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adobe pdf icon Analogic Announces Financial Results for the Third Quarter Ended April 30, 2014 and Declares Quarterly Cash Dividend

PEABODY, Mass., June 5, 2014 (GLOBE NEWSWIRE) — Analogic Corporation (Nasdaq:ALOG), enabling the world’s medical imaging and aviation security technology, today announced results for its third quarter ended April 30, 2014.

Highlights during the third quarter (comparisons are against Q3 of fiscal 2013) included:

  • Revenue of $124.0 million, down 1%

  • Gross margin of 43%, up 4 points

  • GAAP operating margin of 8%, up 3 pts.; Non-GAAP operating margin of 12%, up 2 pts.

  • GAAP diluted EPS of $0.62; Non-GAAP diluted EPS of $0.94

  • Positive operating cash flow of $17.9 million

Revenue for the third quarter of fiscal 2014 was $124.0 million, a decrease of 1% compared with revenue of $125.8 million in the third quarter of fiscal 2013. GAAP net income for the third quarter of fiscal 2014 was $7.8 million, or $0.62 per diluted share, compared with net income of $5.2 million, or $0.41 per diluted share, in the third quarter of fiscal 2013.

Non-GAAP net income for the third quarter was $11.8 million, or $0.94 per diluted share, compared with $9.6 million, or $0.76 per diluted share, in the prior year’s third quarter. A reconciliation of GAAP to non-GAAP results is included as an attachment to this press release.

For the first nine months of fiscal 2014, revenue totaled $375.6 million, down 2% from the same period in the prior year. Year-to-date GAAP net income was $23.3 million, or $1.84 per diluted share, compared with $19.4 million, or $1.54 per diluted share, from the same period last year. Year-to-date non-GAAP net income was $27.5 million, or $2.17 per diluted share, compared with $29.5 million, or $2.34 per diluted share, in the same period last year.

Jim Green, president and CEO, commented, “In spite of the continued challenges in market conditions that negatively impacted our top line in the third quarter, we improved our operating margins and delivered positive cash flows. As a result of continued healthcare market challenges and delays in airport tenders, the exit from our legacy patient monitoring business and a reduction in funded engineering, we anticipate that fiscal 2014 net revenue will decline mid-single digits from fiscal 2013. We remain focused on profitability and expect to deliver double-digit non-GAAP operating margins this fiscal year.”

Green continued, “We remain optimistic about the future, as our newly released CT platform helps stabilize our medical imaging business, multi-unit international airport tenders drive strong security business sales, and we further expand our fast-growing direct Ultrasound business with the commercialization of the first-ever Sonic Window™ handheld Ultrasound. In addition, we have taken aggressive moves to control costs to offset lower external engineering funding. Finally, we will no longer have the difficult year-over-year comparison related to the exit from the patient monitoring and non-strategic legacy OEM probes. While we face near-term market challenges, we continue to execute on our strategy and remain optimistic about our long-term growth prospects.”

Segment Revenues

Revenue from our Medical Imaging segment was $71.6 million for the third quarter of fiscal 2014, consistent with the same period of fiscal 2013, as growth in MRI sales was offset by lower customer funded engineering and the exit from our legacy patient monitoring product line. Year-to-date, Medical Imaging revenue was $211.5 million, down 7% from the prior year.

Our Ultrasound segment revenue was $37.3 million for the third quarter of fiscal 2014, up 10% from revenue of $34.0 million in the same period of fiscal 2013. Solid global direct channel sales in our primary markets of urology and surgery, and our expansion into the point-of-care ultrasound market drove the growth in the quarter, offsetting a decline in legacy Ultrasound OEM probe sales. Year-to-date, Ultrasound revenue was $112.1 million, up 6% from the prior year.

Security Technology segment revenue was $15.1 million for the third quarter of fiscal 2014, down 25% from revenue of $20.1 million in the same period of fiscal 2013. Security revenues during the quarter were lower on fewer shipments of high-speed threat detection systems primarily due to international airport tender delays. Year-to-date, Security Technology revenue was $52.0 million, up 5% from the prior year.

