Hologic Announces Financial Results for Second Quarter of Fiscal 2019

– Revenue of $818.4 Million Grows 3.7%, 5.2% in Constant Currency –

– Company Posts GAAP Loss per Share of ($1.01) Due to Non-Cash Charges,
Non-GAAP Diluted Earnings per Share (EPS) of $0.58 –

– Company Raises Full-Year Guidance for Revenue and Non-GAAP EPS –

MARLBOROUGH, Mass.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/earnings?src=hash” target=”_blank”gt;#earningslt;/agt;–Hologic, Inc. (Nasdaq: HOLX) announced today the Company’s financial
results for the fiscal second quarter ended March 30, 2019.

“We posted strong results in our second fiscal quarter, with both
revenues and non-GAAP EPS exceeding our guidance ranges,” said Steve
MacMillan, Hologic’s Chairman, President and Chief Executive Officer.
“Growth was again driven by our largest businesses, Breast Health and
Molecular Diagnostics. Our international franchises continued to perform
well, our Surgical division strengthened, and our recent Breast Health
acquisitions are off to a great start.”

Key Results

  • Total revenue of $818.4 million increased 3.7%, or 5.2% in constant
    currency, compared to the prior year period.
  • On a GAAP basis, the Company recorded a loss per share of ($1.01) due
    primarily to non-cash impairment charges totaling $443.8 million
    related to Medical Aesthetics. On a non-GAAP basis, the Company
    recorded diluted EPS of $0.58, an increase of 9.4% compared to the
    prior year period.
  • Global Molecular Diagnostics revenue of $167.8 million increased
    11.4%, or 12.8% in constant currency, representing its highest growth
    rate in six quarters.
  • Global Breast Health revenue of $321.5 million increased 7.1%, or 8.4%
    in constant currency, continuing strong recent performance.
  • Global GYN Surgical revenue of $102.2 million increased 2.8%, or 4.1%
    in constant currency, representing its highest growth rate in seven
    quarters.
  • International revenue of $202.9 million increased 1.0%, or 6.9% in
    constant currency. All businesses grew solidly outside the United
    States except Medical Aesthetics, which declined.
  • Hologic’s innovation pipeline continued to be productive. Recent new
    product launches include the Aptima® Mycoplasma genitalium assay
    and the Unifi™ Analytics business intelligence tool for mammography
    centers in the United States, the Omni™ hysteroscope in Europe and
    Canada, and the LOCalizer™ wireless breast lesion localization system
    in Europe. In addition, the Aptima® HIV-1 Quant Dx Assay received two
    new CE marks in Europe – for early infant diagnosis and testing dried
    blood spots.
  • The Company opened a state-of-the-art Learning and Experience Centre
    in Zaventem, Belgium, to provide comprehensive training for customers,
    healthcare professionals and employees in the region.

Key financial results for the fiscal second quarter are shown in the
table below.

      GAAP       Non-GAAP
Q2’19       Q2’18      

Change

Increase
(Decrease)

Q2’19       Q2’18      

Change

Increase

(Decrease)

Revenues $818.4       $789.3       3.7% $818.4       $789.3       3.7%
Gross Margin 5.2% 52.6% (4,740 bps) 61.0% 62.7% (170 bps)
Operating Expenses $365.6 $1,019.3 (64.1%) $272.8 $266.9 2.2%
Operating Margin (39.5%) (76.5%) 3,700 bps 27.7% 28.9% (120 bps)
Net Margin (33.3%) (86.3%) 5,300 bps 19.0% 18.7% 30 bps
Diluted EPS ($1.01) ($2.46) 58.9% $0.58 $0.53 9.4%
 

Throughout this press release, all dollar figures are in millions,
except EPS. Some totals may not foot due to rounding. Unless otherwise
noted, all results are compared to the corresponding prior year period.
Non-GAAP results exclude certain cash and non-cash items as discussed
under “Use of Non-GAAP Financial Measures.” Constant currency percentage
changes show current period revenue results as if the foreign exchange
rates were the same as those in the prior year period.

Revenue Detail

              Increase (Decrease)
$ in millions       Q2’19     Q2’18    

Global

Reported

Change

   

Global

Constant

Currency

Change

   

U.S.

