Investors

Press Release

Mar 5, 2018
Analogic Announces Results for the Second Quarter ended January 31, 2018 and Declares Quarterly Cash Dividend

PEABODY, Mass., March 05, 2018 (GLOBE NEWSWIRE) -- Analogic Corporation (Nasdaq:ALOG), enabling the world's medical imaging and aviation security technology, today announced results for its second quarter ended January 31, 2018. 

Highlights during the second quarter included:

  • Revenue of $129.2 million with gross margin of 44%
  • GAAP operating margin of 12%; Non-GAAP operating margin of 15%
  • GAAP diluted EPS of $0.52; Non-GAAP diluted EPS of $1.27
  • Operating cash flow of $21 million

Revenue for the second quarter of fiscal 2018 was $129.2 million, a decrease of 2% compared with revenue of $131.5 million in the second quarter of fiscal 2017. GAAP net income for the second quarter of fiscal 2018 was $6.5 million, or $0.52 per diluted share, compared with net income of $7.5 million, or $0.59 per diluted share, in the second quarter of fiscal 2017. Included in GAAP net income and diluted EPS for the second quarter of 2018 is a provisional $6.5 million income tax expense, or $0.51 per diluted share, for the one-time transition tax associated with the Tax Cuts and Jobs Act of 2017 that was recently signed into law. Also included in GAAP net income and diluted EPS for the second quarter of fiscal 2017 were one-time net charges of $2.2 million, or $0.11 per diluted share, in connection with our Oncura veterinary business.

Non-GAAP net income for the second quarter of fiscal 2018 was $16.0 million, or $1.27 per diluted share, compared with $12.6 million, or $0.99 per diluted share, in the prior year's second quarter. A reconciliation of GAAP to non-GAAP results is included as an attachment to this press release.

For the first six months of fiscal 2018, revenue totaled $236.0 million, down 7% from the same period in the prior fiscal year. Fiscal year-to-date GAAP net income was $12.2 million, or $0.97 per diluted share, compared with net income of $10.0 million, or $0.79 per diluted share, from the same period in 2017. Included in GAAP net income and diluted EPS for the first six months of 2018 is a provisional $6.5 million income tax expense, or $0.51 per diluted share, for the one-time transition tax associated with the Tax Cuts and Jobs Act of 2017 that was recently signed into law. Included in year-to-date fiscal 2017 GAAP net income and diluted EPS were one-time net charges of $2.3 million, or $0.12 per diluted share, in connection with our Oncura veterinary business.

Year-to-date non-GAAP net income was $25.3 million, or $2.01 per diluted share, compared with $18.0 million, or $1.41 per diluted share, in the same period last year. A reconciliation of GAAP to non-GAAP results is included as an attachment to this press release.

Fred Parks, president and CEO, commented, "We continue to pursue our previously announced strategic sale process. In view of the status of that process, we are not commenting on our fiscal year guidance or other forward-looking performance measures."

Segment Revenues for the Second Quarter of Fiscal 2018 
Medical Imaging segment revenue was $63.4 million for the second quarter of fiscal 2018, down 12% from revenue of $72.4 million in the same period of fiscal 2017, primarily due to lower sales in CT associated with previously reported customer sourcing decisions combined with lower sales in MR offset by favorability in Motion Controls.

Ultrasound segment revenue was $43.5 million for the second quarter of fiscal 2018, up 8% from revenue of $40.3 million in the same period of fiscal 2017, due to the strong sales growth in North America and Europe. Revenue was partially offset by the comparative lower revenue from discontinued Oncura veterinary system sales.

Security and Detection segment revenue was $22.3 million for the second quarter of fiscal 2018, up 18% from revenue of $18.8 million in the same period of fiscal 2017 mainly driven by strong demand for international high-speed threat detection systems and increased revenue in Rapid DNA.

Quarterly Cash Dividend 
On March 1, 2018, Analogic's Board of Directors declared a $0.10 cash dividend for each common share for its second fiscal quarter ended January 31, 2018. The cash dividend will be payable on March 26, 2018, to shareholders of record on March 15, 2018.

