IMGC Intermagnetics General

/C O R R E C T I O N -- Intermagnetics General Corporation/ In the news release, Intermagnetics General Corporation (Nasdaq: IMGC) Reports Strong Q3 Net Income, issued yesterday, March 16, by Intermagnetics General Corporation over PR Newswire, we are advised by the company that in the financial table titled INTERMAGNETICS GENERAL CORPORATION Condensed Consolidated Balance Sheets, the line titled TOTAL CURRENT ASSETS in the February 27, 2005 column, should read "113,081" rather than "51,461" as originally issued inadvertently. Complete, corrected release follows: LATHAM, N.Y., March 16 /PRNewswire-FirstCall/ -- Intermagnetics General Corporation (NASDAQ:IMGC), today reported that third-quarter net income increased 55 percent to $8.0 million, or $0.28 per diluted share-excluding the gain on the sale of a division, acquisition- and integration-related expenses and certain non-cash items. That compares with normalized net income of $5.2 million, or $0.20 per diluted share, a year earlier. Reported net income for the quarter ended February 27, 2005, was $24.7 million, or $0.87 per diluted share. Third-quarter net sales were $75.1 million, compared with $43.1 million the prior year. For the first nine months of fiscal 2005, normalized net income before items climbed to $21.5 million, or $0.77 per diluted share from $10 million, or $0.39 per diluted share, for the same normalized period in fiscal 2004. Reported net income for the nine months of fiscal 2005 was $34.2 million, or $1.22 per diluted share. Net sales for the nine-month period totaled $210 million, nearly double the $105.3 million of the year-earlier period. "All of our business segments, both historical and those acquired in 2004, delivered outstanding results, contributing to a quarterly performance that exceeded our earlier expectations," said Glenn H. Epstein, chairman and chief executive officer. "With the Polycold divestiture completed, we now have an established platform to continue growing our Medical Devices businesses. We have diversified our customer base by achieving a better balance in serving both OEMs and end users, added significant new product lines and strengthened a distribution channel that connects us directly with the marketplace. "Our balance sheet also improved substantially as a result of strong cash flow which, coupled with the proceeds from the sale of Polycold, enabled us to pay down the entire 'revolving' portion of our existing $130 million credit facility, leaving about $21 million in long-term debt," Epstein said. "Looking back, our financings related to the 2004 acquisitions of Invivo and MRI Devices totaled around $112 million, so in a little more than a year we have reduced that debt by more than 80 percent. Our interest expense will now be dramatically reduced, and we are extremely well positioned to pursue a range of strategic initiatives to augment the future growth prospects of Intermagnetics." Businesses Deliver Solid Results Epstein remarked that all of the company's business segments had a strong third quarter, exceeding earlier projections of "seasonality" that were expected to affect Q3 revenues, with solid prospects for continued growth. Magnet systems sales rose to $30.1 million, nearly 10 percent over the prior-year third quarter, and contributed a greater than 15 percent increase in operating profit. "Our high-field 3.0 Tesla magnets continue to perform well and provide a clearly differentiated platform for our major magnet customer," Epstein said. "The 1.0 Tesla high-field open magnet continues to draw significant end-user attention and remains on track to move into commercial production during our next fiscal year. We expect record results for this segment during the fourth quarter with year-over-year growth well in excess of 20 percent. In fact, the outlook and product mix for this business have resulted in our initiating a multi-stage capital and personnel expansion plan over the next two years to match production capacity with anticipated increases in demand." Medical Devices sales, boosted by the additional revenue from the former Invivo and MRI Devices businesses, were $35.3 million in the third quarter. Last year's quarterly results included only about one month of Invivo sales and no results from MRID. For the nine months of fiscal 2005, Medical Devices sales were $94.8 