivable, net                                  132        264
    Notes receivable                                           16         75
    Unbilled revenue                                           35         86
    Inventories, net                                           96         85
    Income taxes recoverable                                   48         61
    Current portion of deferred tax assets                     31         20
    Prepaid expenses and other                                 23         16
    Assets held for sale                                       50          6
    -------------------------------------------------------------------------
    Total current assets                                      729        730

    Property, plant and equipment, net                        272        301
    Deferred tax assets                                        62         95
    Long-term investments                                      22         30
    Other long-term assets                                    115        108
    Intangible assets, net                                    128        155
    Goodwill                                                  419        452
    -------------------------------------------------------------------------
    Total assets                                          $ 1,747    $ 1,871
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Accounts payable and accrued liabilities              $   206    $   266
    Current portion of deferred revenue                        35         79
    Income taxes payable                                        1          1
    Current portion of long-term debt                          36         19
    Current portion of deferred tax liabilities                 -          4
    Liabilities held for sale                                  17          -
    -------------------------------------------------------------------------
    Total current liabilities                                 295        369

    Long-term debt                                            245        263
    Deferred revenue                                           15         10
    Other long-term obligations                                35         31
    Deferred tax liabilities                                   89        108
    -------------------------------------------------------------------------
    Total liabilities                                         679        781
    -------------------------------------------------------------------------

    Shareholders' equity
    Common shares at par  - Authorized shares: unlimited;
    Issued and outstanding shares: 120,137,229 and
    120,137,229 as of July 31, 2009 and October 31, 2008,
    respectively (Note 14)                                    489        489
    Additional paid-in capital                                 77         75
    Retained earnings                                         224        301
    Accumulated other comprehensive income                    278        225
    -------------------------------------------------------------------------
    Total shareholders' equity                              1,068      1,090
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity            $ 1,747    $ 1,871
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    MDS Inc.

    CONSOLIDATED STATEMENTS OF OPERATIONS

                                          Three months           Nine months
    (UNAUDITED)                          ended July 31         ended July 31
    -------------------------------------------------------------------------
    (millions of U.S. dollars,                                          2008
     except per share amounts)         2009       2008       2009   Restated
    -------------------------------------------------------------------------
    Revenues
      Products                      $   125    $   155    $   394    $   475
      Services                           67         89        215        274
      Reimbursement revenues              7          8         21         24
    -------------------------------------------------------------------------
    Total revenues                      199        252        630        773
    -------------------------------------------------------------------------

    Costs and expenses
      Direct cost of products            81         95        245        296
      Direct cost of services            44         53        130        156
      Reimbursed expenses                 7          8         21         24
      Selling, general and
       administration                    57         53        156        173
      Research and development           16         19         44         61
      Depreciation and amortization      21         23         62         70
      Impairment of goodwill             25          -         25          -
      Restructuring charges, net          5          6          9          6
      Change in fair value of
       embedded derivatives             (11)         -         (9)         2
      Other expenses (income), net        7         10          7          3
    -------------------------------------------------------------------------
    Total costs and expenses            252        267        690        791
    -------------------------------------------------------------------------

    Operating loss from continuing
     operations                         (53)       (15)       (60)       (18)

    Interest expense                     (3)        (5)       (13)       (11)
    Interest income                       -          3          6         13
    Change in fair value of interest
     rate swaps                           -          -          -          2
    Equity earnings                       9         14         24         38
    -------------------------------------------------------------------------
    (Loss) income from continuing
     operations before income taxes     (47)        (3)       (43)        24
    -------------------------------------------------------------------------

    Income tax (expense) recovery
      - current                          11         (1)        (3)       (24)
      - deferred                        (12)        (1)        (7)        24
    -------------------------------------------------------------------------
                                         (1)        (2)       (10)         -
    -------------------------------------------------------------------------
    (Loss) income from continuing
     operations                         (48)        (5)       (53)        24

    Loss from discontinued
     operations,
     net of income taxes                (14)        (5)       (24)        (2)
    -------------------------------------------------------------------------
    Net (loss) income               $   (62)   $   (10)   $   (77)   $    22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted (loss)
     earnings per share
      - from continuing operations  $ (0.40)   $ (0.04)   $ (0.44)   $  0.20
      - from discontinued
        operations                    (0.11)     (0.04)     (0.20)     (0.01)
    -------------------------------------------------------------------------
    Basic and diluted (loss)
     earnings per share             $ (0.51)   $ (0.08)   $ (0.64)   $  0.19
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    MDS Inc.

    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                          Three months           Nine months
    (UNAUDITED)                          ended July 31         ended July 31
    -------------------------------------------------------------------------
                                                                        2008
    (millions of U.S. dollars)         2009       2008       2009   Restated
    -------------------------------------------------------------------------
    Operating activities
    Net (loss) income               $   (62)   $   (10)   $   (77)   $    22
    Adjustments to reconcile net
     (loss) income to cash provided
     by (used in) operating
     activities:
      Items not affecting current
       cash flows                        90         33        142         55
      Changes in non-cash operating
       assets and liabilities            (5)        (6)        93       (140)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     operating activities                23         17        158        (63)
    -------------------------------------------------------------------------
    Investing activities
    Acquisitions                          -        (16)         -        (18)
    Purchase of property, plant
     and equipment                      (11)       (14)       (25)       (42)
    Proceeds on sale of property,
     plant and equipment                  -          -          3          3
    Proceeds on sale of short-term
     investments                          -          -          -        101
    Proceeds on sale of long-term
     investments                          1          1          1          8
    Proceeds on sale of businesses       35         15         35         15
    Decrease (increase) in
     restricted cash                    (10)         1         (2)        (2)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     investing activities                15        (13)        12         65
    -------------------------------------------------------------------------
    Financing activities
    Increase in bank indebtedness         -         15          -         15
    Repayment of long-term debt           -          -         (7)       (81)
    Issuance of shares                    -          1          -          6
    Repurchase of shares                  -        (15)         -        (32)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     financing activities                 -          1         (7)       (92)
    -------------------------------------------------------------------------

