IMGC Intermagnetics General

Intermagnetics Reports Record Quarterly Performance * Sales Exceed $75 Million, Solid Contributions From All Businesses LATHAM, N.Y., Dec. 20 /PRNewswire-FirstCall/ -- Intermagnetics General Corporation (NASDAQ:IMGC), benefiting from its first full quarter of results from its most recently acquired business as well as ongoing strength in "historical" operations, today reported that second-quarter net income increased about 75 percent to $7.9 million, or $0.28 per diluted share, excluding acquisition and integration-related expenses and certain non-cash items. Reported net income for the second quarter ended November 28, 2004 was $4.1 million, or $0.15 per diluted share. All per share amounts have been adjusted for the 3-for-2 stock split completed in August 2004. Second-quarter net sales were $75.2 million, versus $39.9 million last year. For the first six months of fiscal 2005, normalized net income, before items, reached $13.5 million, or $0.49 per diluted share. Reported net income was $9.4 million, or $0.34 per diluted share. Net sales for the six-month period reached nearly $135 million. "We are pleased with the broad-based success of our second-quarter performance," said Glenn H. Epstein, chairman and chief executive officer. "Our revenues are right on target to cyclical expectations and are expected to continue to flow consistently from our continuing businesses going forward. Our new operating business model is also yielding profits and cash flow in line with prior forecasts both from historical and acquired businesses. "The expected $53 million in overall proceeds from our previously announced sale of Polycold, combined with our accelerating free cash flow, will enable us to substantially pay down acquisition-related debt and dramatically reduce interest expenses," Epstein said. "It will also provide us even greater financial flexibility in pursuing strategic initiatives to further grow Intermagnetics." Epstein noted that once the divestiture of Polycold is complete, Intermagnetics will be well- positioned in the Medical Device marketplace with three current businesses: the design, manufacture and sale of superconducting magnets for magnetic resonance imaging (MRI) systems (the Magnet Business Group); the design, manufacture and sale of radio frequency (RF) coils and related sub-systems used by MRI systems (Invivo(TM) Diagnostic Imaging); the design, manufacture and sale of patient monitoring systems (Invivo(TM) Patient Care). In addition, Intermagnetics, subsidiary SuperPower, continues to make substantial progress in developing second-generation (2G), high-temperature superconducting (HTS) materials and related devices designed to enhance capacity, reliability and quality of transmission & distribution of electrical power. Strong Results From All Sectors "All of our businesses continued to report solid results during the second quarter," Epstein said. "Magnet system sales came in at nearly $30 million with operating profit of $6.7 million. Our high-field 3.0 Tesla magnets continue to perform well, as our major OEM customer's integrated system maintains a strong position in the marketplace with excellent growth potential in 2005. The new 1.0 Tesla High-Field Open (HFO) magnet was extraordinarily well received at a recent major trade conference and is also positioned for substantial growth during 2005. Year-to-date sales of magnet systems were about $54 million. Medical Devices sales were $33.6 million, yielding an operating profit of $5.4 million. Results from the acquired Invivo and MRID businesses substantially boosted second-quarter results. Prior year's results consisted only of the former Medical Advances RF coil business, which is now part of Invivo Diagnostic Imaging. Year-to-date sales for the segment were nearly $60 million. The Instrumentation segment, consisting of Polycold Systems, Inc., had another strong quarter, with sales of nearly $9 million and operating profit of $2.3 million. Polycold continues to see demand for vacuum-related products across a broad range of non-semiconductor related customers in Europe, the U.S. and the Pacific Rim. Intermagnetics' Energy Technology subsidiary, SuperPower, Inc., continued to make substantial progress in developing commercially viable 2G HTS wire and related devices. Second-quarter revenue was $3.0 million, more than triple last year's level. Intermagnetics' contribution to support SuperPower's operations was $1.7 million, down from $1.9 million last