Use of Non-GAAP Financial Measures 
We supplement our GAAP financial reporting with certain non-GAAP financial measures, including non-GAAP operating income, non-GAAP operating margin, non-GAAP other income and expense, non-GAAP net income, non-GAAP effective tax rate and non-GAAP diluted earnings per share. These measures are not presented in accordance with, nor are they a substitute for, U.S. generally accepted accounting principles, or GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. We have included at the end of this document a reconciliation of each historical non-GAAP financial measure used in this document to the most directly comparable GAAP financial measure.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, in forecasting and planning for future periods, and in determining payments under our compensation programs. We also believe that non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results and in comparing financial results across accounting periods and to those of other companies.

Forward-Looking Statements
Any statements about future expectations, plans, and prospects for the Company, including statements containing the words "believes," "anticipates," "plans," "expects," and similar expressions, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including risks relating to product development and commercialization, limited demand for the Company's products, limited number of customers, risks associated with competition, uncertainties associated with regulatory agency approvals, competitive pricing pressures, downturns in the economy, the risk of potential intellectual property litigation, acquisition related risks, and other factors discussed in our most recent quarterly and annual reports filed with the Securities and Exchange Commission. In addition, the forward-looking statements included in this presentation represent the Company's views as of the date of this document. While the Company anticipates that subsequent events and developments will cause the Company's views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the Company's views as of any later date.

Conference Call Details

Analogic will conduct an investor conference call on Monday, March 5, 2018 at 5:00 p.m. (ET) to discuss the second quarter results. To participate in the conference call, dial 1-866-823-6992, or 1-334-323-7225 for international callers, approximately ten minutes before the conference is scheduled to begin. Inform the operator that you wish to join the Analogic conference, passcode 42748. You will then be asked for your name, organization, and telephone number, and be connected to the conference. The earnings release and, just prior to the call, presentation materials related to the quarterly financial information will be posted on the Company's website at http://investor.analogic.com.

The call will also be available via webcast in listen-only mode. To listen to the webcast, visit investor.analogic.com approximately five to ten minutes before the conference is scheduled to begin. A telephone digital replay will be available approximately two hours after the call is completed through midnight April 5, 2018. To access the digital replay, dial 1-877-919-4059 or 1-334-323-0140 for international callers. The passcode is 84106845.

A replay of the conference call webcast will be archived on the Company's website at www.analogic.com approximately three hours after the call is completed and will be available through midnight April 5, 2018. For more information on the conference call, visit www.analogic.com, call 978-326-4058, or email investorrelations@analogic.com.

About Analogic — Celebrating 50 Years of Imaging Innovation

Analogic (Nasdaq:ALOG) provides leading-edge healthcare and security technology solutions to advance the practice of medicine and save lives. We are recognized around the world for advanced imaging and real-time guidance technologies used for disease diagnosis and treatment as well as for automated threat detection. Our market-leading ultrasound systems, led by our flagship BK Ultrasound brand, used in procedure-driven markets such as urology, surgery, and point-of-care, are sold to clinical practitioners around the world. Our advanced imaging technologies are also used in computed tomography (CT), magnetic resonance imaging (MRI), and digital mammography systems, as well as automated threat detection systems for aviation security. Analogic is headquartered just north of Boston, Massachusetts. For more information, visit www.analogic.com.

Analogic and the globe logo are registered trademarks of Analogic Corporation.