million. Year-to-date results in fiscal 2005 include nine months of Invivo operations and slightly more than seven months of MRID operations. "Consolidated segment-wide revenues were ahead of plan during the quarter, as our earlier discussion of seasonality did not diminish Q3 sales as expected," Epstein stated. "We are still observing the yearly cycles in our new business model, but with the favorable Q3 revenue performance, we now expect a relatively modest ramp up of revenues for the balance of the fiscal year. Also, in view of the dynamics of our business model, we are examining the need to 'rebalance' our product portfolio and distribution priorities to maximize the efficiency of our sales and marketing infrastructure. Experience to date, as demonstrated by our above-target gross margin performance, has shown that the unique differentiation of our Diagnostic Imaging product lines have more leverage per incremental sale than typical Patient Care products. This was one of the potential benefits targeted when we created a comprehensive segment management structure within Medical Devices, now under the leadership of the newly appointed president, Mike Mainelli." The divested Polycold Systems subsidiary, formerly comprising the Instrumentation segment, contributed $6.1 million in revenue and about $1.5 million in operating profit during a partial quarter of operations as part of Intermagnetics. Year-to-date sales were $23.4 million, with an operating profit of $6.3 million. "Polycold's order rate and revenues slowed slightly during the quarter and accounted for about $0.03 in earnings per share for the third quarter of fiscal 2005 and nearly $0.15 year-to-date," Epstein said. "By utilizing the proceeds from the divestiture to substantially reduce our debt, we will save approximately $0.05 to $0.07 in interest costs over the coming year. This brings the net effect of the Polycold sale to a reduction of ongoing annualized earnings in the range of $0.08 to $0.10 per share." Intermagnetics' Energy Technology subsidiary, SuperPower, Inc., continued to make substantial progress in developing commercially viable second- generation (2G) High Temperature Superconductor (HTS) wire and related devices. Third-quarter revenue was $3.6 million, compared with $1.5 million the prior year. Intermagnetics' investment in their developmental operations decreased to $1.3 million from $1.7 million as revenue from third-party sources accelerated. SuperPower also recorded new orders during the quarter for ongoing development programs that are expected to support project activities at current run-rates through FY2006. SuperPower is in the major construction and installation phase of the Albany HTS Cable Project, with significant milestones toward the physical demonstration of HTS technology in Niagara Mohawk's power grid scheduled throughout the balance of calendar year 2005. SuperPower also has begun to make deliveries of 2G HTS wire to multiple third-party customers as it prepares to begin commercial operations during 2006. Performance Measures Advance Against Goals "Our overall margins were exceptionally strong during the third quarter due principally to favorable product mix," Epstein said. "This higher-than- target performance had a beneficial impact on many of our operating metrics and resulted from conscious efforts to focus on our most profitable product opportunities. We view these key performance metrics on a normalized basis inclusive of partial-year contributions from Polycold. "Gross margin was 49 percent, well ahead of our recently increased goal of 45 percent," said Epstein. "We now believe that certain areas of our newly evolved business model are capable of sustained margin contributions above the current target, and we are actively reviewing this metric for fiscal year 2006 objectives. This may come with some modest tradeoffs in nearer-term revenue growth, but we believe that targeted investment in the somewhat longer sales cycle of higher margin business to be in the best long-term interest of shareholders." Third-quarter operating income as a percentage of sales was 18 percent, exceeding the company's ongoing target of 15 percent. The company also is actively reviewing this metric, with the objective of raising the target next year as FY06 budgets are finalized. "Return on operating assets reached 58 percent against a goal of 50 