MDS Reports Preliminary Fourth Quarter and Fiscal 2009 Financial Results
As a result of the strategic repositioning announced in
For the fourth quarter of 2009, MDS reported revenues from continuing operations of
Including discontinued operations, MDS reported a loss of
Fourth Quarter 2009 and Selected Fiscal 2009 Highlights
- MDS reported revenues from continuing operations of $51 million for the fourth quarter of 2009, down from revenue of $84 million in the corresponding period in 2008. Excluding the impact of foreign exchange and divestitures, revenues decreased 40%. For the full 2009 fiscal year, the Company reported revenues from continuing operations of $231 million, down from $296 million in the corresponding period in 2008. Excluding the impact of foreign exchange and divestitures, revenues decreased 10%. - MDS recorded adjusted EBITDA from continuing operations of $4 million for the three months ended October 31, 2009, compared to $2 million in the prior year. For the 2009 fiscal year, MDS recorded adjusted EBITDA from continuing operations of $32 million versus $26 million in 2008. - MDS Nordion continued to be adversely impacted by the prolonged shutdown of Atomic Energy of Canada Ltd.'s (AECL) National Research Universal (NRU) reactor. Adjusted EBITDA in the fourth quarter 2009 for MDS Nordion was $11 million, versus $21 million last year. The fourth quarter of 2009 includes an unrealized embedded derivative charge of $1 million versus a charge of $13 million in 2008. For fiscal 2009, MDS Nordion recorded adjusted EBITDA of $73 million, versus $79 million last year. Fiscal 2009 includes an unrealized embedded derivative gain of $8 million, versus a charge of $15 million in 2008. - MDS continues to have a strong cash position, with $298 million as of the end of the fourth quarter of 2009. - On September 2, 2009, MDS entered into an agreement to sell its MDS Analytical Technologies business to Danaher Corporation for $650 million in cash. Following the close of this transaction, the Company currently intends to return approximately $400 million to $450 million of sale proceeds to shareholders by way of a share buyback. Also on September 2, 2009, MDS announced that it intends to sell its remaining MDS Pharma Services business. - On September 17, 2009, the Company announced a CEO transition plan and Steve West, President of MDS Nordion, was appointed Chief Operating Officer of MDS Inc. Subsequent to the end of the quarter, on January 8, 2010, MDS announced the appointment of Mr. West as Chief Executive Officer of MDS Inc., and the departure of President and Chief Executive Officer Stephen P. DeFalco from the Company. MDS also announced that Peter Dans, currently Senior Vice-President, Finance, MDS Inc., will become Chief Financial Officer, effective February 1, 2010. Doug Prince, currently Executive Vice-President and CFO, MDS Inc., is expected to leave the organization in March 2010.
"With the strategic repositioning of MDS under way, we are focused on completing the announced transactions, and on preparing MDS Nordion to become a stand-alone company," said
Operating Segment Results - Continuing Operations
MDS Inc.
Fourth Quarter Fiscal Year ------------------------------------------------------------------------- (millions of Q4 2009 Q4 2008 % Change Q4 2009 Q4 2008 % Change U.S. dollars) Reported Reported ------------------------------------------------------------------------- Revenues $ 51 $ 84 (39%) $ 231 $ 296 (22%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjusted EBITDA $ 4 $ 2 100% $ 32 $ 26 23% 8% 2% 14% 9% ------------------------------------------------------------------------- -------------------------------------------------------------------------
MDS Inc.'s continuing operations consist of the MDS Nordion business, as well as corporate functions reported as Corporate and Other. These functions include finance, information technology, human resources, and certain assets and liabilities expected to be retained by MDS upon the completion of the strategic repositioning plan.
MDS Nordion
Fourth Quarter Fiscal Year ------------------------------------------------------------------------- (millions of Q4 2009 Q4 2008 % Change Q4 2009 Q4 2008 % Change U.S. dollars) Reported Reported ------------------------------------------------------------------------- Revenues $ 51 $ 84 (39%) $ 231 $ 296 (22%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjusted EBITDA $ 11 $ 21 (48%) $ 73 $ 79 (8%) 22% 25% 32% 27% ------------------------------------------------------------------------- -------------------------------------------------------------------------
MDS Nordion's revenue for the fourth quarter of 2009 was
Corporate and Other
Fourth Quarter Fiscal Year ------------------------------------------------------------------------- (millions of Q4 2009 Q4 2008 % Change Q4 2009 Q4 2008 % Change U.S. dollars) Reported Reported ------------------------------------------------------------------------- Selling, general and administration $ (11) $ (19) 42% $ (39) $ (57) 32% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjusted EBITDA $ (7) $ (19) 63% $ (41) $ (53) 23% ------------------------------------------------------------------------- -------------------------------------------------------------------------
Selling, general and administration (SG&A) expenses in the fourth quarter of 2009 were
Operating Segment Results - Discontinued Operations
During fiscal 2009, as a result of the Company's ongoing strategic review process, MDS sold its MDS Pharma Services Phase II-IV and Central Labs operations, and disclosed its intention to sell the remaining MDS Pharma Services Early Stage operations. The Company also announced a sale agreement to sell MDS Analytical Technologies. As a result, the Company has reported the results of operations of MDS Pharma Services and MDS Analytical Technologies as discontinued operations for all periods presented herein.
