TORONTO, March 12 /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 January 31, 2009. For the first
quarter, MDS reported total revenue of $275 million, net income of
$2 million and earnings per share of $0.02, including
restructuring. Net revenue was $257 million and adjusted EBITDA was
$32 million, compared with $296 million and $40 million in the
prior year, respectively. For the quarter, the Company announced
adjusted earnings per share of $0.06, compared with $0.07 in the
corresponding period a year ago. Quarterly Highlights - Net revenue
of $257 million, down 13% from $296 million in the prior year.
Excluding the impact of foreign exchange, acquisitions and
divestitures, net revenue decreased 1%. - Adjusted EBITDA of $32
million, down 20% from $40 million in the prior year, while
maintaining a double digit margin of 12%, compared with 14% last
year. - Adjusted earnings per share decreased to $0.06 from $0.07
in the prior year. - Positive cash flow of $32 million increased
period-end cash position to $149 million. - Restructuring and
productivity initiatives implemented to adjust for market softness
generated $14 million in savings. "MDS delivered solid margins in a
difficult economic environment, driven by the Company's
restructuring and productivity actions," said Stephen P. DeFalco,
President and Chief Executive Officer, MDS Inc. "We are focused on
building stronger, more competitive businesses that are better able
to operate in rapidly changing global markets." Operating Segment
Results MDS Pharma Services % Change (millions of U.S. dollars) Q1
2009 Q1 2008 Reported
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Net Revenue Early stage 58 63 (8%) Late stage 48 57 (16%)
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$ 106 $ 120 (12%) Reimbursement revenue 18 26 -
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Total revenue $ 124 $ 146 -
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Adjusted EBITDA $ 8 $ 6 33% 8% 5% -
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For the first quarter, MDS Pharma Services reported adjusted EBITDA
of $8 million, up from $6 million last year and flat sequentially.
The year-over-year increase was largely driven by productivity
gains from restructuring actions initiated in 2008, which were
partially offset by the impact of lower revenue. Net revenue
decreased 12% over the prior year with foreign exchange negatively
impacting revenue by $7 million. In early stage, growth in Phase I
revenue was offset by softness in preclinical and bioanalytical
services. Client delays continue to impact late stage, and
contributed to the year-over-year decline in revenue. MDS Pharma
Services recorded new business wins totaling $104 million, level
compared with first quarter revenues and, down 41% compared with
$177 million of new business wins last year. Sequentially, new
business wins decreased 21%. These declines were primarily driven
by soft late-stage orders as customers continue to delay awards
while reprioritizing their research and development (R&D)
projects. Period-end backlog was $458 million, up 2% from $448
million in the prior year. Excluding the impact of foreign
exchange, backlog is up approximately $35 million or 8% over last
year. As of the end of the first quarter, MDS Pharma Services had
implemented the majority of the workforce reductions associated
with its restructuring initiatives announced in the third quarter
of 2008. A restructuring charge of $1 million was recorded for the
first quarter of 2009. MDS Nordion % Change (millions of U.S.
dollars) Q1 2009 Q1 2008 Reported
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Net revenue $ 66 $ 60 10%
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Adjusted EBITDA $ 18 $ 11 64% 27% 18% -
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MDS Nordion's adjusted EBITDA was $18 million, up 64% from $11
million last year, primarily driven by higher medical isotope
revenue. Foreign currency fluctuations - particularly the
strengthening of the U.S. dollar - reduced adjusted EBITDA by $3
million, and resulted in an unrealized embedded derivative charge
of $5 million versus a $4 million charge last year. Revenue for the
first quarter was $66 million, compared with $60 million last year.