percent," Epstein said. "The 50 percent level remains the long-term target for the company, as we currently plan to increase the asset base in our manufacturing infrastructure over the coming year to ensure that we can continue to meet the demands of our key customers." Return on equity continues a favorable trend, 13 percent, versus the recently raised goal of 15 percent. "Our efficiency in utilizing working capital was 17 percent, as we strive for continued improvement toward the goal of requiring less than 15 cents for each dollar of sales," Epstein stated. "One of our objectives remains to adjust the medical devices segment companies' inventories and accounts receivable to the levels that we consider more appropriate for Intermagnetics." Forecast For Fiscal Year 2005 Updated, Ongoing Growth Objectives Reiterated "We remain confident that fiscal 2005 will be a record year across all business segments-with operating EPS in a tightened range of $1.04 to $1.06 per share, including the partial-year Polycold contribution," Epstein said. "Revenues for the year are now anticipated to be about $285 million, versus the previous forecast of $290 million, as we fine-tune product rationalization plans within the Medical Devices business. MRI magnet revenue contributions are expected to be at above-market growth levels. "We also believe that the new portfolio of Intermagnetics' businesses is well positioned to provide 15 percent growth in revenues-based on fiscal year 2005 normalized levels, with Polycold contributions subtracted-of slightly more than $260 million," Epstein said. "We also anticipate enhanced operating leverage from sales growth that should result in 15 to 20 percent growth in operating EPS-also based on fiscal year 2005 normalized levels, with Polycold contributions subtracted and interest savings credited-in the range of $0.94 to $0.98 per share." Operating EPS Reconciliation Information Operating EPS excludes acquisition-related and non-cash performance-based stock compensation and other charges or benefits. Acquisition charges related to Invivo have now been finalized at $0.06 for fiscal 2005, up from the prior estimate of $0.03 due to final inventory and warranty assessments on legacy products that were not attributable to goodwill. Charges related to the acquisition of MRI Devices (MRID) are still expected to total about $0.12 to $0.14 for the year. MRID's non-cash transaction expenses result from a change in accounting for stock distributed to the MRID employee base by the original owners of MRID and a modest write- down of acquired assets (value of MRID name) due to the re-branding of MRID to Invivo Diagnostic Imaging. Charges totaled about $0.09 in the second quarter (including the MRID employee-related stock distribution charge of about $0.04 and about $0.02 resulting from the asset write-down) and about $0.02 in the third quarter with the balance expected to be completed during the fourth quarter. The net benefit of the Polycold divestiture was $0.69 resulting from the gain on the sale and $0.02 of charges not attributable to deal costs, all recognized in Q3. The estimated non-cash charge for Intermagnetics' performance-based restricted stock plan has declined from prior estimates-to about $3.2 million post-tax-based on the closing stock price on March 16, 2005. The company continues to plan charging this $0.12 annualized estimate as evenly as practical over the current fiscal year ($0.03 recognized in Q1, $0.04 in Q2 and $0.02 in Q3). Operating EPS also excludes a non-cash gain of $0.03 resulting from a favorable adjustment to an environmental reserve recognized in Q1. Operating EPS for fiscal 2006 will exclude the estimated non-cash charge for performance-based restricted stock that is currently expected to vest if forecast performance is achieved. A current estimate for the non-cash charge, based on the closing stock price on March 16, 2005, is $5.1 million post-tax, or approximately $0.18 per share expected to be spread evenly over fiscal 2006. Conference Call Tomorrow The company will discuss its third-quarter results as well as other developments during a conference call Thursday, March 17th, beginning at 11 a.m. EST. The call will be broadcast live and archived over the Internet through the company's web site http://www.intermagnetics.com/ under the Investor Relations section. The domestic dial-in