Quarterly Cash Dividend

On June 3, 2014, Analogic’s Board of Directors declared a $0.10 cash dividend for each common share for its third fiscal quarter ended April 30, 2014. The cash dividend will be payable on June 26, 2014, to shareholders of record on June 16, 2014.

Use of Non-GAAP Financial Measures

This document includes non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on our reported results and, therefore, should not be relied upon as the sole financial measures to evaluate our financial results. The non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial results. An explanation and a reconciliation of our non-GAAP measures are provided at the end of this press release.

Forward-Looking Statements

Any statements about future expectations, plans, and prospects for the Company, including statements containing the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including risks relating to product development and commercialization, limited demand for the Company’s products, limited number of customers, risks associated with competition, uncertainties associated with regulatory agency approvals, competitive pricing pressures, downturns in the economy, the risk of potential intellectual property litigation, acquisition related risks, and other factors discussed in our most recent quarterly and annual reports
filed with the Securities and Exchange Commission. In addition, the forward-looking statements included in this presentation represent the Company’s views as of the date of this document. While the Company anticipates that subsequent events and developments will cause the Company’s views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the Company’s views as of any later date.

Conference Call

Analogic will conduct an investor conference call on Thursday, June 5, at 5:00 p.m. (ET) to discuss the third quarter results. To participate in the conference call, dial 1-866-823-6992, or 1-334-323-7225 for international callers, approximately ten minutes before the conference is scheduled to begin. Inform the operator that you wish to join the Analogic conference, passcode 42748. You will then be asked for your name, organization, and telephone number, and be connected to the conference. The earnings release and, just prior to the call, presentation materials related to the quarterly financial information will be posted on the Company’s website at http://investor.analogic.com/.

The call will also be available via webcast in listen-only mode. To listen to the webcast, visit investor.analogic.com approximately five to ten minutes before the conference is scheduled to begin. A telephone digital replay will be available approximately two hours after the call is completed through midnight (ET) July 5, 2014. To access the digital replay, dial 1-877-919-4059 or 1-334-323-0140 for international callers. The passcode is 88492660.

A replay of the conference call webcast will be archived on the Company’s website at www.analogic.com approximately three hours after the call is completed and will be available through midnight (ET) July 5, 2014.

For more information on the conference call, visit www.analogic.com, call 978-326-4058, or email investorrelations@analogic.com.

About Analogic

Analogic (Nasdaq:ALOG) provides leading-edge healthcare and security technology solutions to advance the practice of medicine and save lives. We are recognized around the world for advanced imaging systems and technology that enable computed tomography (CT), ultrasound, digital
mammography, and magnetic resonance imaging (MRI), as well as automated threat detection for aviation security. Our CT, MRI, digital mammography, and ultrasound transducer products are sold to original equipment manufacturers (OEMs), providing state-of-the-art capability and enabling them to enter new markets and expand their existing market presence. Our market-leading BK Medical and Ultrasonix branded ultrasound systems, used in procedure-driven markets such as urology, surgery, and point-of-care, are sold to clinical end users through our direct sales force. For over 40 years we’ve enabled customers to thrive, improving the health and enhancing the safety of people around the world. Analogic is headquartered just north of Boston, Massachusetts. For more information, visit www.analogic.com.

Analogic is a registered trademark of Analogic Corporation.

The globe logo is a trademark of Analogic Corporation.

 

 

     
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 

       

 

Three Months Ended Nine Months Ended

(In thousands, except per share data)

April 30, 2014 April 30, 2013 April 30, 2014 April 30, 2013

 

 

 

 

 

Net revenue:

 

 

 

 

Product

 $122,067

 $121,188

 $369,992

 $366,498

Engineering

 1,965

4,577

 5,559

 17,688

Total net revenue

 124,032

125,765

 375,551

 384,186

Cost of sales:

 

 

 

 

Product

 68,717

72,341

 213,110

 218,355

Engineering

 1,961

4,284

 5,067

 16,206

Total cost of sales

 70,678

76,625

 218,177

 234,561

 

 

 

 

 

Gross profit

 53,354

49,140

 157,374

 149,625

Operating expenses:

 

 

 

 

Research and product development

 16,915

16,127

 55,795

 46,324

Selling and marketing

 14,338

13,540

 43,603

 37,062

General and administrative

12,764

12,265

 40,624

 37,793

Restructuring

 (80)

