TORONTO, Jan. 21 /PRNewswire-FirstCall/ -- MDS Inc. (TSX: MDS;
NYSE: MDZ), a leading provider of products and services to the
global life sciences markets, today reported preliminary and
unaudited financial results for the three-month period ended
October 31, 2009 and for the full 2009 fiscal year ended October
31, 2009. MDS intends to file financial results for fiscal 2009 on
or before January 29, 2010. As a result of the strategic
repositioning announced in September 2009, including the expected
sale of MDS Analytical Technologies and the intended sale of MDS
Pharma Services, the Company has reported the results for these
businesses as discontinued operations for all periods presented
herein. Continuing operations now focus solely on the MDS Nordion
business, as well as Corporate and Other functions. For the fourth
quarter of 2009, MDS reported revenues from continuing operations
of $51 million, a loss of $19 million and a loss per share of
$0.15. This compares with revenues of $84 million, a loss of $264
million, and a loss per share from continuing operations of $2.19
for the corresponding period in 2008, which included a $246 million
after-tax charge to write off the MAPLE Facilities. Adjusted EBITDA
from continuing operations was $4 million, compared with $2 million
in the prior year. Adjusted loss per share was $0.10 versus $0.08
for the same period in 2008. Including discontinued operations, MDS
reported a loss of $58 million in the fourth quarter, compared with
a $575 million loss in the prior year. Current quarter results
include a $25 million loss related to the sale of the Company's
Late Stage operations and an estimated loss of $13 million related
to the intended sale of Early Stage operations, both of which were
reported in discontinued operations. In the fourth quarter of 2008,
the Company wrote down $320 million of goodwill related to MDS
Pharma Services. Fourth Quarter 2009 and Selected Fiscal 2009
Highlights - MDS reported revenues from continuing operations of
$51 million for the fourth quarter of 2009, down from revenue of
$84 million in the corresponding period in 2008. Excluding the
impact of foreign exchange and divestitures, revenues decreased
40%. For the full 2009 fiscal year, the Company reported revenues
from continuing operations of $231 million, down from $296 million
in the corresponding period in 2008. Excluding the impact of
foreign exchange and divestitures, revenues decreased 10%. - MDS
recorded adjusted EBITDA from continuing operations of $4 million
for the three months ended October 31, 2009, compared to $2 million
in the prior year. For the 2009 fiscal year, MDS recorded adjusted
EBITDA from continuing operations of $32 million versus $26 million
in 2008. - MDS Nordion continued to be adversely impacted by the
prolonged shutdown of Atomic Energy of Canada Ltd.'s (AECL)
National Research Universal (NRU) reactor. Adjusted EBITDA in the
fourth quarter 2009 for MDS Nordion was $11 million, versus $21
million last year. The fourth quarter of 2009 includes an
unrealized embedded derivative charge of $1 million versus a charge
of $13 million in 2008. For fiscal 2009, MDS Nordion recorded
adjusted EBITDA of $73 million, versus $79 million last year.
Fiscal 2009 includes an unrealized embedded derivative gain of $8
million, versus a charge of $15 million in 2008. - MDS continues to
have a strong cash position, with $298 million as of the end of the
fourth quarter of 2009. - On September 2, 2009, MDS entered into an
agreement to sell its MDS Analytical Technologies business to
Danaher Corporation for $650 million in cash. Following the close
of this transaction, the Company currently intends to return
approximately $400 million to $450 million of sale proceeds to
shareholders by way of a share buyback. Also on September 2, 2009,
MDS announced that it intends to sell its remaining MDS Pharma
Services business. - On September 17, 2009, the Company announced a
CEO transition plan and Steve West, President of MDS Nordion, was
appointed Chief Operating Officer of MDS Inc. Subsequent to the end
of the quarter, on January 8, 2010, MDS announced the appointment
of Mr. West as Chief Executive Officer of MDS Inc., and the
departure of President and Chief Executive Officer Stephen P.