number for the live call is (877) 407-8029. The international dial-in number is (201) 689-8029. No conference code is required for the live call. The company will also make available a digital replay beginning Thursday at 2 p.m. EST through midnight March 24, 2005, by dialing (201) 612-7415 - account number 249 and requesting conference 140539. Intermagnetics (http://www.intermagnetics.com/) draws on the financial strength, operational excellence and technical leadership in the market of Magnetic Resonance Imaging (MRI) as well as its expanding businesses within Medical Devices that encompass Invivo Diagnostic Imaging (focusing on MRI components & imaging sub-systems) and Invivo Patient Care (focusing on monitoring & other patient care devices). Intermagnetics is also a prominent participant in superconducting applications for Energy Technology. The company has a more than 30-year history as a successful developer, manufacturer and marketer of superconducting materials, high-field magnets, medical systems & components and other specialized high-value added devices. Safe Harbor Statement: The statements contained in this press release that are not historical fact are "forward-looking statements" which involve various important assumptions, risks, uncertainties and other factors. These forward- looking statements are based on currently available competitive, financial and economic data and management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain and are subject to risks, including but not limited to: the company's ability to meet the performance, quality and price requirements of our customers, develop new products and maintain gross margin levels through continued production cost reductions and manufacturing efficiencies; the ability of the company's largest customer to maintain and grow its share of the market for MRI systems; the company's ability to successfully integrate acquisitions; and the company's ability to invest sufficient resources in and obtain third-party funding for its HTS development efforts and avoid the potential adverse impact of competitive emerging patents; as well as other risks and uncertainties set forth herein and in the company's Annual Report on Forms 10-K and 10-Q. Except for the company's continuing obligation to disclose material information under federal securities law, the company is not obligated to update its forward- looking statements even though situations may change in the future. The company qualifies all of its forward-looking statements by these cautionary statements. INTERMAGNETICS GENERAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended Nine Months Ended February 27, February 22, February 27, February 22, 2005 2004 2005 2004 Revenues $68,974 $37,561 $186,673 $87,332 Cost of revenues 36,535 21,284 99,889 51,806 Gross margin 32,439 16,277 86,784 35,526 Product research and development 6,399 2,952 17,546 8,017 Selling, general and administrative: Stock based compensation 1,064 201 3,757 442 Other selling, general and administrative 15,952 6,782 43,314 15,222 Amortization of intangible assets 1,661 774 4,718 1,671 Impairment of intangible assets 913 25,076 10,709 70,248 25,352 Operating income 7,363 5,568 16,536 10,174 Interest and other income 74 176 486 695 Interest and other expense (1,109) (294) (3,238) (519) Gain on prior period sale of division 1,094 Income from continuing operations before income taxes 6,328 5,450 14,878 10,350 Provision for income taxes 1,481 1,891 4,238 3,591 INCOME FROM CONTINUING OPERATIONS $4,847 $3,559 $10,640 $6,759 Discontinued operations: Income from operations of discontinued subsidiary including gain on sale of $33,375,000 in FY'05 35,133 1,105 40,725 3,360 Provision for income taxes 15,245 383 17,184 1,166 INCOME FROM DISCONTINUED OPERATIONS $19,888 722 $23,541 2,194 NET INCOME $24,735 $4,281 $34,181 $8,953 Basic Net Income per Common Share: Continuing operations $0.17 $0.14 $0.39 $0.27 Discontinued operations 0.71 0.03 0.85 0.09 Basic Net Income per Common Share $0.88 $0.17 $1.24 $0.36 Diluted Net Income per Common Share: Continuing operations $0.17 $0.14 $0.38 $0.27 Discontinued operations 0.70 0.03 0.84 0.09 Diluted Net Income per Common Share $0.87 $0.17 $1.22 $0.35 Shares: Basic 28,020,094 25,120,424 27,563,179 24,971,697 Diluted 28,526,926 25,626,969 28,028,870 25,427,747 INTERMAGNETICS GENERAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (INCL. POLYCOLD)* (Dollars in Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended Nine Months Ended February 27, February 22, February 27, February 22, 2005 2004 2005 2004 Revenues $75,123 $43,133 $210,027 $105,296 Cost of revenues 39,965 24,691 112,645 62,791 Gross margin 35,158 18,442 97,382 42,505 Product research and development 6,545 3,148 18,053 8,815 Selling, general and administrative: Stock based compensation 1,064 201 3,757 442 Other selling, general and administrative 16,754 7,633 46,012 18,002 Amortization of intangible assets 1,671 786 4,752 1,707 Impairment of intangible assets 913 26,034 11,768 73,487 28,966 Operating income 9,124 6,674 23,895 13,539 Interest and other income 74 176 487 695 Interest and other expense (1,112) (295) (3,246) (524) Gain on sale of subsidiary 33,375 33,375 Gain on prior period sale of division 1,094 Income before income taxes 41,461 6,555 55,605 13,710 Provision for income taxes 16,726 2,274 21,424 4,757 NET INCOME $24,735 $4,281 $34,181 $8,953 Earnings per Common Share: Basic $0.88 $0.17 $1.24 $0.36 Diluted $0.87 $0.17 $1.22 $0.35 Shares: Basic 28,020,094 25,120,424 27,563,179 24,971,697 Diluted 28,526,926 25,626,969 28,028,870 25,427,747 * We believe this measure provides shareholders and prospective shareholders with important information that is more representative of the Company's performance. This information is provided to allow the reader to understand the effectiveness or ineffectiveness of the Company by giving a more detailed explanation of revenues, cost of revenues, and expenses. INTERMAGNETICS GENERAL CORPORATION RECONCILING STATEMENTS OF OPERATIONS (INCL. POLYCOLD)* (Dollars in Thousands, Except Per Share Amounts) (Unaudited) Operations without Acquisition, Integration, Sale and Non-cash Three Months Ended Nine Months Ended items: February 27, February 22, February 27, February 22, 2005 2004 2005 2004 Revenues $75,123 $43,133 $210,027 $105,296 Cost of revenues 38,140 24,691 110,608 62,791 Gross margin 36,983 18,442 99,419 42,505 Product research and development 6,545 3,148 18,035 8,815 Selling, general and administrative: 15,111 6,460 40,853 16,829 Amortization of intangible assets 1,671 786 4,752 1,707 23,327 10,394 63,640 27,351 Operating income 13,656 8,048 35,779 15,154 Interest and other income 74 176 487 695 Interest and other expense (1,112) (295) (3,246) (524) Income before income taxes 12,618 7,929 33,020 15,325 Provision for income taxes 4,614 2,751 11,484 5,319 NET INCOME $8,004 $5,178 $21,536 $10,006 Earnings per Common Share: Basic $0.29 $0.21 $0.78 $0.40 Diluted $0.28 $0.20 $0.77 $0.39 Shares: Basic 28,020,094 25,120,424 27,563,179 24,971,697 Diluted 28,526,926 25,626,969 28,028,870 25,427,747 Reconciliation of Financial Three Months Ended Nine Months Ended Statements February 27, February 22, February 27, February 22, to GAAP Equivalent: 2005 2004 2005 2004 Pro-forma net income $8,004 $5,178 $21,536 $10,006 Gain on sale of subsidiary 33,375 33,375 Acquisition and integration related charges (3,468) (1,173) (7,214) (1,173) Non-cash Items: Gain on prior period sale of division 1,094 Stock based compensation (1,064) (201) (3,757) (442) Amortization of intangible assets (913) Provision for taxes relating to pro- forma adjustments (12,112) 477 (9,940) 562 As Reported Net Income $24,735 $4,281 $34,181 $8,953 * We believe this measure provides shareholders and prospective shareholders with important information that is more representative of the Company's performance. This information is provided to allow the reader to understand the effectiveness or ineffectiveness of the Company by giving a more detailed explanation of revenues, cost of revenues, and expenses. INTERMAGNETICS GENERAL CORPORATION Condensed Consolidated Balance Sheets (Dollars in Thousands) (unaudited) February 27, May 30, 2005 2004 ASSETS CURRENT ASSETS Cash and short-term investments $3,719 $11,868 Trade accounts receivable 57,901 41,218 Costs and estimated earnings in excess of billings on uncompleted contracts 692 127 Inventories 39,541 27,037 Income tax receivable 4,285 Prepaid expenses and other 11,228 8,941 TOTAL CURRENT ASSETS 113,081 93,476 PROPERTY, PLANT AND EQUIPMENT, net 41,970 36,736 GOODWILL, INTANGIBLE AND OTHER ASSETS 226,885 154,723 $381,936 $284,935 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $8,169 $4,171 Accounts payable 14,874 