 496

 216

 496

Total operating expenses

 43,937

42,428

 140,238

 121,675

 

 

 

 

 

Income from operations

 9,417

6,712

 17,136

 27,950

Other income (expense), net

 882

 190

 104

 (1,118)

 

 

 

 

 

Income before income taxes

 10,299

 6,902

 17,240

 26,832

Provision for (benefit from) income taxes

 2,509

1,678

 (6,089)

 7,418

Net income

 $7,790

 $5,224

 $23,329

 $19,414

 

 

 

 

 

Net income per share

 

 

 

 

Basic

 $0.63

 $0.42

 $1.88

 $1.58

Diluted

 $0.62

 $0.41

 $1.84

 $1.54

 

 

 

 

 

Dividends declared and paid per share

 $0.10

 $0.10

 $0.30

 $0.30

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

Basic

 12,403

 12,305

 12,421

 12,300

Diluted

 12,647

 12,620

 12,679

 12,584

 

 

 

 

 

 

 

 

 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 

   

(In thousands)

   

 

 

 

Assets:

April 30, 2014 July 31, 2013

Cash and cash equivalents

 $119,448

 $113,033

Accounts receivable, net

 94,841

 113,150

Inventory

 120,423

 116,280

Other current assets

 24,899

 17,950

Total current assets

 359,611

 360,413

Property, plant, and equipment, net

 113,622

 110,983

Intangible assets and goodwill, net

 116,405

 105,598

Other non-current assets

 12,804

 10,790

Total Assets

 $602,442

 $587,784

 

 

 

Liabilities and Stockholders’ Equity:

 

 

Accounts payable

 $40,290

 $32,138

Accrued liabilities

 32,692

 42,191

Other current liabilities

 12,472

 16,565

Total current liabilities

 85,454

 90,894

Long-term liabilities

 9,744

 10,494

Stockholders’ equity

 507,244

 486,396

Total Liabilities and Stockholders’ Equity

 $602,442

 $587,784

UNAUDITED SUPPLEMENTAL INFORMATION – RECONCILIATION OF GAAP TO NON-GAAP MEASURES

We provide non-GAAP income from operations, operating margin, other income, net income, and diluted net income per share as supplemental measures to reported results regarding our operational performance. These financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. The adjustments to these financial measures, and the basis for such adjustments, are outlined below:

Share-Based Compensation Expense

We incur expense related to share-based compensation included in the reported presentation of cost of sales, research and development, selling and marketing, and general and administrative expense. Although share-based compensation is an expense and viewed as a form of compensation, these expenses vary in amount from period to period. In addition, fluctuations in market price and volatility of our shares, risk-free interest rates, and the expected term and forfeiture rates of the awards impact the expense period to period. A portion of our equity compensation is performance-based, which drives volatility in expense as estimated performance-based metrics are updated for actual and forecasted results. Our management team believes that exclusion of these expenses allows comparisons of operating results that are consistent between periods and allows comparisons of our operating results to
those of other companies that disclose non-GAAP financial measures that exclude share-based compensation.

BK Medical Distributor Matter Inquiry-Related Costs

As initially disclosed in our annual report on Form 10-K for the fiscal year ended July 31, 2011, we have identified transactions involving our Danish subsidiary, BK Medical, and certain of its foreign distributors, with respect to which we have raised questions concerning compliance with law and our business policies. We have concluded that the identified transactions have been properly accounted for in our reported consolidated financial statements in all material respects. During the three and nine months ended April 30, 2014 we incurred $0.4 million and $1.3 million of pre-tax inquiry-related costs, respectively. We incurred $0.3 million and $0.7 million of pre-tax inquiry-related costs during the three and nine months ended April 30, 2013, respectively.

Acquisition Related Expenses

We incur amortization of intangibles and other expenses related to acquisitions. The intangible assets are valued at the time of acquisition and are amortized over their estimated economic life. We believe the exclusion of these acquisition related expenses allow comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses. On March 2, 2013, we acquired Ultrasonix Medical Corporation and on September 20, 2013 we acquired the remaining 90% equity interest in PocketSonics, Inc. We initially purchased a 10% equity interest in PocketSonics in April 2010. During the three and nine months ended April 30, 2014, we incurred pre-tax acquisition-related expenses associated with the Ultrasonix and PocketSonics acquisitions of $1.5 million and $5.0 million, respectively. The remainder relates to prior acquisitions.