DeFalco from the Company. MDS also announced that Peter Dans,
currently Senior Vice-President, Finance, MDS Inc., will become
Chief Financial Officer, effective February 1, 2010. Doug Prince,
currently Executive Vice-President and CFO, MDS Inc., is expected
to leave the organization in March 2010. "With the strategic
repositioning of MDS under way, we are focused on completing the
announced transactions, and on preparing MDS Nordion to become a
stand-alone company," said Mr. West. "Despite the prolonged
shutdown of AECL's NRU reactor, MDS Nordion continued to deliver
positive returns from its radiotherapeutics and sterilization
operations." Operating Segment Results - Continuing Operations MDS
Inc. Fourth Quarter Fiscal Year
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(millions of Q4 2009 Q4 2008 % Change Q4 2009 Q4 2008 % Change U.S.
dollars) Reported Reported
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Revenues $ 51 $ 84 (39%) $ 231 $ 296 (22%)
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Adjusted EBITDA $ 4 $ 2 100% $ 32 $ 26 23% 8% 2% 14% 9%
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MDS Inc.'s continuing operations consist of the MDS Nordion
business, as well as corporate functions reported as Corporate and
Other. These functions include finance, information technology,
human resources, and certain assets and liabilities expected to be
retained by MDS upon the completion of the strategic repositioning
plan. MDS Nordion Fourth Quarter Fiscal Year
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(millions of Q4 2009 Q4 2008 % Change Q4 2009 Q4 2008 % Change U.S.
dollars) Reported Reported
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Revenues $ 51 $ 84 (39%) $ 231 $ 296 (22%)
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Adjusted EBITDA $ 11 $ 21 (48%) $ 73 $ 79 (8%) 22% 25% 32% 27%
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MDS Nordion's revenue for the fourth quarter of 2009 was $51
million, compared with $84 million last year, primarily driven by
AECL's shutdown of the NRU reactor in May 2009 and by lower cobalt
volumes. MDS Nordion's results were positively impacted by strength
in its radiotherapeutics business, largely driven by
TheraSphere(R), where revenues increased to $20 million, up more
than 25% year over year. Adjusted EBITDA was $11 million, versus
$21 million in the prior-year period as the impact of lower revenue
was only partially offset by favourable pricing, productivity and
the year-over-year change in embedded derivative expense. In the
fourth quarter of 2009, an embedded derivative loss of $1 million
was recorded, compared with a $13 million loss for the
corresponding period in 2008. Corporate and Other Fourth Quarter
Fiscal Year
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(millions of Q4 2009 Q4 2008 % Change Q4 2009 Q4 2008 % Change U.S.
dollars) Reported Reported
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Selling, general and administration $ (11) $ (19) 42% $ (39) $ (57)
32%
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Adjusted EBITDA $ (7) $ (19) 63% $ (41) $ (53) 23%
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Selling, general and administration (SG&A) expenses in the
fourth quarter of 2009 were $11 million compared with $19 million
last year. This was primarily driven by lower compensation costs
due to workforce reductions, cost-control initiatives and lower
stock-based compensation expense. During the quarter, MDS recorded
$9 million in restructuring charges related to the Company's
intended closure of its Toronto, Ontario corporate headquarters.
Operating Segment Results - Discontinued Operations During fiscal
2009, as a result of the Company's ongoing strategic review
process, MDS sold its MDS Pharma Services Phase II-IV and Central
Labs operations, and disclosed its intention to sell the remaining
MDS Pharma Services Early Stage operations. The Company also
announced a sale agreement to sell MDS Analytical Technologies. As
a result, the Company has reported the results of operations of MDS
Pharma Services and MDS Analytical Technologies as discontinued
operations for all periods presented herein. Discontinued
Operations Fourth Quarter Fiscal Year
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(millions of Q4 2009 Q4 2008 % Change Q4 2009 Q4 2008 % Change U.S.
dollars) Reported Reported
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Loss from discontinued operations, net of income taxes $ (39) $
(311) 87% $ (120) $ (307) 61%
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In the fourth quarter of 2009, MDS recorded a loss from
discontinued operations, net of income taxes, which includes
operating results from MDS Analytical Technologies and MDS Pharma
Services. In addition, in the fourth quarter, the Company recorded
a $25 million after-tax loss on the sale of its Central Labs
business and an estimated $13 million pre-tax loss, which includes
recognition of an unrealized foreign currency translation gain of
$44 million, on the intended sale of MDS Pharma Services Early
Stage operations. Prior-year results included a $320 million
write-down of goodwill related to MDS Pharma Services. In October
2009, MDS sold its Central Labs operation to Czura Thornton for
proceeds of approximately $6 million, and completed its exit from
the late-stage market. The Company expects to receive approximately
$2 million from transition services, and the purchase price may be
increased by up to $4 million if certain performance thresholds are
attained by Central Labs following the closing. Consolidated
Results of Continuing and Discontinued Operations (millions of U.S.