Reported

Change

   

International

Reported

Change

   

International

Constant

Currency

Change

Diagnostics                
Cytology & Perinatal $ 115.5 $ 117.7 (1.9 %) 0.3 % (2.5 %) (0.7 %) 6.0 %
Molecular Diagnostics $ 167.8 $ 150.7 11.4 % 12.8 % 10.6 % 14.8 % 22.8 %
Blood Screening $ 13.4 $ 11.3 19.0 % 19.0 % 18.6 %

 

 
Total Diagnostics $ 296.7 $ 279.7 6.0 % 7.8 % 6.2 % 5.6 % 12.9 %
Total Diagnostics ex. Blood $ 283.3 $ 268.4 5.6 % 7.3 % 5.5 % 5.6 % 12.9 %
 
Breast Health
Breast Imaging $ 265.9 $ 250.4 6.2 % 7.5 % 7.5 % 1.6 % 7.2 %
Interventional Breast Solutions $ 55.6 $ 49.7 11.8 % 12.9 % 14.7 % (1.5 %) 4.6 %
Total Breast Health $ 321.5 $ 300.1 7.1 % 8.4 % 8.8 % 1.2 % 6.9 %
 
Medical Aesthetics $ 73.8 $ 85.5 (13.7 %) (12.1 %) (15.3 %) (11.9 %) (8.2 %)
 
GYN Surgical $ 102.2 $ 99.4 2.8 % 4.1 % 2.0 % 6.5 % 14.2 %
 
Skeletal Health $ 24.2 $ 24.6 (1.4 %) 0.8 % (10.7 %) 14.9 % 20.8 %
 
Total $ 818.4 $ 789.3 3.7 % 5.2 % 4.6 % 1.0 % 6.9 %
Total Revenue ex. Blood $ 805.0 $ 778.1 3.5 % 5.0 % 4.3 % 1.0 % 6.9 %
 

Other Financial Highlights

  • U.S. revenue of $615.5 million increased 4.6%. International revenue
    of $202.9 million increased 1.0%, or 6.9% in constant currency.
    Excluding Medical Aesthetics, international growth was 4.4%, or 10.9%
    in constant currency.
  • The recently acquired Faxitron and Focal businesses contributed $14.6
    million to Breast Health revenue, an increase of 40.4% compared to
    what the companies recorded as independent entities in the prior year
    period.
  • Gross margin was 5.2% on a GAAP basis, and 61.0% on a non-GAAP basis.
    GAAP gross margin decreased significantly primarily due to a $374.6
    million non-cash impairment charge related to Medical Aesthetics
    intangible assets and equipment recorded within cost of goods sold.
    Non-GAAP gross margin decreased 170 basis points, primarily due to
    unfavorable product sales mix, manufacturing variances, one-time
    charges, and the negative impact of a stronger U.S. dollar.
  • The Company’s effective tax rate was a benefit of 22.9% on a GAAP
    basis, and a provision of 21.0% on a non-GAAP basis.
  • GAAP net loss was ($272.6) million, which included an aggregate $443.8
    million of non-cash impairment charges related to intangible assets
    and equipment in Medical Aesthetics. This compares to a GAAP net loss
    of ($681.4) million in the prior year period, which included
    impairment charges related to goodwill and an in-process research and
    development asset in Medical Aesthetics.
  • Adjusted non-GAAP earnings before interest, taxes, depreciation and
    amortization (EBITDA) was $254.1 million, an increase of 2.4%.
  • GAAP EPS of ($1.01) increased 58.9% compared to the prior year period.
    Non-GAAP diluted EPS of $0.58 increased 9.4%.
  • Total debt outstanding at the end of the quarter was $3.1 billion. The
    Company ended the quarter with cash and equivalents of $401.0 million,
    and a net leverage ratio (net debt over adjusted EBITDA) of 2.6 times.
  • On a trailing 12 months basis, adjusted Return on Invested Capital
    (ROIC) of 12.3% declined 30 basis points compared to the prior year
    period.

Financial Guidance for Fiscal 2019

Based on its strong performance in the fiscal second quarter, Hologic is
raising its full-year guidance for revenue and non-GAAP EPS.

