Hologic Announces Fourth Quarter and Fiscal 2007 Operating Results
Revenues, Earnings and Backlog Increase to Record Highs
PRNewswire-FirstCall
BEDFORD, Mass

BEDFORD, Mass, Nov. 6, 2007 /PRNewswire-FirstCall/ -- Hologic, Inc. (NASDAQ: HOLX), a diversified diagnostic and medical product and device company dedicated to serving the heathcare needs of women, today announced its results for the quarter and year ended September 29, 2007.

Highlights of the quarter include:

  • Record revenues of $202.6 million.
  • Record earnings of $32.1 million.
  • Record 351 Selenia full field digital mammography systems installed and recognized as revenue.
  • Record backlog of $240.6 million.
  • Cash balance increases to $100.4 million.
  • Acquisition of BioLucent's MammoPad completed on September 18, 2007 contributes $0.8 million of revenue.

Fourth quarter fiscal 2007 revenues totaled $202,564,000, a 31% increase when compared to revenues of $154,055,000 in the fourth quarter of fiscal 2006. For the fourth quarter of fiscal 2007, Hologic reported net income of $32,110,000, or $0.58 per diluted share, compared with a net loss of $1,473,000, or $0.03 per diluted share, in the fourth quarter of fiscal 2006. The improvement in quarterly earnings primarily reflects the increase in product sales of Selenia™ full-field digital mammography systems in the current quarter as compared to the fourth quarter of fiscal 2006. Included in the fourth quarter of fiscal 2006 results was a charge of $15.1 million attributable to the in-process research and development costs related to the R2 and Suros acquisitions and a gain of $5.1 million from the sale of intellectual property. Included in the current quarter's results are the operations of (i) AEG Elektrofotografie ("AEG"), acquired on May 2, 2006, (ii) R2 Technology, Inc. ("R2"), acquired on July 13, 2006, (iii) Suros Surgical Systems, Inc. ("Suros"), acquired on July 27, 2006 and (iv) BioLucent, Inc. ("BioLucent"), acquired on September 18, 2007.

The Company's non-GAAP adjusted net income for the fourth quarter of fiscal 2007 increased 153% to $35.9 million compared to the Company's non-GAAP adjusted net income of $14.2 million in the fourth quarter of fiscal 2006. The Company's fiscal 2007 fourth quarter non-GAAP adjusted net income excludes the following:

  • a $3.9 million charge to operating expenses to amortize the intangible assets acquired from AEG, BioLucent, Fischer, R2, and Suros; and
  • a $1.4 million charge for stock-based compensation expense.

Non-GAAP adjusted net income is a non-GAAP financial measure. A reconciliation of this adjusted net income to the Company's net income for the fourth quarters of fiscal 2007 and 2006 is set forth in the supplemental disclosure schedule attached to this press release. The Company believes this non-GAAP measure is useful to investors in comparing the results of operations in fiscal 2007 to the comparable period in fiscal 2006 by eliminating certain of the more significant effects of the acquisitions that took place in fiscal 2006, as well as the Company's non-cash compensation expense associated with its stock option and other equity awards. Management uses this non-GAAP financial measure for this purpose, and these amounts are also excluded by the Company when calculating compliance with the Company's financial covenants under its credit facility. When analyzing the Company's operating performance, investors should not consider this non-GAAP measure as a substitute for net income prepared in accordance with GAAP.

For the twelve months ended September 29, 2007, revenues increased 60%, to $738,368,000 compared to revenues of $462,680,000 in the twelve months ended September 30, 2006. For the twelve months ended September 29, 2007, Hologic recognized net income of $94,578,000, or $1.72 per diluted share, compared with net income of $27,423,000, or $0.56 per diluted share, for the comparable twelve-month period in fiscal 2006. As set fourth in the attached reconciliation table, the Company's non-GAAP adjusted net income for fiscal 2007 increased 121% to $110.4 million compared to the Company's non-GAAP adjusted net income of $49.9 million in fiscal 2006.