dollars) Fourth Quarter Fiscal Year
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Q4 2009 Q4 2008 Q4 2009 Q4 2008
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Revenues from continuing operations $ 51 $ 84 $ 231 $ 296 Operating
loss from continuing operations $ (12) $ (353) $ (2) $ (355) Loss
from continuing operations $ (19) $ (264) $ (15) $ (246) Loss from
discontinued operations, net of income taxes $ (39) $ (311) $ (120)
$ (307) Net loss $ (58) $ (575) $ (135) $ (553) Basic and diluted
loss per share - from continuing operations $ (0.15) $ (2.19) $
(0.12) $ (2.02) - from discontinued operations $ (0.33) $ (2.58) $
(1.00) $ (2.52)
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Basic and diluted loss per share $ (0.48) $ (4.77) $ (1.12) $
(4.54)
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In the fourth quarter of 2009, MDS recorded a consolidated loss
from continuing and discontinued operations of $58 million,
compared with $575 million in the prior year. Subsequent Events On
November 3, 2009, MDS and Danaher received a Second Request for
Information from the U.S. Federal Trade Commission (FTC) with
respect to a global market segment that MDS and Danaher estimate
generates less than $50 million in annual revenues for all sellers
combined. Both companies continue to work with the FTC toward the
resolution of this matter. On December 11, 2009, MDS announced that
it was served with a Notice of Application from PerkinElmer, Inc.,
with whom MDS has a joint-venture to develop, manufacture and sell
inductively coupled plasma mass spectrometers. The Notice relates
to the sale of MDS Analytical Technologies and seeks a range of
alternative possible remedies. MDS Strategic Repositioning On
September 2, 2009, MDS announced it had reached an agreement to
sell its MDS Analytical Technologies business to Danaher
Corporation for $650 million in cash. The sale was approved by
shareholders at a Special Meeting on October 20, 2009. MDS
currently intends to return approximately $400 million to $450
million of sale proceeds to shareholders by way of a share buyback.
The Company currently expects the sale to close before the end of
the first calendar quarter of 2010, subject to the satisfaction of
the conditions to closing. MDS also announced on September 2, 2009
that it intends to sell its remaining MDS Pharma Services business,
a leading provider of innovative drug discovery and early-stage
development solutions for pharmaceutical and biotechnology
companies. The Company continues to have discussions with
interested parties. There can be no assurance that MDS will
complete a transaction involving MDS Pharma Services. While the
Company believes it is probable that a sale of MDS Pharma Services
will occur, in the unlikely event that MDS determines there is not
an acceptable transaction, it currently intends to retain and
invest in building the business. Upon completion of these
transactions, the Company would be focused solely on its MDS
Nordion business, a global leader in the provision of innovative
technologies for use in medical imaging and radiotherapeutics, and
sterilization technologies. Additional background materials
pertaining to the new strategic direction for MDS Inc. can be found
on MDS Inc.'s Website at
http://www.mdsinc.com/strategic_repositioning_of_mds/index.asp.
Conference Call MDS will hold a conference call today at 9:30 a.m.
EST to discuss fourth quarter and full-year 2009 results. This call
will be Webcast live at http://www.mdsinc.com/, and be available in
archived format at
http://www.mdsinc.com/news_events/webcasts_presentations.asp after
the call. About MDS Inc. MDS Inc. (TSX: MDS; NYSE: MDZ) is a global
life sciences company that provides market-leading products and
services that customers need for the development of drugs and the
diagnosis and treatment of disease. MDS Inc. is a leading global
provider of innovative technologies for use in medical imaging and
radiotherapeutics, sterilization, pharmaceutical contract research,
and analytical instruments. MDS has more than 3,500 highly skilled
people in 13 countries. Find out more at http://www.mdsinc.com/ or
by calling 1-888-MDS-7222, 24 hours a day. Caution Concerning
Forward-Looking Statements From time to time, we make written or
oral forward-looking statements within the meaning of certain
securities laws, including under applicable Canadian securities
laws and the "safe harbour" provisions of the U.S. Private
Securities Litigation Reform Act of 1995. This document contains
forward-looking statements, including statements with respect to
the impact of the proposed sale of MDS Analytical Technologies on
the Company's operations and financial results, the strategy of the
continuing businesses, the proposed use of proceeds from the sale
of MDS Analytical Technologies, if completed, the Company's