Discontinued Operations
Fourth Quarter Fiscal Year ------------------------------------------------------------------------- (millions of Q4 2009 Q4 2008 % Change Q4 2009 Q4 2008 % Change U.S. dollars) Reported Reported ------------------------------------------------------------------------- Loss from discontinued operations, net of income taxes $ (39) $ (311) 87% $ (120) $ (307) 61% ------------------------------------------------------------------------- -------------------------------------------------------------------------
In the fourth quarter of 2009, MDS recorded a loss from discontinued operations, net of income taxes, which includes operating results from MDS Analytical Technologies and MDS Pharma Services. In addition, in the fourth quarter, the Company recorded a
In
Consolidated Results of Continuing and Discontinued Operations
(millions of U.S. dollars) Fourth Quarter Fiscal Year ------------------------------------------------------------------------- Q4 2009 Q4 2008 Q4 2009 Q4 2008 ------------------------------------------------------------------------- Revenues from continuing operations $ 51 $ 84 $ 231 $ 296 Operating loss from continuing operations $ (12) $ (353) $ (2) $ (355) Loss from continuing operations $ (19) $ (264) $ (15) $ (246) Loss from discontinued operations, net of income taxes $ (39) $ (311) $ (120) $ (307) Net loss $ (58) $ (575) $ (135) $ (553) Basic and diluted loss per share - from continuing operations $ (0.15) $ (2.19) $ (0.12) $ (2.02) - from discontinued operations $ (0.33) $ (2.58) $ (1.00) $ (2.52) ------------------------------------------------------------------------- Basic and diluted loss per share $ (0.48) $ (4.77) $ (1.12) $ (4.54) ------------------------------------------------------------------------- -------------------------------------------------------------------------
In the fourth quarter of 2009, MDS recorded a consolidated loss from continuing and discontinued operations of
Subsequent Events
On
MDS Strategic Repositioning
On
MDS also announced on
Additional background materials pertaining to the new strategic direction for MDS Inc. can be found on MDS Inc.'s Website at http://www.mdsinc.com/strategic_repositioning_of_mds/index.asp.
Conference Call
MDS will hold a conference call today at
About MDS Inc.
MDS Inc. (TSX: MDS; NYSE: MDZ) is a global life sciences company that provides market-leading products and services that customers need for the development of drugs and the diagnosis and treatment of disease. MDS Inc. is a leading global provider of innovative technologies for use in medical imaging and radiotherapeutics, sterilization, pharmaceutical contract research, and analytical instruments. MDS has more than 3,500 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
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 based on U.S. Generally Accepted Accounting Principles (GAAP). MDS converted to U.S. GAAP reporting with the filing of the Company's 2007 Annual Report and financial statements on
Use of Non-GAAP Financial Measures
In addition to measures based on U.S. 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 (Preliminary and unaudited) ------------------------------------------------------------------------- As of October 31 (millions of U.S. dollars, except share amounts) 2009 2008 ------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 298 $ 117 Accounts receivable 45 49 Notes receivable 16 75 Inventories 28 24 Income taxes recoverable 2 56 Current portion of deferred tax assets 16 22 Other current assets 13 3 Assets of discontinued operations 941 1,245 ------------------------------------------------------------------------- Total current assets 1,359 1,591 Property, plant and equipment 131 124 Deferred tax assets 39 - Long-term investments 6 16 Other long-term assets 91 105 ------------------------------------------------------------------------- Total assets $ 1,626 $ 1,836 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 26 $ 31 Accrued liabilities 82 84 Current portion of deferred revenue 5 6 Current portion of long-term debt 30 17 Liabilities of discontinued operations 214 303 ------------------------------------------------------------------------- Total current liabilities 357 441 Long-term debt 237 257 Deferred revenue 14 9 Deferred tax liabilities - 21 Other long-term liabilities 24 18 ------------------------------------------------------------------------- Total liabilities 632 746 ------------------------------------------------------------------------- Shareholders' equity Common shares at par - Authorized shares: unlimited; Issued and outstanding shares: 120,137,229 and 120,137,229 as of October 31, 2009 and October 31, 2008, respectively 489 489 Additional paid-in capital 79 75 Retained earnings 166 301 Accumulated other comprehensive income 260 225 ------------------------------------------------------------------------- Total shareholders' equity 994 1,090 ------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 1,626 $ 1,836 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MDS Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Preliminary and unaudited) ------------------------------------------------------------------------- Years ended October 31 2009 2008 (millions of