10,242 Salaries, wages and related items 14,155 10,799 Customer advances and deposits 2,087 1,302 Product warranty reserve 4,276 3,189 Income tax payable 17,468 Other liabilities and accrued expenses 8,292 11,753 TOTAL CURRENT LIABILITIES 69,321 41,456 LONG-TERM DEBT, less current portion 21,202 57,635 NOTE PAYABLE 5,000 DEFERRED INCOME TAXES 19,450 10,050 DERIVATIVE LIABILITY 83 225 SHAREHOLDERS' EQUITY 266,880 175,569 $381,936 $284,935 INTERMAGNETICS GENERAL CORPORATION SUMMARY OF PERFORMANCE AGAINST GOALS Three Months Ended February 27, February 22, 2005 2004 Goal Gross Margin (2) 49% 43% 45% Operating Income: Percent of Sales (2) 18% 19% 15% Percent of Net Operating Assets (1) (2) 58% 59% 50% Return on Equity (1) (2) 13% 12% 15% Working Capital Efficiency (Working capital, less cash divided by net sales) (1) 17% 13% 15% (1) Based on annualized data (2) Based on normalized data SEGMENT DATA* Three Months Ended February 27, 2005 (Dollars in Thousands) Magnetic Resonance Medical Instrumen- Energy Imaging Devices tation Technology Total Net sales to external customers: Magnet systems $30,128 $30,128 Patient Monitors & RF Coils $35,290 35,290 Refrigeration equipment $6,149 6,149 Other $3,556 3,556 Total 30,128 35,290 6,149 3,556 75,123 Segment operating profit (loss) 8,496 4,977 1,510 (1,327) 13,656 Total assets $290,642 $79,804 $11,490 $381,936 February 22, 2004 Magnetic Resonance Medical Instrumen- Energy Imaging Devices tation Technology Total Net sales to external customers: Magnet systems $27,514 $27,514 Patient Monitors & RF Coils $8,527 8,527 Refrigeration equipment $5,573 5,573 Other $1,519 1,519 Total 27,514 8,527 5,573 1,519 43,133 Segment operating profit (loss) 8,416 576 760 (1,704) 8,048 Total assets $209,861 $44,102 $9,575 $9,324 $272,862 Nine Months Ended February 27, 2005 (Dollars in Thousands) Magnetic Resonance Medical Instrumen- Energy Imaging Devices tation Technology Total Net sales to external customers: Magnet systems $83,736 $83,736 Patient Monitors & RF Coils $94,806 94,806 Refrigeration equipment $23,354 23,354 Other $8,131 8,131 Total 83,736 23,354 8,131 210,027 Segment operating profit (loss) 19,872 14,746 6,333 (5,172) 35,779 Total assets $290,642 $79,804 $11,490 $381,936 February 22, 2004 Magnetic Resonance Medical Instrumen- Energy Imaging Devices tation Technology Total Net sales to external customers: Magnet systems $67,585 $67,585 Patient Monitors & RF Coils $15,218 15,218 Refrigeration equipment $17,965 17,965 Other $4,528 4,528 Total 67,585 15,218 17,965 4,528 105,296 Segment operating profit (loss) 15,792 1,165 2,316 (4,141) 15,132 Total assets $209,861 $44,102 $9,575 $9,324 $272,862 Three Months Ended February 27, 2005 February 22, 2004 Reconciliation of income before income taxes: Total profit from reportable segments $13,656 $8,048 Acquisition / Integration / Sale related charges (3,468) (1,173) Non-cash stock based compensation (1,064) (201) Intercompany profit in ending inventory Net Operating Profit 9,124 6,674 Interest and other income 74 176 Interest and other expense (1,112) (295) Gain on sale of subsidiary 33,375 Adjustment to gain on prior period sale of division Income before income taxes $41,461 $6,555 Nine Months Ended February 27, 2005 February 22, 2004 Reconciliation of income before income taxes: Total profit from reportable segments $35,779 $15,132 Acquisition / Integration / Sale related charges (8,127) (1,173) Non-cash stock based compensation (3,757) (442) Intercompany profit in ending inventory 22 Net Operating Profit 23,895 13,539 Interest and other income 487 695 Interest and other expense (3,246) (524) Gain on sale of subsidiary 33,375 Adjustment to gain on prior period sale of division 1,094 Income before income taxes $55,605 $13,710 * We believe this measure provides shareholders and prospective shareholders with important information that is more representative of the Company's performance. This information is provided to allow the reader to understand the effectiveness or ineffectiveness of the Company by giving a more detailed explanation of revenues, cost of revenues, and expenses. DATASOURCE: Intermagnetics General Corporation CONTACT: Michael Burke, Exec. VP & CFO or Cathy Yudzevich, IR Manager, both of Intermagnetics General Corporation, +1-518-782-1122 Web site: http://www.intermagnetics.com/

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