intention to sell other assets of the Company, as well as
statements with respect to our beliefs, plans, objectives,
expectations, anticipations, estimates and intentions. The words
"may", "could", "should", "would", "suspect", "outlook", "believe",
"plan", "anticipate", "estimate", "expect", "intend", "forecast",
"objective", "optimistic", and words and expressions of similar
import, are intended to identify forward-looking statements. By
their very nature, forward-looking statements involve inherent
risks and uncertainties, both general and specific, which give rise
to the possibility that predictions, forecasts, projections and
other forward-looking statements will not be achieved. We caution
readers not to place undue reliance on these statements as a number
of important factors could cause our actual results to differ
materially from the beliefs, plans, objectives, expectations,
anticipations, estimates and intentions expressed in such
forward-looking statements. These factors include, but are not
limited to: management of operational risks; the strength of the
global economy, in particular the economies of Canada, the U.S.,
the European Union, Asia, and the other countries in which we
conduct business; the stability of global equity markets; our
ability to complete the proposed sale of MDS Analytical
Technologies and the intended sale of MDS Pharma Services in a
timely manner, or at all; our ability to retain customers as a
result of any perceived uncertainty relating to the proposed sale
of MDS Analytical Technologies and the intended sale of MDS Pharma
Services; the fact that our operations will be substantially
reduced as a result of the proposed sale of MDS Analytical
Technologies and the intended sale of MDS Pharma Services; our
likely need to negotiate a new credit agreement which may not be on
terms favourable to us; liabilities that we will retain of
businesses sold; our ability to complete other strategic
transactions and to execute them successfully; our ability to
remain in compliance with our senior unsecured notes and credit
facilities covenants; our ability to secure a reliable supply of
raw materials, particularly cobalt and critical medical isotopes;
the impact of the movement of certain currencies relative to other
currencies, particularly the U.S. dollar, Canadian dollar and the
Euro; changes in interest rates in Canada, the U.S., and elsewhere;
the effects of competition in the markets in which we operate; the
timing and technological advancement of new products introduced by
us or by our competitors; our ability to manage our research and
development; the impact of changes in laws, trade policies and
regulations, and enforcement thereof; regulatory actions; judicial
judgments and legal proceedings; our ability to maintain adequate
insurance; our ability to successfully realign our organization,
resources and processes; our ability to retain key personnel; our
ability to have continued and uninterrupted performance of our
information technology systems; our ability to compete effectively;
the risk of environmental liabilities; our ability to maintain
effectiveness of our clinical trials; new accounting standards that
impact the methods we use to report our financial condition;
uncertainties associated with critical accounting assumptions and
estimates; the possible impact on our businesses from third-party
special interest groups, certain of our employees subject to
collective-bargaining, environmental and other regulations; natural
disasters; public-health emergencies and pandemics; international
conflicts and other developments including those relating to
terrorism; other risk factors described in section 3.10 of our AIF
and described in our Notice of Special Meeting of Shareholders of
MDS Inc. and Management Proxy Circular dated September 17, 2009;
and our success in anticipating and managing these risks. The
foregoing list of factors that may affect future results is not
exhaustive. When relying on our forward-looking statements to make
decisions with respect to the Company, investors and others should
carefully consider the foregoing factors and other uncertainties
and potential events. We do not undertake to update any
forward-looking statement, whether written or oral, that may be
made from time to time by us or on our behalf, except as required
by law. Also note that all financial data is shown based on U.S.
Generally Accepted Accounting Principles (GAAP). MDS converted to
U.S. GAAP reporting with the filing of the Company's 2007 Annual
Report and financial statements on January 29, 2008. Use of
Non-GAAP Financial Measures In addition to measures based on U.S.
GAAP used in this report, the following terms are also used:
adjusted earnings before interest, taxes, depreciation and
amortization (adjusted EBITDA); adjusted EBITDA margin; adjusted
earnings per share; operating working capital; and net revenue.