U.S. dollars, except per share amounts) ------------------------------------------------------------------------- Revenues $ 231 $ 296 ------------------------------------------------------------------------- Costs and expenses Direct cost of revenues 122 153 Selling, general and administration 79 105 Research and development 3 3 Depreciation and amortization 24 25 MAPLE Facilities write-off - 341 Restructuring charges, net 9 1 Change in fair value of embedded derivatives (8) 15 Other expenses (income), net 4 8 ------------------------------------------------------------------------- Total costs and expenses 233 651 ------------------------------------------------------------------------- Operating loss from continuing operations (2) (355) Interest expense (8) (3) Interest income 8 12 Change in fair value of interest rate swaps - 2 ------------------------------------------------------------------------- Loss from continuing operations before income taxes (2) (344) ------------------------------------------------------------------------- Income tax expense (recovery) - current 11 33 - deferred 2 (131) ------------------------------------------------------------------------- 13 (98) ------------------------------------------------------------------------- Loss from continuing operations (15) (246) Loss from discontinued operations, net of income taxes (120) (307) ------------------------------------------------------------------------- Net loss $ (135) $ (553) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic loss per share - from continuing operations $ (0.12) $ (2.02) - from discontinued operations (1.00) (2.52) ------------------------------------------------------------------------- Basic loss per share $ (1.12) $ (4.54) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted loss per share - from continuing operations $ (0.12) $ (2.02) - from discontinued operations (1.00) (2.52) ------------------------------------------------------------------------- Diluted loss per share $ (1.12) $ (4.54) ------------------------------------------------------------------------- ------------------------------------------------------------------------- MDS Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Preliminary and unaudited) ------------------------------------------------------------------------- Years ended October 31 2009 2008 (millions of U.S. dollars) ------------------------------------------------------------------------- Operating activities Net loss $ (135) $ (553) Loss from discontinued operations, net of income taxes (120) (307) ------------------------------------------------------------------------- Loss from continuing operations (15) (246) Adjustments to reconcile net loss to cash provided by (used in) operating activities relating to continuing operations: Items not affecting current cash flows 3 243 Changes in operating assets and liabilities 93 (107) ------------------------------------------------------------------------- Cash provided by (used in) operating activities of continuing operations 81 (110) Cash provided by (used in) operating activities of discontinued operations 94 89 ------------------------------------------------------------------------- Cash provided by (used in) operating activities 175 (21) ------------------------------------------------------------------------- Investing activities Purchase of property, plant and equipment (10) (13) Proceeds on sale of property, plant and equipment - 2 Proceeds on sale of short-term investments - 101 Proceeds on sale of long-term investments - 7 Proceeds on sale of businesses - 15 Decrease (increase) in restricted cash (3) 1 ------------------------------------------------------------------------- Cash provided by (used in) investing activities of continuing operations (13) 113 Cash provided by (used in) investing activities of discontinued operations 12 (53) ------------------------------------------------------------------------- Cash provided by (used in) investing activities (1) 60 ------------------------------------------------------------------------- Financing activities Repayment of long-term debt (6) (79) Issuance of shares - 7 Repurchase of shares - (44) ------------------------------------------------------------------------- Cash used in financing activities of continuing operations (6) (116) Cash used in financing activities of discontinued operations (6) (10) ------------------------------------------------------------------------- Cash used in financing activities (12) (126) ------------------------------------------------------------------------- Effect of foreign exchange rate changes on cash and cash equivalents 19 (18) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the year 181 (105) Cash and cash equivalents, beginning of year 117 222 ------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 298 $ 117 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MDS Inc. Consolidated operating highlights from Continuing Operations and reconciliation of consolidated Adjusted EBITDA from Continuing Operations (millions of U.S. dollars) Fourth Quarter Fiscal Year ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- $ 51 $ 84 Total revenues $ 231 $ 296 Net loss from continuing $ (19) $ (264) operations $ (15) $ (246) 7 (89) Income tax expense (recovery) 13 (98) - - Net interest expense (income) - (9) Change in fair value of interest - - rate swaps - (2) 7 6 Depreciation and amortization 24 25 ------------------------------------------------------------------------- $ (5) $ (347) EBITDA $ 22 $ (330) 9 1 Restructuring charges, net 9 1 Write-down of investments and - 7 valuation provisions 1 10 - 341 MAPLE facilities write-off - 341 - - Loss on sale of business - 4 ------------------------------------------------------------------------- $ 4 $ 2 Adjusted EBITDA $ 32 $ 26 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 8% 2% Adjusted EBITDA margin 14% 9% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated operating highlights and reconciliation of consolidated Adjusted Income from Continuing Operations (millions of U.S. dollars) Fourth Quarter Fiscal Year ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- Loss from continuing operations - as reported $ (19) $ (264) $ (15) $ (246) Adjusted for (after tax): Restructuring charges, net 6 1 6 1 Write-down of investments/ valuation provisions - 7 1 10 MAPLE facilities write-down - 246 - 246 Change in fair value of interest rate swaps - - - (2) Write-off of tax assets - - 9 - Tax rate changes - - - (11) Loss on sale of business - - - 2 ------------------------------------------------------------------------- Adjusted (loss) income from continuing operations $ (13) $ (10) $ 1 $ - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated operating highlights and reconciliation of consolidated Adjusted Earnings Per Share Fourth Quarter Fiscal Year ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- Basic loss per share from continuing operations - as reported $ (0.15) $ (2.19) $ (0.12) $ (2.02) Adjusted for: Restructuring charges, net 0.05 0.01 0.05 0.01 Write-down of investments/ valuation provisions - 0.06 0.01 0.08 MAPLE facilities write-down - 2.04 - 2.02 Change in fair value of interest rate swaps - - - (0.02) Write-off of tax assets - - 0.08 - Tax rate changes - - - (0.09) Loss on sale of business - - - 0.02 ------------------------------------------------------------------------- Adjusted (loss) earnings per share from continuing operations $ (0.10) $ (0.08) $ 0.02 $ - ------------------------------------------------------------------------- -------------------------------------------------------------------------
Notes
1. Continuing Operations
Fourth quarter fiscal 2009 compared to the fourth quarter fiscal 2008
Revenues from continuing operations
Revenues from continuing operations in the fourth quarter of fiscal 2009 of
Selling, general and administration (SG&A)
SG&A expenses in the fourth quarter of fiscal 2009 of
Other income (expenses), net
Other income in the fourth quarter of fiscal 2009 of
Net loss
The
Adjusted EBITDA
Adjusted EBITDA in the fourth quarter of fiscal 2009 of
The adjusting items in the fourth quarter of fiscal 2009 include a
The adjusting items in the fourth quarter of fiscal 2008 includes a
2. Discontinued operations
As a result of its ongoing strategic activities, the Company has completed the sale of MDS Pharma Services Phase II-IV and Central Labs operations and announced its intention to sell its remaining MDS Pharma Services Early Stage operations and the planned sale of MDS Analytical Technologies. Each of these divestitures is described in more details below.
Sale of MDS Pharma Services Phase II-IV
On
Total assets disposed of are
As part of the sale of Phase II-IV, the Company signed a Transition Services Agreement (TSA) to provide certain post closing transition services to the buyer for a period of six months from the closing date with an option by the buyer to extend for an additional six months. The total cash consideration includes
Sale of MDS Pharma Services Central Labs
On
As part of the sale of Central Labs, the Company signed a TSA to provide certain post closing transition services to the buyer for a period of six months from the closing date with an option by the buyer to extend for an additional six months. In addition to the total consideration of
Intent to sell MDS Pharma Services Early Stage
On
As of
Sale of MDS Analytical Technologies
On
The Company has reflected the total assets and total liabilities of MDS AT at the lower of their carrying value or fair value less costs to sell as "Assets of discontinued operations" and "Liabilities of discontinued operations" in the consolidated statements of financial position, respectively. The assets included in "Assets of discontinued operations" are not being depreciated. The carrying value of MDS AT's net assets did not exceed its fair value less costs to sell resulting in no write-down of this business as of
3. Restructuring
During the fourth quarter of fiscal 2009, the Company announced a strategic repositioning of its businesses, which resulted in the planned sale of MDS Analytical Technologies and its intention to sell the remaining MDS Pharma Services Early Stage business. As a result of these activities, a pre-tax restructuring charge of
As of
For further information: MEDIA: Janet Ko, (905) 267-4226, [email protected]; INVESTORS: Catherine Love, (905) 267-4230, [email protected]
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