During the fourth quarter, Hologic recognized as revenue the sale of 351 Selenia full-field digital mammography systems. At September 29, 2007, the Company's backlog for orders of Selenia was 589 systems, and total backlog for all products was $241 million.

"We are very pleased to report record revenues and earnings for the fourth quarter and full 2007 fiscal year," said Jack Cumming, Chief Executive Officer. "Once again, our strong performance is primarily due to the continued increase in sales of Selenia, our full field digital mammography system. A combination of superior technology and increased market demand for newer digital products is fueling our growth. On October 22, 2007, we completed our merger with Cytyc Corporation, creating a global leader in women's healthcare. This marks a new chapter in the history of our company. By combining our products and technologies, we expect to drive enhanced growth and value creation. Management's focus for the coming fiscal year will be to execute our business strategy, to deliver anticipated growth from our acquisitions and to continue to invest in innovation."

Beginning in fiscal 2006, the Company combined its previously reported mammography and digital detector operating segments to better reflect how the Company views its operations and manages its business. Since fiscal 2006, the primary function of the digital detector business is to support the Company's mammography product line.

The Company has three reporting segments: Mammography/Breast Care, Osteoporosis Assessment and All Other. The AEG operation is included in All Other and the BioLucent, R2 and Suros operations are included in Mammography/Breast Care.

Fourth quarter financial overview by segment:

  • Mammography/Breast Care revenues increased 45% to $165,102,000 for the fourth quarter of fiscal 2007 from $114,198,000 for the same period in fiscal 2006. This increase was primarily due to continued increasing sales of Selenia together with R2 CAD software and to a lesser extent, the growth in our service and Suros operations. Operating income for this business segment in the fourth quarter of fiscal 2007 increased to $46,632,000 compared to operating income of $6,435,000 in the fourth quarter of fiscal 2006. The 2006 results include a $15.1 million write-off of in-process R&D and a gain of $5.1 million from the sale of intellectual property. The remaining increase in operating income in the current quarter was primarily due to the significant increase in revenues and the higher gross margins on increased product sales. Mammography/Breast Care costs and expenses in the fourth quarters of fiscal 2007 and 2006 included $1,151,000 and $1,091,000, respectively, of stock-based compensation.
  • Osteoporosis assessment revenues decreased to $15,088,000 for the fourth quarter of fiscal 2007 from $19,195,000 for the same period in fiscal 2006. This decrease was primarily due to a reduction in the number of bone densitometry systems sold in the U.S. as a direct result of decreases in reimbursement and a slight shift to lower-end bone densitometry systems with lower average selling prices. Operating income for this business segment in the fourth quarter of fiscal 2007 was $254,000 compared to operating income of $1,658,000 in the fourth quarter of fiscal 2006 reflecting a shift to more systems with fewer features, lower selling prices and earning lower gross margins which was offset in part by lower operating expenses. Osteoporosis assessment costs and expenses in the fourth quarters of fiscal 2007 and 2006 included $195,000 and $364,000, respectively, of stock-based compensation.
  • All other revenues, which includes the Company's AEG, mini C-arm, extremity MRI, conventional general radiography service and digital general radiography systems businesses, increased 8% to $22,374,000 for the fourth quarter of fiscal 2007 from $20,661,000 for the same period in fiscal 2006. The increase in revenues was primarily due to an increase in the number of mini C-arm systems sold in the current quarter. The operating loss for this business segment in the fourth quarter of fiscal 2007 was $388,000 compared to an operating loss of $533,000 in the fourth quarter of fiscal 2006. Costs and expenses for this business segment in the fourth quarters of fiscal 2007 and 2006 include $67,000 and $57,000, respectively, of stock-based compensation.

Hologic completed its merger with Cytyc Corporation (Nasdaq: CYTC) on October 22, 2007. At closing, Hologic borrowed $2.35 billion under a credit agreement to fund the acquisition and related transaction costs and issued approximately 66 million shares of Common Stock. As of the close of business on November 2, 2007, Hologic had 122,350,318 shares (basic) of Common Stock outstanding. The results of Cytyc's quarter ended September 30, 2007 are not included in the attached financials. Included below are select financial and operational results of Cytyc on a stand-alone basis.