These terms are not defined by GAAP and our use of such terms may
vary from that of other companies. In addition, measurement of
growth is not defined by GAAP and our use of growth may vary from
that of other companies. Where relevant, and particularly for
earnings-based measures, we provide tables in this document that
reconcile the non-GAAP measures used to amounts reported on the
face of the consolidated financial statements. Our executive
management team assesses the performance of our businesses based on
a review of results comprising GAAP measures and these non-GAAP
measures. We also report on our performance to the Company's Board
of Directors based on these GAAP and non-GAAP measures. In fiscal
2009, net revenues, adjusted EBITDA, and operating working capital
are the primary metrics for our annual incentive compensation plan
for senior management. In fiscal 2008, adjusted EBITDA and
operating working capital were the primary metrics for our annual
incentive compensation plan for senior management. We provide this
non-GAAP detail so that readers have a better understanding of the
significant events and transactions that have had an impact on our
results, and so that these events and transactions can be viewed
from our management's perspective. MDS Inc. CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION (Preliminary and unaudited)
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As of October 31 (millions of U.S. dollars, except share amounts)
2009 2008
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ASSETS Current assets Cash and cash equivalents $ 298 $ 117
Accounts receivable 45 49 Notes receivable 16 75 Inventories 28 24
Income taxes recoverable 2 56 Current portion of deferred tax
assets 16 22 Other current assets 13 3 Assets of discontinued
operations 941 1,245
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Total current assets 1,359 1,591 Property, plant and equipment 131
124 Deferred tax assets 39 - Long-term investments 6 16 Other
long-term assets 91 105
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Total assets $ 1,626 $ 1,836
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LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts
payable $ 26 $ 31 Accrued liabilities 82 84 Current portion of
deferred revenue 5 6 Current portion of long-term debt 30 17
Liabilities of discontinued operations 214 303
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Total current liabilities 357 441 Long-term debt 237 257 Deferred
revenue 14 9 Deferred tax liabilities - 21 Other long-term
liabilities 24 18
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Total liabilities 632 746
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Shareholders' equity Common shares at par - Authorized shares:
unlimited; Issued and outstanding shares: 120,137,229 and
120,137,229 as of October 31, 2009 and October 31, 2008,
respectively 489 489 Additional paid-in capital 79 75 Retained
earnings 166 301 Accumulated other comprehensive income 260 225
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Total shareholders' equity 994 1,090
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Total liabilities and shareholders' equity $ 1,626 $ 1,836
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MDS Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Preliminary and
unaudited)
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Years ended October 31 2009 2008 (millions of U.S. dollars, except
per share amounts)
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Revenues $ 231 $ 296
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Costs and expenses Direct cost of revenues 122 153 Selling, general
and administration 79 105 Research and development 3 3 Depreciation
and amortization 24 25 MAPLE Facilities write-off - 341
Restructuring charges, net 9 1 Change in fair value of embedded
derivatives (8) 15 Other expenses (income), net 4 8
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Total costs and expenses 233 651
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Operating loss from continuing operations (2) (355) Interest
expense (8) (3) Interest income 8 12 Change in fair value of
interest rate swaps - 2
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Loss from continuing operations before income taxes (2) (344)
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Income tax expense (recovery) - current 11 33 - deferred 2 (131)
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13 (98)
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Loss from continuing operations (15) (246) Loss from discontinued
operations, net of income taxes (120) (307)
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Net loss $ (135) $ (553)
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Basic loss per share - from continuing operations $ (0.12) $ (2.02)
- from discontinued operations (1.00) (2.52)
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Basic loss per share $ (1.12) $ (4.54)
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Diluted loss per share - from continuing operations $ (0.12) $
(2.02) - from discontinued operations (1.00) (2.52)
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Diluted loss per share $ (1.12) $ (4.54)
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MDS Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Preliminary and
unaudited)
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Years ended October 31 2009 2008 (millions of U.S. dollars)
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Operating activities Net loss $ (135) $ (553) Loss from
discontinued operations, net of income taxes (120) (307)
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Loss from continuing operations (15) (246) Adjustments to reconcile
net loss to cash provided by (used in) operating activities
relating to continuing operations: Items not affecting current cash
flows 3 243 Changes in operating assets and liabilities 93 (107)
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Cash provided by (used in) operating activities of continuing
operations 81 (110) Cash provided by (used in) operating activities
of discontinued operations 94 89
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Cash provided by (used in) operating activities 175 (21)
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Investing activities Purchase of property, plant and equipment (10)
(13) Proceeds on sale of property, plant and equipment - 2 Proceeds
on sale of short-term investments - 101 Proceeds on sale of
long-term investments - 7 Proceeds on sale of businesses - 15
Decrease (increase) in restricted cash (3) 1
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Cash provided by (used in) investing activities of continuing
operations (13) 113 Cash provided by (used in) investing activities