Excluding the $11 million negative impact of foreign exchange and
$7 million related to the divestiture of certain product lines,
revenue increased by $24 million or 48% year-over-year. Revenue
growth was driven by year-over-year strength in medical isotopes
sales resulting from a competitor's nuclear reactor shutdown in
Europe during the first quarter of 2009, and an unscheduled
shutdown of Atomic Energy of Canada Limited's NRU reactor in the
first quarter of 2008. MDS Analytical Technologies % Change
(millions of U.S. dollars) Q1 2009 Q1 2008 Reported
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Net revenue $ 85 $ 116 (27%)
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Adjusted EBITDA $ 13 $ 27 (52%) 15% 23% -
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MDS Analytical Technologies reported $13 million in adjusted
EBITDA, compared with $27 million last year. Declines were
primarily driven by lower revenue and the impact of unfavorable
foreign exchange due to hedge positions established in 2008, which
were partially offset by savings associated with restructuring, the
manufacturing transition to Asia, and a year-over-year reduction in
R&D spending following the completion of key projects in the
second half of 2008. In addition, a $2 million gain on the sale of
land was recorded in the first quarter of 2009. For the quarter,
MDS Analytical Technologies reported $85 million in revenue, down
27% from $116 million in the prior year. The effect of foreign
exchange reduced reported revenue by $10 million, or 9%. Including
the impact of foreign exchange, total end-user revenue decreased
12%, with a 7% decline in mass spectrometry end-user revenue. While
growth in services, Asia and applied markets continued, softening
end-market demand for instruments was the primary driver for the
year-over-year decline in volumes across all product lines. As
previously announced, MDS Analytical Technologies has implemented
restructuring actions to better serve its fastest growing markets
and to further improve profitability. For the first quarter, a $3
million restructuring charge was recorded. In addition, equity
earnings included a $2 million charge representing MDS Analytical
Technologies' share of restructuring initiatives at its joint
venture. Corporate and Other % Change (millions of U.S. dollars) Q1
2009 Q1 2008 Reported
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Selling, general and administration $ (7) $ (5) 40%
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Adjusted EBITDA $ (7) $ (4) 75%
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Corporate selling, general and administration expenses increased to
$7 million in the first quarter of 2009 from $5 million in the
first quarter of 2008. The increase was primarily driven by $4
million of incremental stock-based compensation expense, which was
partially offset by the impact of foreign exchange gains and lower
spending. 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 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 first quarter
2009 results. This 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. MDS Annual and Special Meeting of Shareholders MDS will
also hold its Annual and Special Meeting of Shareholders for
shareholders of record today at 4 p.m. EDT at the Renaissance
Toronto Airport Hotel and Conference Centre. The Meeting will be
Webcast live at mdsinc.com, and will also be available in archived
form at http://www.mdsinc.com/investors/webcasts_presentations.asp
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 The use of 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 (Unaudited) As of As
of January 31 October 31
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(millions of U.S. dollars, except share amounts) 2009 2008
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ASSETS Current assets Cash and cash equivalents $ 149 $ 117
Accounts receivable, net 227 264 Notes receivable 75 75 Unbilled
revenue 92 86 Inventories, net 90 85 Income taxes recoverable 61 61
Current portion of deferred tax assets 20 20 Prepaid expenses and
other 34 17 Assets held for sale 6 6
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Total current assets 754 731 Property, plant and equipment, net 293
301 Deferred tax assets 98 95 Long-term investments 20 30 Other
long-term assets 96 108 Goodwill 452 452 Intangible assets, net 146
155
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Total Assets $ 1,859 $ 1,872
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LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts
payable and accrued liabilities $ 252 $ 267 Current portion of
deferred revenue 84 79 Income taxes payable 16 1 Current portion of
long-term debt 36 19 Current portion of deferred tax liabilities 4
4
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Total current liabilities 392 370 Long-term debt 240 263 Deferred
revenue 13 10 Other long-term obligations 31 31 Deferred tax
liabilities 101 108
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Total liabilities 777 782
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Shareholders' equity Common shares at par - Authorized shares:
unlimited; Issued and outstanding shares: 120,137,229 and
120,137,229 for January 31, 2009 and October 31, 2008, respectively
489 489 Additional paid-in capital 75 75 Retained earnings 303 301
Accumulated other comprehensive income 215 225
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Total shareholders' equity 1,082 1,090
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Total liabilities and shareholders' equity $ 1,859 $ 1,872