Cytyc's revenue for the quarter ended September 30, 2007, rose 22% to $187.7 million compared to revenue of $154.3 million for the same period of 2006.

Reported operating income for the quarter was $53.6 million, which includes charges of approximately $10.7 million related to settlement costs and costs associated with the Cytyc merger.

Highlights of Cytyc's quarter ended September 30, 2007 include:

  • Domestic surgical products revenue increased 24% over the same period of 2006 to $65.7 million, representing 35% of total Cytyc revenue.
  • International revenue increased 32% over the same period of 2006 to $22.7 million.
  • Domestic diagnostic products revenue increased 18% to $99.3 million, driven by a strong quarter for prenatal products and a 25% increase in ThinPrep® Imaging System revenue over the fourth quarter of 2006.
  • As of September 30, 2007, Cytyc had repaid the remaining balance of $55.2 million borrowed under its line of credit, ending the quarter with a cash balance of $89.8 million.
  • Quest's ThinPrep Imaging system pilot concluded and a phased deployment commenced.
  • The Company shipped the first two revenue generating Cellient™ Automated Cell Block Systems. The Cellient instrument is a fully automated system that allows individual cells or small tissue samples to be process for histological examination.

The following table sets forth Cytyc's revenue by division:

 
Three Months Ended
September 30,
Nine Months Ended
September 30, 2006
 
2007
2006
%
Change
2007
2006
%
Change
 
($ in millions)
 
($ in millions)
 
Domestic Diagnostic Products....
$ 99.3
$ 84.0
18%
$288.8
$248.8
16%
Domestic Surgical Products........
65.7
53.0
24%
190.8
147.7
29%
International...............................
22.7
17.3
32%
65.8
48.7
35%
 
Total Cytyc Revenue..................
187.7
154.3
22%
545.4
445.2
23%
In October 2007, TriPath Imaging, Inc. and Cytyc settled their ongoing patent infringement dispute in which TriPath asserted that Cytyc's ThinPrep Imaging System infringed TriPath's patents, and Cytyc asserted that TriPath's patents were either invalid or non-infringed. Under the terms of the agreement, Cytyc made an upfront payment and will pay TriPath an on-going royalty for a license under certain TriPath's patents. The two parties have also agreed to a non-royalty bearing cross-license of other patents held by each company. The agreement resolves all pending litigation between the parties, and permits Cytyc to continue making, using and selling the ThinPrep Imaging System. Both TriPath and Cytyc are satisfied with the settlement reached, and the parties have agreed that the terms of the settlement shall remain confidential. Further, Cytyc does not believe that the settlement will have a material affect on its business, financial position or results of operations.
Hologic's management will host a conference call today at 9:00 a.m. (Eastern) to discuss fourth quarter and fiscal 2007 operating results. Interested participants may listen to the call by dialing 800-311-8845 or 913-981-4905 for international callers and referencing code 4644467 approximately 15 minutes prior to the call. For those unable to participate in the live broadcast, a replay will be available one hour after the call ends through November 9, 2007 at 888-203-1112 or 719-457-0820 for international callers, access code 4644467. The Company will also provide a live webcast of the call on the investor relations page of the Company's website at www.hologic.com/investor. A replay of the call will also be available on the investor relations page of the Company's website www.hologic.com/investor shortly after the completion of the live broadcast. A power point presentation related to the conference call will be posted in the investor relations page of the Company's website at www.hologic.com/investor.
About Hologic, Inc.
Hologic, Inc. is a diversified diagnostic and medical product and device company dedicated to serving the healthcare needs of women. Historically, we have developed, manufactured and marketed products focused on mammography, breast care and osteoporosis assessment. In October 2007, we completed our business combination with Cytyc Corporation, a company that develops, manufactures and markets a complementary product line covering a range of cancer and women's health applications, including cervical cancer screening, treatment of excessive menstrual bleeding, and radiation treatment of early-stage breast cancer. As a result of our business combination with Cytyc, we have become one of the largest companies in the world focused on creating innovative and clinically effective advanced technologies in women's health.
Hologic, Cytyc, Suros, BioLucent, MammoPad and ThinPrep are registered trademarks and Selenia and R2 are trademarks of the Company.
Forward Looking Disclaimer