of discontinued operations 12 (53)
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Cash provided by (used in) investing activities (1) 60
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Financing activities Repayment of long-term debt (6) (79) Issuance
of shares - 7 Repurchase of shares - (44)
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Cash used in financing activities of continuing operations (6)
(116) Cash used in financing activities of discontinued operations
(6) (10)
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Cash used in financing activities (12) (126)
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Effect of foreign exchange rate changes on cash and cash
equivalents 19 (18)
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Net increase (decrease) in cash and cash equivalents during the
year 181 (105) Cash and cash equivalents, beginning of year 117 222
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Cash and cash equivalents, end of year $ 298 $ 117
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MDS Inc. Consolidated operating highlights from Continuing
Operations and reconciliation of consolidated Adjusted EBITDA from
Continuing Operations (millions of U.S. dollars) Fourth Quarter
Fiscal Year
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2009 2008 2009 2008
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$ 51 $ 84 Total revenues $ 231 $ 296 Net loss from continuing $
(19) $ (264) operations $ (15) $ (246) 7 (89) Income tax expense
(recovery) 13 (98) - - Net interest expense (income) - (9) Change
in fair value of interest - - rate swaps - (2) 7 6 Depreciation and
amortization 24 25
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$ (5) $ (347) EBITDA $ 22 $ (330) 9 1 Restructuring charges, net 9
1 Write-down of investments and - 7 valuation provisions 1 10 - 341
MAPLE facilities write-off - 341 - - Loss on sale of business - 4
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$ 4 $ 2 Adjusted EBITDA $ 32 $ 26
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8% 2% Adjusted EBITDA margin 14% 9%
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Consolidated operating highlights and reconciliation of
consolidated Adjusted Income from Continuing Operations (millions
of U.S. dollars) Fourth Quarter Fiscal Year
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2009 2008 2009 2008
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Loss from continuing operations - as reported $ (19) $ (264) $ (15)
$ (246) Adjusted for (after tax): Restructuring charges, net 6 1 6
1 Write-down of investments/ valuation provisions - 7 1 10 MAPLE
facilities write-down - 246 - 246 Change in fair value of interest
rate swaps - - - (2) Write-off of tax assets - - 9 - Tax rate
changes - - - (11) Loss on sale of business - - - 2
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Adjusted (loss) income from continuing operations $ (13) $ (10) $ 1
$ -
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Consolidated operating highlights and reconciliation of
consolidated Adjusted Earnings Per Share Fourth Quarter Fiscal Year
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2009 2008 2009 2008
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Basic loss per share from continuing operations - as reported $
(0.15) $ (2.19) $ (0.12) $ (2.02) Adjusted for: Restructuring
charges, net 0.05 0.01 0.05 0.01 Write-down of investments/
valuation provisions - 0.06 0.01 0.08 MAPLE facilities write-down -
2.04 - 2.02 Change in fair value of interest rate swaps - - -
(0.02) Write-off of tax assets - - 0.08 - Tax rate changes - - -
(0.09) Loss on sale of business - - - 0.02
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Adjusted (loss) earnings per share from continuing operations $
(0.10) $ (0.08) $ 0.02 $ -
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Notes 1. Continuing Operations Fourth quarter fiscal 2009 compared
to the fourth quarter fiscal 2008 Revenues from continuing
operations Revenues from continuing operations in the fourth
quarter of fiscal 2009 of $51 million were $33 million lower
compared to the comparative fourth quarter of fiscal 2008,
primarily due to lower revenues in medical imaging and
radiotherapeutics, and sterilization technologies. These lower
revenues were primarily driven by AECL's NRU reactor shutdown and
lower cobalt supply. Selling, general and administration (SG&A)
SG&A expenses in the fourth quarter of fiscal 2009 of $21
million were $10 million lower compared to the fourth quarter of
fiscal 2008 primarily due to lower compensation cost due to
workforce reductions and cost control initiatives. Other income
(expenses), net Other income in the fourth quarter of fiscal 2009
of $5 million was $10 million higher compared to fiscal 2008. This
was primarily due to a $7 million valuation provision and charge
related to the investment in Entelos recorded in fiscal 2008,
partially offset by foreign exchange losses on revaluation of
certain assets and liabilities in fiscal 2009. Net loss The $19
million net loss from continuing operations in the fourth quarter
of fiscal 2009 improved by $245 million compared to the fourth
quarter of fiscal 2008. This decrease was due to a $341 million
MAPLE Facilities write-off in the fourth quarter of fiscal 2008, a
$12 million increase in fair value of the embedded derivatives
recorded in the fourth quarter of fiscal 2009, $10 million of lower
SG&A expenses for the fourth quarter of fiscal 2009, and a $7
million valuation provision and charge related to the investment in
Entelos recorded in the fourth quarter of fiscal 2008. This was
partially offset by lower revenues from both medical imaging and
radiotherapeutics, and sterilization technologies in the fourth
quarter of fiscal 2009 and a $9 million restructuring charge
recorded due to the strategic repositioning in the fourth quarter
of fiscal 2009. Adjusted EBITDA Adjusted EBITDA in the fourth
quarter of fiscal 2009 of $4 million was $2 million higher compared
to the fourth quarter of fiscal 2008. This was primarily due to the
lower revenues from both the medical imaging, lower cobalt supply
and the negative impact of foreign exchange on the revaluation of
certain of the assets and liabilities, partially offset by a $12
million increase in fair value of the embedded derivatives, lower
compensation cost due to workforce reductions and other cost
control initiatives. The adjusting items in the fourth quarter of
fiscal 2009 include a $9 million restructuring charge due to the
strategic repositioning. The adjusting items in the fourth quarter
of fiscal 2008 includes a $341 million non-cash MAPLE Facilities
write-off, a $7 million valuation provision and charge related to
the investment in Entelos, and a $1 million restructuring charge
for lease termination costs of the headquarter offices in Canada.