    Effect of foreign exchange rate
     changes on cash and cash
     equivalents                         17          -         18         (2)
    -------------------------------------------------------------------------
    Net increase (decrease) in cash
     and cash equivalents during
     the period                          55          5        181        (92)
    Cash and cash equivalents,
     beginning of period                243        125        117        222
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                  $   298    $   130    $   298    $   130
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    MDS Inc.

    Consolidated operating highlights and reconciliation of consolidated
     adjusted EBITDA

    (millions of U.S. dollars)

       Third Quarter                                          Year-to-date
    -------------------                                   -------------------
                2008(1)                                               2008(1)
       2009   Restated                                       2009   Restated
    -------------------------------------------------------------------------
    $   199    $   252   Total revenues                   $   630    $   773
         (7)        (8)  Reimbursement revenues               (21)       (24)
    -------------------------------------------------------------------------
    $   192    $   244   Net revenues                     $   609    $   749
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                         Net (loss) income from
    $   (48)   $    (5)   continuing operations           $   (53)   $    24
          1          2   Income tax expense                    10          -
          3          2   Interest expense (income), net         7         (2)

                         Change in fair value
          -          -    of interest rate swaps                -         (2)
         21         23   Depreciation and amortization         62         70
    -------------------------------------------------------------------------
        (23)        22   EBITDA                                26         90
          5          8   Restructuring charges, net            11          8

                         Impairment of property,
          7         11    plant and equipment, net              7         11

                         Write-down of investments
          -          -    and valuation provisions              1          3
         (7)         -   Change in FDA estimate                (7)       (10)
         25          -   Impairment of goodwill                25          -
          -          1   Loss on sale of business               -          3
          1          -   Acquisition integration                -          2
    -------------------------------------------------------------------------
    $     8    $    42   Adjusted EBITDA                  $    63    $   107
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
         4%        17%   Adjusted EBITDA margin               10%        14%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The comparative figures have been restated to conform to the current
        year's presentation of discontinued operations.



    Consolidated operating highlights and reconciliation of consolidated
     adjusted Earnings Per Share

                                        Third Quarter         Year-to-date
    -------------------------------------------------------------------------
                                                2008(1)               2008(1)
                                       2009   Restated       2009   Restated
    -------------------------------------------------------------------------
    Basic (loss) earnings per
     share from continuing
     operations -  as reported      $ (0.40)   $ (0.04)   $ (0.44)   $  0.20
    Adjusted for:
      Restructuring charges, net       0.03       0.04       0.06       0.04
      Write-down of investments/
       valuation provisions               -          -       0.01       0.03
      Impairment charge of property,
       plant and equipment, net        0.04       0.06       0.04       0.06
      Change in FDA estimate          (0.04)         -      (0.04)     (0.06)
      Impairment of goodwill           0.21          -       0.21          -
      Change in fair value of
       interest rate swaps                -          -          -      (0.02)
      Acquisition integration          0.01          -          -       0.01
      Write-off of tax assets             -          -       0.08          -
      Tax rate changes                    -          -          -      (0.09)
      Loss on sale of business            -       0.01          -       0.01
    -------------------------------------------------------------------------
    Adjusted (loss) earnings per
      share from continuing
      operations                    $ (0.15)   $  0.07    $ (0.08)   $  0.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The comparative figures have been restated to conform to the current
        year's presentation of discontinued operations.



    Consolidated operating highlights and reconciliation of consolidated
     adjusted Income from Continuing Operations

    (millions of U.S. dollars)

                                        Third Quarter         Year-to-date
    -------------------------------------------------------------------------
                                                2008(1)               2008(1)
                                       2009   Restated       2009   Restated
    -------------------------------------------------------------------------
    (Loss) income from continuing
     operations - as reported       $   (48)   $    (5)   $   (53)   $    24
    Adjusted for (after tax):
      Restructuring charges, net          3          5          7          5
      Write-down of investments/
       valuation provisions               -          -          1          3
      Impairment charge of property,
       plant and equipment, net           5          8          5          8
      Change in FDA estimate             (5)         -         (5)        (7)
      Impairment of goodwill             25          -         25          -
      Change in fair value of
       interest rate swaps                -          -          -         (2)
      Acquisition integration             1          -          -          1
      Write-off of tax assets             -          -          9          -
      Tax rate changes                    -          -          -        (11)
      Loss on sale of business            -          1          -          1
    -------------------------------------------------------------------------
    Adjusted (loss) income from
     continuing operations          $   (19)   $     9    $   (11)   $    22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The comparative figures have been restated to conform to the current
        year's presentation of discontinued operations.
    





For further information:

For further information: MEDIA: Janet Ko, (905) 267-4226,
janet.ko@mdsinc.com; INVESTORS: Kim Lee, (905) 267-4230, kim.lee@mdsinc.com

Organization Profile

Nordion Inc.

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