year-a direct result of improved levels of third-party revenue sources. This trend of reduced year- over-year investment is expected to be repeated in the third quarter. Epstein noted that, effective in the second quarter, Intermagnetics has reconstituted the Magnetic Resonance Imaging reporting segment information to consist solely of magnet systems sales. The Medical Devices reporting segment now includes Invivo Diagnostic Imaging, consisting of RF coils and other components for MRI systems, and Invivo Patient Care, consisting of the patient-monitor business. There were no changes to segment reporting data for Instrumentation or Energy Technology. Balance Sheet Remains Strong, "Reloading" For Future Growth The company reported operating cash flow of about $5 million during the quarter, which when combined with existing cash balances, enabled Intermagnetics to reduce its long-term debt to about $80 million, about $10 million of which was in excess of scheduled requirements. Cash flow generation is expected to accelerate in the third quarter which, when combined with the cash proceeds from the Polycold transaction, will provide even greater flexibility to continue aggressively paying down debt while maintaining the ability to invest in ongoing growth opportunities throughout the operating businesses in addition to other strategic alternatives. Performance Against Goals "We have continued to exceed the gross-margin target of 42 percent that we revised upwards following the Invivo acquisition. This favorable performance is a result of beneficial product mix and ongoing cost-control efforts," Epstein said. "As we mentioned in prior conference calls, we are now prepared to formally revise this particular long-term performance metric to 45 percent. "We believe that this goal is achievable due to the improved mix of products following our acquisitions over the past year and the favorable impact of increasing our percentage of sales to direct, versus OEM, customers." Second-quarter operating income as a percent of sales was 17 percent, exceeding the company's ongoing target of 15 percent, and a 48 percent return on assets was consistent with working towards attaining a long-term goal of 50 percent. Return on equity was 13 percent, versus the recently raised goal of 15 percent. Efficiency in utilizing working capital was 20 percent, still short of the goal of requiring less than 15 cents for each dollar of sales. "We have made some modest improvement over the first quarter in reducing our working capital in the newly acquired businesses," Epstein said. "We continue to place high priority on adjusting the acquired companies' current inventories and accounts receivable to the levels that we consider appropriate for Intermagnetics." Forecast For Fiscal Year Remains On Target, Q3 Outlook Provided "The ongoing strength across all of our business segments continues to reinforce our confidence that fiscal 2005 will be a record year for our remaining historical and newly acquired businesses," Epstein said. "Our prior forecast of consolidated revenues right around $300 million and operating EPS- excluding acquisition-related and non-cash performance-based stock compensation and other charges or benefits-within the previously forecast range of $1.03 to $1.10 remains intact, with the exception that we expect to subtract about $8 to $9 million of Polycold revenue, assuming an on-schedule close, and about $0.03 to $0.04 of operating EPS. Additional information will be provided when the transaction is completed. "Our current outlook for the 'new Intermagnetics' third quarter is for revenue and profit slightly below what we have just achieved in Q2. This is entirely consistent with our prior guidance on the evolving business cycles of our newer markets and customers, and we remain highly confident that the overall financial objectives for the year will be achieved." Operating EPS Reconciliation Information Operating EPS excludes acquisition-related and non-cash performance-based stock compensation and other charges or benefits. Expected acquisition-related charges related to Invivo remain unchanged at around $0.03 about evenly split among the first three quarters of FY2005. Charges related to the acquisition of MRI Devices are still expected to total about $0.12 to $0.14 in 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 $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) with the balance expected in the second half of this fiscal year. The estimated non-cash