2. Discontinued operations As a result of its ongoing strategic
activities, the Company has completed the sale of MDS Pharma
Services Phase II-IV and Central Labs operations and announced its
intention to sell its remaining MDS Pharma Services Early Stage
operations and the planned sale of MDS Analytical Technologies.
Each of these divestitures is described in more details below. Sale
of MDS Pharma Services Phase II-IV On July 1, 2009, the Company
completed the sale of MDS Pharma Services Phase II-IV (Phase II-IV)
for total cash consideration of $50 million, subject to certain
closing adjustments including final working capital, cash, and
indebtedness amounts. The consideration includes $10 million in
restricted cash that will be paid or released to MDS upon meeting
post closing obligations (subject to set off for any claims for
breach of representations and warranties under the sale agreement)
and $3 million to be paid following the delivery of certain tax
certifications. MDS expects the $10 million to be released to the
Company within 15 months from the closing date of July 1, 2009.
Total assets disposed of are $103 million (2008 - $105 million),
which includes accounts receivable of $49 million (2008 - $49
million) and unbilled revenue of $27 million (2008 - $42 million).
Total liabilities disposed of are $67 million (2008 - $61 million),
which includes accounts payable and accrued liabilities of $26
million (2008 - $25 million) and deferred revenue of $39 million
(2008 - $33 million). During the fourth quarter of fiscal 2009, the
sale of Phase II-IV was finalized and the Company recorded an after
tax loss of $7 million on the sale, which is included in "(Loss)
income from discontinued operations, net of income taxes" on the
consolidated statements of operations. The loss on sale includes a
$4 million closing adjustment, which is a reduction in the sale
proceeds, and recognition of an unrealized foreign currency
translation gain of $8 million. As part of the sale of Phase II-IV,
the Company signed a Transition Services Agreement (TSA) to provide
certain post closing transition services to the buyer for a period
of six months from the closing date with an option by the buyer to
extend for an additional six months. The total cash consideration
includes $2 million related to the TSA in which $1 million has been
recorded in "(Loss) income from continuing operations" in the
consolidated statements of operations in fiscal 2009 and the
remainder will be recorded in the first quarter of fiscal 2010 when
the TSA is anticipated to be completed. Sale of MDS Pharma Services
Central Labs On October 30, 2009, the Company completed the sale of
MDS Pharma Services Central Labs (Central Labs) for total cash
consideration of $6 million, subject to certain closing
adjustments. Total assets disposed of are $63 million (2008 - $77
million), which includes accounts receivable of $42 million (2008 -
$40 million). Total liabilities disposed of are $18 million (2008 -
$27 million), which includes accounts payable and accrued
liabilities of $13 million (2008 - $22 million). The Company has
recorded an after tax loss of $25 million on the sale. The loss on
sale includes a $13 million preliminary closing adjustment, which
is an increase in the sale proceeds, and recognition of an
unrealized foreign currency translation gain of $4 million. The
Company expects to finalize the loss on the sale during fiscal 2010
for post-closing adjustments. As part of the sale of Central Labs,
the Company signed a TSA to provide certain post closing transition
services to the buyer for a period of six months from the closing
date with an option by the buyer to extend for an additional six
months. In addition to the total consideration of $6 million, the
Company is expected to receive an additional $2 million in cash
related to this TSA during fiscal 2010. No amounts have been
recorded in fiscal 2009 in the consolidated statements of
operations related to the TSA. Intent to sell MDS Pharma Services
Early Stage On September 2, 2009, the Company announced that it
intends to sell its remaining MDS Pharma Services Early Stage
operations (Early Stage). As a result of this decision, the Company
has reflected the total assets and total liabilities of Early Stage
at the lower of their carrying value or their fair value less costs
to sell as "Assets of discontinued operations" and "Liabilities of
discontinued operations" in the consolidated statements of