Hologic’s financial guidance for the third quarter and fiscal year 2019
is shown in the table below. The guidance is based on a full year
non-GAAP tax rate of approximately 22%, lower than the Company’s
previous estimate of 23%, and diluted shares outstanding of
approximately 272 million for the full year. Constant currency guidance
assumes that foreign exchange rates are the same in fiscal 2019 as in
fiscal 2018. Current guidance assumes that recent foreign exchange rates
persist for all of fiscal 2019.

      Current Guidance       Previous Guidance

Constant

Currency %

Increase

(Decrease)

     

Reported %

Increase

(Decrease)

      Guidance $      

Constant

Currency %

Increase

(Decrease)

     

Reported %

Increase

(Decrease)

     

 

 

Guidance $

Fiscal 2019

                             
Revenue 4.3% to 4.9% 3.3% to 3.9% $3,325 – $3,345 3.8% to 4.7% 2.7% to 3.6% $3,305 – $3,335
GAAP EPS N.M. $0.06 – $0.09 N.M. $1.39 – $1.43
Non-GAAP EPS 8.1% to 9.4% $2.41 – $2.44 7.2% to 9.0% $2.39 – $2.43
 

Q3 2019

Revenue 1.2% to 3.0% 0.1% to 1.9% $825 – $840
GAAP EPS N.M. $0.33 – $0.35
Non-GAAP EPS 3.4% to 6.9% $0.60 – $0.62
 

Use of Non-GAAP Financial Measures

The Company has presented the following non-GAAP financial measures in
this press release: constant currency revenues; non-GAAP gross margin;
non-GAAP operating expenses; non-GAAP operating margin; non-GAAP net
income; non-GAAP EPS; and adjusted EBITDA. The Company defines its
non-GAAP net income, EPS, and other non-GAAP financial measures to
exclude, as applicable: (i) the amortization of intangible assets and
impairment of goodwill, intangible assets and equipment; (ii) additional
depreciation expense from acquired fixed assets and accelerated
depreciation related to consolidation and closure of facilities; (iii)
additional expenses resulting from the purchase accounting adjustment to
record inventory at fair value; (iv) non-cash interest expense related
to amortization of the debt discount from the equity conversion option
of convertible notes; (v) restructuring and divestiture charges and
facility closure and consolidation charges and costs incurred to
integrate acquisitions (including retention, transaction bonuses, legal
and professional consulting services) and separate divested businesses
from existing operations; (vi) transaction related expenses for
divestitures and acquisitions; (vii) debt extinguishment losses and
related transaction costs; (viii) the unrealized (gains) losses on the
mark-to-market of forward foreign currency contracts for which the
Company has not elected hedge accounting; (ix) litigation settlement
charges (benefits) and non-income tax related charges (benefits); (x)
other-than-temporary impairment losses on investments and realized gains
resulting from the sale of investments; (xi) the one-time discrete
impact of tax reform primarily related to remeasuring net deferred tax
liabilities; (xii) other one-time, non-recurring, unusual or infrequent
charges, expenses or gains that may not be indicative of the Company’s
core business results; and (xiii) income taxes related to such
adjustments. The Company defines adjusted EBITDA as its non-GAAP net
income plus net interest expense, income taxes, and depreciation and
amortization expense included in its non-GAAP net income.

These non-GAAP financial measures should be considered supplemental to,
and not a substitute for, financial information prepared in accordance
with GAAP. The company’s definition of these non-GAAP measures may
differ from similarly titled measures used by others.

The non-GAAP financial measures used in this press release adjust for
specified items that can be highly variable or difficult to predict. The
company generally uses these non-GAAP financial measures to facilitate
management’s financial and operational decision-making, including
evaluation of Hologic’s historical operating results, comparison to
competitors’ operating results and determination of management incentive
compensation. These non-GAAP financial measures reflect an additional
way of viewing aspects of the company’s operations that, when viewed
with GAAP results and the reconciliations to corresponding GAAP
financial measures, may provide a more complete understanding of factors
and trends affecting Hologic’s business.

Because non-GAAP financial measures exclude the effect of items that
will increase or decrease the company’s reported results of operations,
management strongly encourages investors to review the company’s
consolidated financial statements and publicly filed reports in their
entirety. A reconciliation of the non-GAAP financial measures to the
most directly comparable GAAP financial measures is included in the
tables accompanying this release.