charge for Intermagnetics' performance-based restricted stock plan remains about $3.8 million post-tax, based on today's closing stock price and current roster of plan participants. The company said it plans to charge this $0.13 annualized estimate as evenly as practical over the balance of the year ($0.03 recognized in Q1, $0.04 recognized in Q2). Operating EPS also excludes a non-cash gain of $0.03 resulting from a favorable adjustment to an environmental reserve recognized in the company's first quarter. Conference Call Tomorrow The company will discuss its second-quarter results as well as other developments during a conference call Tuesday, December 21st, 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) 407-8037. The international dial-in number is (201) 689-8037. No conference code is required for the live call. The company will also make available a digital replay beginning Tuesday at 2 p.m. EST through midnight January 6, 2005, by dialing (201) 612-7415 - account number 2926 and requesting conference 127734. Intermagnetics (http://www.intermagnetics.com/) draws on the financial strength, operational excellence and technical leadership in its expanding businesses within Medical Devices that encompass Magnetic Resonance Imaging Magnet Systems, Invivo Diagnostic Imaging (focusing on MRI components and imaging sub-systems) and Invivo Patient Care (focusing on monitoring and other patient care devices). Intermagnetics is also a key supplier to the markets within Instrumentation and has become 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: possible future legal proceedings; the performance of all closing conditions required for the sale of Polycold, the company's ability to meet the performance, quality and price requirements of our customers 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; continued improvement in order trends from the Instrumentation segment; the company's ability to successfully integrate Invivo Corporation and MRI Devices Corporation; 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 Six Months Ended November 28, November 23, November 28, November 23, 2004 2003 2004 2003 Net sales $75,156 $39,894 $134,904 $62,163 Cost of products sold 39,946 24,316 72,680 38,100 Gross margin 35,210 15,578 62,224 24,063 Product research and development 6,384 2,759 11,508 5,667 Selling, general and administrative 17,744 5,581 29,258 10,369 Stock based compensation 1,566 155 2,693 241 Amortization of intangible assets 1,685 460 3,081 921 Impairment of intangible assets 913 913 28,292 8,955 47,453 17,198 Operating income 6,918 6,623 14,771 6,865 Interest and other income 211 238 413 519 Interest and other expense (1,120) (107) (2,134) (229) Gain on prior period sale of division 1,094 Income before income taxes 6,009 6,754 14,144 7,155 Provision for income taxes 1,875 2,344 4,698 2,483 NET INCOME $4,134 $4,410 $9,446 $4,672 Earnings per Common Share: Basic $0.15 $0.18 $0.35 $0.19 Diluted $0.15 $0.17 $0.34 $0.18 Shares: Basic 27,979,535 25,069,418 27,334,721 24,897,333 Diluted 28,478,513 25,682,126 27,801,185 25,442,393 INTERMAGNETICS GENERAL CORPORATION RECONCILING STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended Six Months Ended November 28, November 23, November 28, November 23, 2004 2003 2004 2003 Operations without Acquisition, Integration, and Non-cash items: Net sales $75,156 $39,894 $134,904 $62,163 Cost of products sold 39,872 24,316 72,468 38,100 Gross margin 35,284 15,578 62,436 24,063 Product research and development 6,384 2,759 11,490 5,667 Selling, general and administrative 14,590 5,581 25,742 10,369 Amortization of intangible assets 1,685 460 3,081 921 22,659 8,800 40,313 16,957 Operating income 12,625 6,778 22,123 7,106 Interest and other income 211 238 413 519 Interest and other expense (1,120) (107) (2,134) (229) Income before income taxes 11,716 6,909 20,402 7,396 Provision for income taxes 3,855 2,398 6,870 2,567 NET INCOME $7,861 $4,511 $13,532 $4,829 Earnings per Common Share: Basic $0.28 $0.18 $0.50 $0.19 Diluted $0.28 $0.18 $0.49 $0.19 Shares: Basic 27,979,535 25,069,418 27,334,721 24,897,333 Diluted 28,478,513 25,682,126 27,801,185 25,442,393 Three Months Ended Six Months Ended November 28, November 23, November 28, November 23, 2004 2003 2004 2003 Reconciliation of Financial Statements to GAAP Equivalent: Pro-forma net income $7,861 $4,511 $13,532 $4,829 Acquisition and integration related charges (3,228) (3,746) Non-cash Items: Gain on prior period sale of division 1,094 Stock based