financial position, respectively. The assets included in "Assets of
discontinued operations" are not being depreciated. The results of
operations of Early Stage are included in "(Loss) income from
discontinued operations, net of income taxes" in the consolidated
statements of operations. As a result of MDS's intention to sell
Early Stage, the Company estimated the loss on sale utilizing a
fair value based on appraisals, estimated net proceeds upon sale,
and discounted cash flows. As a result, the Company recorded an
estimated pre-tax loss on sale of $13 million in the fourth quarter
of fiscal 2009. This estimated loss on sale includes recognition of
an unrealized foreign currency translation gain of $44 million. In
addition, the Company recorded non-cash long-lived asset impairment
charge of $2 million and $7 million in the fourth and third quarter
of fiscal 2009, respectively, in "(Loss) income from discontinued
operations, net of income taxes". As of October 31, 2009, total
assets of Early Stage included in "Assets of discontinued
operations" are $208 million (2008 - $301 million), which includes
accounts receivable of $37 million (2008 - $54 million), unbilled
revenue of $29 million (2008 - $34 million), and property, plan
equipment of $107 million (2008 - $127 million). Total liabilities
of Early Stage included in "Liabilities of discontinued operations"
are $107 million (2008 - $92 million), which includes accounts
payable and accrued liabilities of $58 million (2008 - $42 million)
and deferred revenue of $18 million (2008 - $27 million). Sale of
MDS Analytical Technologies On September 2, 2009, MDS announced
that it has entered into an agreement to sell MDS Analytical
Technologies (MDS AT) to Danaher Corporation (Danaher), which
includes its two joint ventures, Applied Biosystems MDS Analytical
Technologies Instruments (AB/MDS) and PerkinElmer Sciex Instruments
(PKI/Sciex). Total consideration for this sale is $650 million in
cash subject to certain closing adjustments including final working
capital, cash, and indebtedness amounts. The sale remains subject
to certain closing conditions and approvals, including clearance by
the U.S. Federal Trade Commission. Under a separate arrangement,
Danaher has agreed to purchase the portion of the AB/MDS joint
venture partnership held by Life Technologies Corporation.
Completion of each transaction is conditional on the concurrent
closing of the other transaction. The Company has reflected the
total assets and total liabilities of MDS AT at the lower of their
carrying value or fair value less costs to sell as "Assets of
discontinued operations" and "Liabilities of discontinued
operations" in the consolidated statements of financial position,
respectively. The assets included in "Assets of discontinued
operations" are not being depreciated. The carrying value of MDS
AT's net assets did not exceed its fair value less costs to sell
resulting in no write-down of this business as of October 31, 2009.
The results of operations of MDS AT are included in "(Loss) income
from discontinued operations, net of income taxes" in the
consolidated statements of operations. The Company expects to
finalize the sale of MDS AT during the first calendar quarter of
2010 and the Company expects to record an after-tax gain on the
sale in the range of $10 million to $20 million. 3. Restructuring
During the fourth quarter of fiscal 2009, the Company announced a
strategic repositioning of its businesses, which resulted in the
planned sale of MDS Analytical Technologies and its intention to
sell the remaining MDS Pharma Services Early Stage business. As a
result of these activities, a pre-tax restructuring charge of $9
million was recorded to reflect the closure of the Company's
Toronto, Canada corporate office and establishment of its corporate
headquarters in Ottawa, Canada. The restructuring charge is for
estimated workforce reductions including severance and benefit
costs. These restructuring activities are expected to be completed
in fiscal 2010 and additional restructuring charges may be
incurred. As of October 31, 2009, the restructuring provision of $8
million (2008 - $1 million) is included in accrued liabilities in
the consolidated statements of financial position. DATASOURCE: MDS
Inc. CONTACT: MEDIA: Janet Ko, (905) 267-4226, ; INVESTORS:
Catherine Love, (905) 267-4230,
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