Future Non-GAAP Adjustments

Future GAAP EPS may be affected by changes in ongoing assumptions and
judgments, and may also be affected by non-recurring, unusual or
unanticipated charges, expenses or gains, which are excluded in the
calculation of the Company’s non-GAAP EPS guidance as described in this
press release.

Conference Call and Webcast

Hologic’s management will host a conference call at 4:30 p.m. ET today
to discuss its financial results for the second quarter of fiscal 2019.
Approximately 10 minutes before the call, dial 888-254-3590 (in the
U.S.) or +1 323-994-2093 (international) and enter access code 5259693.
A replay will be available approximately two hours after the call ends
through Friday, May 24, 2019. The replay numbers are 888-203-1112 (U.S.)
or +1 719-457-0820 (international), access code 5259693, PIN 2953. The
Company will also provide a live webcast of the call at http://investors.hologic.com.

About Hologic, Inc.

Hologic, Inc. is an innovative medical technology company primarily
focused on improving women’s health and well-being through early
detection and treatment. For more information on Hologic, visit www.hologic.com.

Hologic, Aptima, Cynosure, LOCalizer, Unifi, and associated logos are
trademarks and/or registered trademarks of Hologic, Inc. and/or its
subsidiaries in the United States and/or other countries.

Forward-Looking Statements

This news release contains forward-looking information that involves
risks and uncertainties, including statements about the Company’s plans,
objectives, expectations and intentions. Such statements include,
without limitation: financial or other information included herein based
upon or otherwise incorporating judgments or estimates relating to
future performance, events or expectations; the Company’s strategies,
positioning, resources, capabilities, and expectations for future
performance; and the Company’s outlook and financial and other guidance.
These forward-looking statements are based upon assumptions made by the
Company as of the date hereof and are subject to known and unknown risks
and uncertainties that could cause actual results to differ materially
from those anticipated.

Risks and uncertainties that could adversely affect the Company’s
business and prospects, and otherwise cause actual results to differ
materially from those anticipated, include without limitation: the
ability of the Company to successfully manage leadership and
organizational changes, including the ability of the Company to attract,
motivate and retain key employees; U.S., European and general worldwide
economic conditions, trade relations, and related uncertainties; the
Company’s reliance on third-party reimbursement policies to support the
sales and market acceptance of its products, including the possible
adverse impact of government regulation and changes in the availability
and amount of reimbursement and uncertainties for new products or
product enhancements; changes to applicable laws and regulations,
including tax laws, global health care reform, and import/export trade
laws; changes in guidelines, recommendations and studies published by
various organizations that could affect the use of the Company’s
products; uncertainties inherent in the development of new products and
the enhancement of existing products, including FDA approval and/or
clearance and other regulatory risks, technical risks, cost overruns and
delays; the risk that products may contain undetected errors or defects
or otherwise not perform as anticipated; risks associated with strategic
alliances and the ability of the Company to realize anticipated benefits
of those alliances; risks associated with acquisitions, including,
without limitation, the Company’s ability to successfully integrate
acquired businesses, the risks that the acquired businesses may not
operate as effectively and efficiently as expected even if otherwise
successfully integrated, and the risks that acquisitions may involve
unexpected costs or unexpected liabilities; the risks of conducting
business internationally; the risk of adverse exchange rate fluctuations
on the Company’s international activities and businesses; manufacturing
risks, including the Company’s reliance on a single or limited source of
supply for key components, the need to comply with especially high
standards for the manufacture of many of its products and risks
associated with utilizing third party manufacturers; the Company’s
ability to predict accurately the demand for its products, and products
under development, and to develop strategies to address its markets
successfully; the early stage of market development for certain of the
Company’s products; the Company’s leverage risks, including the
Company’s obligation to meet payment obligations and financial covenants
associated with its debt; cybersecurity risks; risks related to the use
and protection of intellectual property; expenses, uncertainties and
potential liabilities relating to litigation, including, without
limitation, commercial, intellectual property, employment and product
liability litigation; technical innovations that could render products
marketed or under development by the Company obsolete; and competition.

The risks included above are not exhaustive. Other factors that could
adversely affect the Company’s business and prospects are described in
the filings made by the Company with the SEC. The Company expressly
disclaims any obligation or undertaking to release publicly any updates
or revisions to any such statements presented herein to reflect any
change in expectations or any change in events, conditions or
circumstances on which any such statements are based.