compensation (1,566) (155) (2,693) (241) Amortization of intangible assets (913) (913) Provision for taxes relating to pro-forma adjustments 1,980 54 2,172 84 As Reported Net Income $4,134 $4,410 $9,446 $4,672 INTERMAGNETICS GENERAL CORPORATION Condensed Consolidated Balance Sheets (Dollars in Thousands) (unaudited) November 28, May 30, 2004 2004 ASSETS CURRENT ASSETS Cash and short-term investments $2,756 $11,868 Trade accounts receivable 66,819 41,218 Costs and estimated earnings in excess of billings on uncompleted contracts 124 127 Inventories 36,018 27,037 Income tax receivable 3,414 4,285 Prepaid expenses and other 10,210 8,941 TOTAL CURRENT ASSETS 119,341 93,476 PROPERTY, PLANT AND EQUIPMENT, net 44,439 36,736 GOODWILL, INTANGIBLE AND OTHER ASSETS 235,739 154,723 $399,519 $284,935 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $8,413 $4,171 Accounts payable 17,057 10,242 Salaries, wages and related items 13,112 10,799 Customer advances and deposits 2,625 1,302 Product warranty reserve 3,179 3,189 Other liabilities and accrued expenses 9,977 11,753 TOTAL CURRENT LIABILITIES 54,363 41,456 LONG-TERM DEBT, less current portion 80,037 57,635 NOTE PAYABLE 5,000 DEFERRED INCOME TAXES 20,605 10,050 DERIVATIVE LIABILITY 129 225 SHAREHOLDERS' EQUITY 239,385 175,569 $399,519 $284,935 INTERMAGNETICS GENERAL CORPORATION SUMMARY OF PERFORMANCE AGAINST GOALS Three Months Ended November 28, November 23, 2004 2003 Goal Gross Margin (2) 47% 39% 45% Operating Income: Percent of Sales (2) 17% 17% 15% Percent of Net Operating Assets (1) (2) 48% 55% 50% Return on Equity (1) (2) 13% 11% 15% Working Capital Efficiency (Working capital, less cash divided by net sales) (1) 20% 13% 15% (1) Based on annualized data (2) Based on normalized data SEGMENT DATA Three Months Ended November 28, 2004 Magnetic Resonance Medical Energy Imaging Devices Instrumentation Technology Total (Dollars in Thousands) Net sales to external customers: Magnet systems $29,506 $29,506 Patient Monitors & RF Coils $33,645 33,645 Refrigeration equipment $8,980 8,980 Other $3,025 3,025 Total 29,506 8,980 3,025 75,156 Segment operating profit (loss) 6,685 5,375 2,310 (1,745) 12,625 Total assets $303,537 $74,157 $10,223 $11,602 $399,519 November 23, 2003 Magnetic Resonance Medical Energy Imaging Devices Instrumentation Technology Total Net sales to external customers: Magnet systems $28,310 $28,310 Patient Monitors & RF Coils $4,025 4,025 Refrigeration equipment $6,582 6,582 Other $977 977 Total 28,310 4,025 6,582 977 39,894 Segment operating profit (loss) 7,113 555 963 (1,875) 6,756 Total assets $166,418 $4,855 $9,218 $9,302 $189,793 Six Months Ended November 28, 2004 Magnetic Resonance Medical Energy Imaging Devices Instrumentation Technology Total (Dollars in Thousands) Net sales to external customers: Magnet systems $53,608 $53,608 Patient Monitors & RF Coils $59,516 59,516 Refrigeration equipment $17,205 17,205 Other $4,575 4,575 Total 53,608 17,205 4,575 134,904 Segment operating profit (loss) 11,556 9,591 4,823 (3,847) 22,123 Total assets $303,537 $74,157 $10,223 $11,602 $399,519 November 23, 2003 Magnetic Resonance Medical Energy Imaging Devices Instrumentation Technology Total Net sales to external customers: Magnet systems $40,071 $40,071 Patient Monitors & RF Coils $6,691 6,691 Refrigeration equipment $12,392 12,392 Other $3,009 3,009 Total 40,071 12,392 3,009 62,163 Segment operating profit (loss) 7,375 590 1,556 (2,437) 7,084 Total assets $166,418 $4,855 $9,218 $9,302 $189,793 Three Months Ended November 28, November 23, 2004 2003 Reconciliation of income before income taxes: Total profit from reportable segments $12,625 $6,756 Acquisition / Integration related charges (5,707) (155) Intercompany profit in ending inventory 22 Net Operating Profit 6,918 6,623 Interest and other income 211 238 Interest and other expense (1,120) (107) Adjustment to gain on prior period sale of division Income before income taxes $6,009 $6,754 Six Months Ended November 28, November 23, 2004 2003 Reconciliation of income before income taxes: Total profit from reportable segments $22,123 $7,084 Acquisition / Integration related charges (7,352) (241) Intercompany profit in ending inventory 22 Net Operating Profit 14,771 6,865 Interest and other income 413 519 Interest and other expense (2,134) (229) Adjustment to gain on prior period sale of division 1,094 Income before income taxes $14,144 $7,155 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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