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MDS Inc. Consolidated Statements of Operations (Unaudited) Three
months ended January 31
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(millions of U.S. dollars, 2008 except per share amounts) 2009
Restated
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Revenues Products $ 134 $ 151 Services 123 145 Reimbursement
revenues 18 26
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Total revenues 275 322
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Costs and expenses Direct cost of products 82 95 Direct cost of
services 77 92 Reimbursed expenses 18 26 Selling, general and
administration 60 64 Research and development 14 20 Depreciation
and amortization 22 27 Restructuring charges - net 4 - Change in
fair value of embedded derivatives 3 4 Other (income) expenses -
net (2) -
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Total costs and expenses 278 328
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Operating loss (3) (6) Interest expense (5) (3) Interest income 3 6
Change in fair value of interest rate swaps - 2 Equity earnings 6
14
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Income before income taxes 1 13 Income tax (provision) recovery -
current (10) (22) - deferred 11 28
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Net income $ 2 $ 19
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Basic and diluted earnings per share $ 0.02 $ 0.16
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MDS Inc. Consolidated Statements of Cash Flows (Unaudited) Three
months ended January 31
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2008 (millions of U.S. dollars) 2009 Restated
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Cash flows from operating activities Net income for the period $ 2
$ 19
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Adjustments to reconcile net income to cash provided by (used in)
operating activities Items not affecting current cash flows 9 25
Net change in operating assets and liabilities 27 (138)
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Cash provided by (used in) operating activities 38 (94)
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Cash flows from investing activities Purchases of property, plant
and equipment (7) (13) Proceeds on sale of property, plant and
equipment 3 1 Proceeds from sale of businesses and investments - 3
Proceeds on sale of short-term investments - 101 Decrease
(increase) in restricted cash 8 (1)
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Cash provided by investing activities 4 91
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Cash flows from financing activities Repayment of long-term debt
(6) (80) Issuance of Common shares - 1 Repurchase of Common shares
- (5)
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Cash used in financing activities (6) (84)
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Effect of foreign exchange rate changes on cash and cash
equivalents (4) (5)
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Net increase (decrease) in cash and cash equivalents during the
period 32 (92) Cash and cash equivalents, beginning of period 117
222
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Cash and cash equivalents, end of period $ 149 $ 130
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MDS Inc. Consolidated operating highlights and reconciliation of
consolidated adjusted EBITDA First Quarter
------------------------- (millions of U.S. dollars) 2008 2009
Restated
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Total revenues $ 275 $ 322 Reimbursement revenues (18) (26)
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Net revenues $ 257 $ 296
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Income (loss) $ 2 $ 19 Income taxes (1) (6) Net interest expense
(income) 2 (3) Change in fair value of interest rate swaps - (2)
Depreciation and amortization 22 27
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EBITDA 25 35 Restructuring charges - net 6 - Write-down of
investments 1 - Loss on sale of a business/investment and other
long-term assets - 2 Acquisition integration - 3
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Adjusted EBITDA $ 32 $ 40
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Adjusted EBITDA margin 12% 14%
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Consolidated operating highlights and reconciliation of
consolidated adjusted Earnings Per Share First Quarter
------------------------- 2008 2009 Restated
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Basic earnings per share - as reported $ 0.02 $ 0.16 Adjusted for:
Restructuring charges - net 0.03 - Investment write-downs 0.01 -
Change in fair value of interest rate swaps - (0.02) Acquisition
integration - 0.02 Tax rate changes - (0.09)
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Adjusted EPS $ 0.06 $ 0.07
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Consolidated operating highlights and reconciliation of
consolidated adjusted Income from Continuing Operations First
Quarter ------------------------- 2008 (millions of U.S. dollars)
2009 Restated
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Income - as reported $ 2 $ 19 Adjusted for (after tax):
Restructuring charges - net 4 - Investment write-downs 1 - Change
in fair value of interest rate swaps - (2) Acquisition integration
- 2 Tax rate changes - (11)
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Adjusted income $ 7 $ 8
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DATASOURCE: MDS Inc. CONTACT: MEDIA: Janet Ko, (416) 213-4167, ;
INVESTORS: Kim Lee, (416) 213-4721,
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