This News Release contains forward-looking information that involves risks and uncertainties, including statements regarding the Company's plans, objectives, expectations and intentions. Such statements include, without limitation, statements regarding: the Company's backlog and any implication that the Company's backlog may be indicative of future sales; and expectations regarding future growth and value creation. These forward-looking statements are based upon assumptions made by the Company as of the date hereof and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.

The Company's backlog consists of purchase orders for which delivery is scheduled within the next twelve months, as specified by the customer. In certain circumstances, orders included in backlog may be canceled or rescheduled by customers without significant penalty. Therefore, backlog as of any particular date should not be relied upon as indicative of the Company's net revenues for any future period.

Hologic has recently acquired AEG Elektrofotografie, R2 Technologies, Suros Surgical Systems, BioLucent, Inc. and Cytyc Corporation, and prior to Hologic's acquisition of Cytyc, Cytyc had recently acquired Adiana, Inc. and Adeza BioMedical Corp. Risks and uncertainties relating to these acquisitions could cause actual results to materially differ from those contemplated by the forward-looking statements. Such risks and uncertainties include, without limitation: the ability of Hologic to successfully integrate acquired businesses, which may result in the combined companies not operating as effectively and efficiently as expected; the ability and time it may take to achieve the expected synergies from its acquisitions; the risk that the Company may incur unexpected costs or liabilities in connection with an acquisition; the risk that the combined companies may be adversely affected by future legislative, regulatory, or tax changes as well as other economic, business and/or competitive factors; risks associated with international operations, particularly in respect of the acquisition of AEG, which has headquarters in Germany and operates a manufacturing facility in China; financing risks associated with its acquisition of Cytyc, including risks associated with the Company's significant debt incurred in financing that transaction, and the Company's related obligations to meet financial covenants and payment obligations under the Company's financing arrangements, the restrictive covenants that may limit the Company's ability to engage in advantageous transactions and other risks generally associated with the incurrence of substantial leverage and the limitations resulting from such financing.

Other risks and uncertainties that could adversely affect the Company's business and prospects include without limitation: manufacturing risks that may limit the Company's ability to increase commercial production of the Selenia and other of its digital products, including the Company's reliance on a single source of supply for some key components of its products as well as the need to comply with especially high standards for those components and in the manufacture of digital X-ray products in general; uncertainties inherent in the development of new products and the enhancement of existing products, including technical and regulatory risks, cost overruns and delays; the risk that newly introduced products may contain undetected errors or defects or otherwise not perform as anticipated; the ability of the Company's sales force to successfully service its product offerings; the Company's ability to successfully complete or manage current or future acquisitions, alliances or joint ventures; the Company's ability to predict accurately the demand for its products, and products under development, and to develop strategies to address its markets successfully; the early stage of market development for certain of the Company's products; expenses and uncertainties relating to litigation; use and protection of intellectual property; technical innovations that could render products marketed or under development by the Company obsolete; competition; reimbursement policies for the use of the Company's products and products under development; general worldwide economic conditions and related uncertainties; future legislative, regulatory, or tax changes as well as other economic, business and/or competitive factors; and the effect of exchange rate fluctuations on international operations. The risks included above are not exhaustive. Other factors that could adversely affect the Company's business and prospects are described in the Company's filings with the Securities and Exchange Commission. Hologic expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based.


Contact:
Deborah R. Gordon
Vice President, Investor Relations
Hologic, Inc.
Tel: 781.999.7716


Frances Doria
Director, Investor Relations
Hologic, Inc.
Tel: 781.999.7377