Restructuring
Charges

Through the third quarter of fiscal year 2014, we continued the process of consolidating manufacturing and certain support activities currently conducted at our Ultrasonix facility in Vancouver, Canada with operations at our existing facilities, which we refer to as the Vancouver manufacturing consolidation, which began in fiscal 2013. In addition, we have undertaken other restructuring activities to further streamline our business and realize synergies, including the consolidation of our ultrasound transducer operation in Englewood, Colorado, into our other existing operations, and other efforts to further optimize our global operational footprint. Total pre-tax restructuring charges for the three and nine months ended April 30, 2014 amounted to ($0.1 million) and $0.2 million, respectively.

Taxes

For purposes of calculating non-GAAP net income and non-GAAP diluted earnings per share, we adjust the provision for (benefit from) income taxes to tax effect the non-GAAP adjustments described above as they have a significant impact on our income tax (benefit) provision. In addition, from time-to-time, we recognize certain non-recurring tax adjustments.

During the nine months ended April 30, 2014, we excluded from our non-GAAP results $8.8 million in discrete net tax benefits primarily associated with a reduction in taxes expected to be payable in the future associated with our Canadian operations. These benefits were excluded from our non-GAAP results as the significant benefit recorded in the second quarter of fiscal year 2014 was non-recurring and management believes not helpful in evaluating short-term and longer-term trends in our operations.

Summary

We exclude the above-described expenses, their related tax impact and other non-recurring tax benefits in evaluating short-term and long-term operating trends in our operations, and allocating resources to various initiatives and operational requirements. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making.

These non-GAAP financial measures have not been prepared in accordance with GAAP, and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. Further, these non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. The following table reconciles the non-GAAP financial measures to their most directly comparable GAAP financial measures. 

 

       
NON-GAAP STATEMENTS OF OPERATIONS RECONCILIATION

 

       

(In thousands, except per share data)

Three Months Ended Nine Months Ended

 

April 30, 2014 April 30, 2013 April 30, 2014 April 30, 2013

 

 

 

 

 

GAAP Income From Operations

$9,417

$6,712

$17,136

$27,950

Share-based compensation expense

 2,888

 2,004

 8,727

 7,958

BK distributor matter inquiry related costs

 417

 335

 1,328

 740

Restructuring

 (80)

 496

 216

 496

Acquisition-related expenses

 2,148

 2,646

 6,674

 4,816

Non-GAAP Income From Operations

$14,790

$12,193

$34,081

$41,960

Percentage of Total Net Revenue

11.9%

9.7%

9.1%

10.9%

 

 

 

 

 

GAAP Other Income (Expense), net

$882

$190

$104

($1,118)

Acquisition related loss

 – 

 – 

 484

 – 

Non-GAAP Other Income (Expense), net

$882

$190

$588

($1,118)

Percentage of Total Net Revenue

0.7%

0.2%

0.2%

-0.3%

 

 

 

 

 

GAAP Net Income

$7,790

$5,224

$23,329

$19,414

Share-based compensation expense

 2,064

 1,432

 6,026

 5,469

BK distributor matter inquiry related costs

 263

 215

 844

 476

Restructuring

 (57)

 372

 140

 372

Acquisition related revenues, expenses and loss

 1,772

 2,382

 5,888

 3,781

Tax benefit

 – 

 – 

 (8,764)

 – 

Non-GAAP Net Income

$11,832

$9,625

$27,463

$29,512

Percentage of Total Net Revenue

9.5%

7.7%

7.3%

7.7%

 

 

 

 

 

GAAP Diluted Net Income Per Share

$0.62

$0.41

$1.84

$1.54

Effect of non-GAAP adjustments

$0.32

 0.35

$0.33

$0.80

Non-GAAP Diluted Net Income Per Share

$0.94

$0.76

$2.17

$2.34

CONTACT: For Further Information, Contact:

         

         Mark Namaroff

         Director of Investor Relations

         (978) 326-4058

         investorrelations@analogic.com