SOURCE: Hologic, Inc.

           

HOLOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions, except number of shares, which are reflected in
thousands, and per share data)

 
Three Months Ended Six Months Ended
March 30, 2019       March 31, 2018 March 30, 2019       March 31, 2018
 
Revenues:
Product $ 667.8 $ 645.0 $ 1,350.9 $ 1,295.7
Service and other 150.6   144.3   298.2   284.7  
Total revenues 818.4   789.3   1,649.1   1,580.4  
 
Cost of revenues:
Product 232.9 217.1 465.0 430.8
Amortization of acquired intangible assets 80.4 79.8 161.4 159.6
Impairment of intangible assets and equipment 374.6 374.6
Service and other 88.1   77.3   171.6   150.4  
 
Gross profit 42.4   415.1   476.5   839.6  
 
Operating expenses:
Research and development 57.3 56.8 110.5 111.6
Selling and marketing 133.5 130.5 279.5 270.0
General and administrative 89.9 83.8 168.5 161.7
Amortization of acquired intangible assets 14.1 14.7 28.2 29.1
Impairment of intangible assets and equipment 69.2 46.0 69.2 46.0
Impairment of goodwill 685.7 685.7
Restructuring charges 1.6   1.8   3.3   5.6  
Total operating expenses 365.6   1,019.3   659.2   1,309.7  
 
Loss from operations (323.2 ) (604.2 ) (182.7 ) (470.1 )
Interest income 0.8 2.1 2.1 2.9
Interest expense (34.8 ) (38.9 ) (70.9 ) (79.9 )
Debt extinguishment losses (44.9 ) (0.8 ) (45.9 )
Other income (expense), net 3.5   (5.1 ) 2.9   (2.2 )
 
Loss before income taxes (353.7 ) (691.0 ) (249.4 ) (595.2 )
Benefit for income taxes (81.1 ) (9.6 ) (75.4 ) (320.5 )
 
Net Loss $ (272.6 ) $ (681.4 ) $ (174.0 ) $ (274.7 )
 
Net loss per common share:
Basic $ (1.01 ) $ (2.46 ) $ (0.64 ) $ (0.99 )
Diluted $ (1.01 ) $ (2.46 ) $ (0.64 ) $ (0.99 )
 
Weighted average number of shares outstanding:
Basic 269,235   277,114   269,913   276,985  
Diluted 269,235   277,114   269,913   276,985  
 
 
                       

HOLOGIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)

 
March 30, 2019 September 29, 2018
ASSETS
 
Current assets:
Cash and cash equivalents $ 401.0 $ 666.7
Accounts receivable, net 557.5 579.2
Inventories 443.4 384.1
Other current assets 109.1 93.2
Total current assets 1,511.0 1,723.2
 
Property, plant and equipment, net 469.7 478.2
Goodwill and intangible assets, net 4,439.4 4,931.8
Other assets 105.2 97.7
Total assets $ 6,525.3 $ 7,230.9
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Current portion of long-term debt $ 310.7 $ 599.7
Accounts payable and accrued liabilities 561.0 630.0
Deferred revenue 173.5 172.9
Total current liabilities 1,045.2 1,402.6
 
Long-term debt, net of current portion 2,799.7 2,704.6
Deferred income taxes 335.4 498.2
Other long-term liabilities 185.2 196.7
Total stockholders’ equity 2,159.8 2,428.8
Total liabilities and stockholders’ equity $ 6,525.3 $ 7,230.9
 
 
             

HOLOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in millions)

