Hologic to Exchange Notes - Analyst Blog
February 29 2012 - 10:00AM
Zacks
Hologic (HOLX) has
decided to retire $500 million of its 2% convertible senior notes
(due 2037) in exchange of $500 million of 2% convertible senior
notes due 2042. Subsequent to this arrangement, $775 million in
aggregate principal amount of the original notes will remain
outstanding.
The new notes have been issued at a
conversion rate of 32.07698 shares per $1,000 of principal amount
(conversion price of approximately $31.175 per share), which
represents a 45% premium over the closing price of Hologic's share
on February 28, 2012.
Hologic exited the most recent
quarter with cash and cash equivalents of $793.6 million, up 11% on
a sequential basis, primarily driven by strong cash flow from
operations. A strong cash balance enables Hologic to look for
suitable acquisitions to drive growth besides investing in current
technologies and operations.
Major acquisitions in 2011 that are
now playing a significant role in the company’s performance include
Interlace Medical, Healthcome Technology and TCT Medical. This
troika of acquisitions is expected to account for approximately 2%
of the total top-line growth in fiscal 2012.
The Bedford based company in its
effort to reduce leverage is preparing for the possible redemption
of the first tranche of its $1.275 billion convertible notes
(expected to be redeemed in December 2013). With free cash flow of
$97 million in the latest quarter ($112 million of cash flow from
operations less $15 million of capital expenditure), static on a
sequential basis, the company reiterated its free cash flow
guidance of $400–$425 million for fiscal 2012.
Hologic has become an industry
giant in the field of women’s health products with a wide
portfolio. Besides, the Dimensions 3D system is a major
technological breakthrough for the company and should help generate
higher revenues. The company is confident of recording double-digit
compounded growth by 2015 on the back of a strong product
portfolio, international expansion and opportunistic tuck-in
acquisitions. The stock retains a Zacks #2 Rank (Buy) in the short
term.
However, the current economic
uncertainty is taking a toll on Hologic. High unemployment is
forcing many to defer their physician visits, thereby impacting
volumes for NovaSure and Adiana products. A similar scenario has
affected other players in the industry, such as
Conceptus (CPTS) and Cepheid
(CPHD), among others. Over the long term, we are Neutral on
Hologic.
CEPHEID INC (CPHD): Free Stock Analysis Report
CONCEPTUS INC (CPTS): Free Stock Analysis Report
HOLOGIC INC (HOLX): Free Stock Analysis Report
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