 
Six Months Ended
March 30, 2019           March 31, 2018
OPERATING ACTIVITIES
Net loss $ (174.0 ) $ (274.7 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 46.8 52.0
Amortization of acquired intangibles 189.6 188.7
Non-cash interest expense 4.0 11.2
Stock-based compensation expense 34.6 35.9
Deferred income taxes (173.3 ) (433.6 )
Goodwill impairment charge 685.7
Intangible asset and equipment impairment charges 443.8 46.0
Debt extinguishment loss 0.8 45.9
Fair value write-up of acquired inventory sold 3.6
Other adjustments and non-cash items 6.0 7.3
Changes in operating assets and liabilities, excluding the effect of
acquisitions:
Accounts receivable 18.6 2.5
Inventories (54.0 ) (27.5 )
Prepaid income taxes (8.3 ) (29.8 )
Prepaid expenses and other assets (10.4 ) (9.1 )
Accounts payable (27.2 ) (9.5 )
Accrued expenses and other liabilities (71.2 ) (22.5 )
Deferred revenue 8.7   (2.0 )
Net cash provided by operating activities 238.1   266.5  
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (108.6 ) (4.4 )
Capital expenditures (23.0 ) (24.6 )
Increase in equipment under customer usage agreements (28.9 ) (24.2 )
Purchase of cost-method investment (3.0 ) (6.0 )
Other activity (3.6 ) (2.1 )
Net cash used in investing activities (167.1 ) (61.3 )
FINANCING ACTIVITIES
Proceeds from long-term debt 1,500.0 1,500.0
Repayment of long-term debt (1,462.5 ) (1,340.6 )
Proceeds from senior notes 1,350.0
Repayment of senior notes (1,037.7 )
Payments to extinguish convertible notes (302.8 )
Payment of acquired long-term debt (2.5 )
Proceeds from amounts borrowed under revolving credit line 480.0 710.0
Repayments of amounts borrowed under revolving credit line (695.0 ) (900.0 )
Repayment of amounts borrowed under accounts receivable
securitization program
(18.0 )
Payment of debt issuance costs (2.7 ) (23.5 )
Purchase of interest rate caps (1.5 )
Repurchase of common stock (150.1 ) (90.7 )
Proceeds from issuance of common stock pursuant to employee stock
plans
28.8 16.3
Payments under capital lease obligations (0.8 ) (0.8 )
Payment of minimum tax withholdings on net share settlements of
equity awards
(11.9 ) (15.6 )
Net cash used in financing activities (336.2 ) (135.4 )
Effect of exchange rate changes on cash and cash equivalents (0.5 ) 3.8  
Net (decrease) increase in cash and cash equivalents (265.7 ) 73.6
Cash and cash equivalents, beginning of period 666.7   540.6  
Cash and cash equivalents, end of period $ 401.0   $ 614.2  
 
 
 

HOLOGIC, INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(Unaudited)

(In millions, except earnings per share and margin percentages)

 
      Three Months Ended       Six Months Ended
March 30, 2019       March 31, 2018 March 30, 2019       March 31, 2018
Gross Profit:
GAAP gross profit $ 42.4 $ 415.1 $ 476.5 $ 839.6
Adjustments:
Amortization of acquired intangible assets (1) 80.4 79.8 161.4 159.6
Incremental depreciation expense (2) 0.1 0.1 0.2 0.3
Impairment of intangible assets and equipment (17) 374.6 374.6
Fair value write-up of acquired inventory (12) 1.8     3.6    
Non-GAAP gross profit $ 499.3   $ 495.0   $ 1,016.3   $ 999.5  
 
Gross Margin Percentage:
GAAP gross margin percentage 5.2 % 52.6 % 28.9 % 53.1 %
Impact of adjustments above 55.8 % 10.1 % 32.7 % 10.1 %
Non-GAAP gross margin percentage 61.0 % 62.7 % 61.6 % 63.2 %
 
Operating Expenses:
GAAP operating expenses $ 365.6 $ 1,019.3 $ 659.2 $ 1,309.7
Adjustments:
Amortization of acquired intangible assets (1) (14.1 ) (14.7 ) (28.2 ) (29.1 )
Incremental depreciation expense (2) (0.3 ) (1.6 ) (0.7 ) (5.1 )
Transaction expenses (4) (0.9 ) (0.3 ) (1.3 ) (0.7 )
Non-income tax benefit (9) 4.0
Litigation settlements (19) (4.5 ) (4.5 )
Integration/consolidation costs (3) (2.2 ) (0.6 ) (4.5 ) (1.1 )
Restructuring charges (3) (1.6 ) (1.8 ) (3.3 ) (5.6 )
Research and development asset charge (16) (1.7 ) (1.7 )
Impairment of intangible assets and equipment (17) (69.2 ) (46.0 ) (69.2 ) (46.0 )
Impairment of goodwill (18)   (685.7 )   (685.7 )
Non-GAAP operating expenses $ 272.8   $ 266.9   $ 547.5   $ 538.7  
 
Operating Margin:
GAAP loss from operations $ (323.2 ) $ (604.2 ) (182.7 ) (470.1 )
Adjustments to gross profit as detailed above 456.9 79.9 539.8 159.9
Adjustments to operating expenses as detailed above 92.8   752.4   111.7   771.0  
Non-GAAP income from operations $ 226.5   $ 228.1   $ 468.8   $ 460.8  
 
Operating Margin Percentage:
GAAP loss from operations margin percentage (39.5 ) % (76.5 ) % (11.1 ) % (29.7 ) %
Impact of adjustments above 67.2 % 105.4 % 39.5 % 58.9 %
Non-GAAP operating margin percentage 27.7 % 28.9 % 28.4 % 29.2 %
 
Interest Expense:
GAAP interest expense $ 34.8 $ 38.9 70.9 79.9
Adjustments:
Non-cash interest expense relating to convertible notes (5) (0.6 ) (3.5 )
Debt transaction costs (10)   (2.6 ) (0.8 ) (4.3 )
Non-GAAP interest expense $ 34.8   $ 35.7   $ 70.1   $ 72.1  
 
Pre-Tax Income (Loss):
GAAP pre-tax loss $ (353.7 ) $ (691.0 ) (249.4 ) (595.2 )
Adjustments to pre-tax earnings as detailed above 549.7 835.5 652.3 938.7
Debt extinguishment losses (6) 44.9 0.8 45.9
(Gain) loss on sale of investment securities (7) (0.8 ) 0.6
Unrealized losses (gains) on forward foreign currency contracts (8) 1.4   1.7   (2.0 ) 0.2  
Non-GAAP pre-tax income $ 197.4   $ 191.1   400.9   390.2  
 
Net Income (Loss):
GAAP net loss $ (272.6 ) (681.4 ) $ (174.0 ) $ (274.7 )
Adjustments:
Amortization of acquired intangible assets (1) 94.5 94.5 189.6 188.7
Fair value write-up of acquired inventory sold (12) 1.8 3.6
Restructuring, integration/consolidation costs and transaction
expenses (3) (4)
4.7 2.7 9.1 7.4
Non-income tax expense (benefit) (9) (4.0 )
Incremental depreciation expense (2) 0.4 1.7 0.9 5.4
Impairment of intangible assets and equipment (17) 443.8 46.0 443.8 46.0
Impairment of goodwill (18) 685.7 685.7
Research and development asset charge (16) 1.7 1.7
Debt related expenses (5) (6) (10) 48.1 1.6 53.7
Litigation settlements (19) 4.5 4.5
Non-operating losses (gains) (7) (8) 1.4 1.7 (2.8 ) 0.8
Discrete impact of tax reform (11) 2.1 5.0 (327.1 )
Tax benefit of tax internal reorganization (15) 0.8 (19.2 )
Income tax effect of reconciling items (13) (123.4 ) (55.5 ) (149.4 ) (83.0 )
Non-GAAP net income $ 155.9   $ 147.3   $ 312.7   $ 300.6  
 
Net Income (Loss) Percentage:
GAAP net loss percentage (33.3) % (86.3 ) % (10.6 ) % (17.4 ) %
Impact of adjustments above 52.3 % 105.0 % 29.6 % 36.4 %
Non-GAAP net income percentage 19.0 % 18.7 % 19.0 % 19.0 %
 
Earnings (Loss) Per Share:
GAAP loss per share – Diluted $ (1.01 ) $ (2.46 ) $ (0.64 ) $ (0.99 )
Adjustment to net loss (as detailed above) 1.59   2.99   1.79   2.06  
Non-GAAP earnings per share – diluted (14) $ 0.58   $ 0.53   $ 1.15   $ 1.07  
 
Adjusted EBITDA:
Non-GAAP net income $ 155.9 $ 147.3 $ 312.7 $ 300.6
Interest expense, net, not adjusted above 34.0 33.6 68.0 69.2
Provision for income taxes 41.4 44.0 88.2 89.8
Depreciation expense, not adjusted above 22.8   23.3   45.9   46.6  
Adjusted EBITDA $ 254.1   $ 248.2   $ 514.8   $ 506.2  
 

Contacts

Michael Watts
Vice President, Investor Relations and Corporate
Communications
858-410-8588
[email protected]

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