          
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
          
          
   Three Months Ended Six Months Ended
(In thousands, except per share data)  January 31, 2018 January 31, 2017 January 31, 2018 January 31, 2017
          
Net revenue:         
Product   $  126,691  $  130,330  $  232,444  $  250,582  
Engineering      2,481     1,204     3,604     2,077  
Total net revenue      129,172     131,534     236,048     252,659  
Cost of sales:         
Product      70,356     72,721     128,329     141,482  
Engineering      1,952     1,123     3,088     1,846  
Total cost of sales      72,308     73,844     131,417     143,328  
          
Gross profit     56,864     57,690     104,631     109,331  
Operating expenses:         
Research and product development      15,631     16,213     30,642     32,063  
Selling and marketing      13,195     17,358     25,601     35,538  
General and administrative      12,098     3,979     24,039     17,600  
Restructuring      197     267     731     299  
Asset impairment charges     -     10,423     -     10,423  
Total operating expenses      41,121     48,240     81,013     95,923  
          
Income from operations      15,743     9,450     23,618     13,408  
Total other income (expense), net     939     28     1,175     (414)
Income before income taxes      16,682     9,478     24,793      12,994  
Provision for income taxes      10,133     1,968     12,586     2,948  
Net income   $  6,549  $  7,510  $  12,207  $  10,046  
          
Net income per share         
Basic   $  0.52  $  0.60  $  0.98  $  0.81  
Diluted   $  0.52  $  0.59  $  0.97  $  0.79  
          
Dividends declared and paid per share  $  0.10  $  0.10  $  0.20  $  0.20  
          
Weighted-average shares outstanding:         
Basic      12,490     12,466     12,482     12,442  
Diluted      12,601     12,680     12,606     12,712  
          


     
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
     
(In thousands)    
     
Assets: January 31, 2018 July 31, 2017
Cash and cash equivalents $  101,863  $  129,298
Short-term marketable securities    63,772     18,797
Accounts receivable, net    84,555     77,587
Inventory    127,395     130,575
Other current assets    13,508     14,448
Total current assets    391,093     370,705
Long-term marketable securities    36,625     26,171
Property, plant, and equipment, net    100,399     102,676
Intangible assets and goodwill, net    25,631     28,269
Other non-current assets    8,364     10,262
Total Assets $  562,112  $  538,083
     
Liabilities and Stockholders' Equity:    
Accounts payable $  28,431  $  27,179
Accrued liabilities    29,708     31,619
Other current liabilities    8,957     8,312
Total current liabilities    67,096     67,110
Long-term liabilities    17,675     10,479
Stockholders' equity    477,341     460,494
Total Liabilities and Stockholders' Equity $  562,112  $  538,083
     


         
NON-GAAP STATEMENTS OF OPERATIONS RECONCILIATION 
         
(In thousands, except per share data)Three Months Ended Six Months Ended 
 January 31, 2018 January 31, 2017 January 31, 2018 January 31, 2017 
         
GAAP Income From Operations$  15,743   $  9,450   $  23,618   $  13,408   
Share-based compensation expense (Note 1)   1,898      2,597      3,881      4,160   
Acquisition-related revenues and expenses (Note 2)   1,461      (6,065)    2,923      (3,853) 
Non-routine other legal costs (Note 3)   77      12      654      15   
Restructuring (Note 4)   197      267      731      299   
Asset impairment charges (Note 5)   -      10,423      -      10,423   
Non-GAAP Income From Operations$  19,376   $  16,684   $  31,807   $  24,452   
Percentage of Total Net Revenue 15.0%   12.7%   13.5%   9.7%  
         
GAAP  Tax Provision (Note 6)$  10,133   $  1,968   $  12,586   $  2,948   
GAAP Tax Rate 60.7%   20.8%   50.8%   22.7%  
Non-GAAP  Tax Provision (Note 6)   4,355      4,123   $  7,704   $  6,074   
Non-GAAP Tax Rate 21.4%   24.7%   23.4%   25.3%  
         
GAAP Net Income$  6,549   $  7,510   $  12,207   $  10,046   
Share-based compensation expense (Note 1)   1,493      1,791      3,377      2,857   
Acquisition-related revenues and expenses (Note 2)   1,264      (3,500)    2,378      (1,748) 
Non-routine other legal costs (Note 3)   101      8      466      10   
Restructuring (Note 4)   159      169      517      189   
Asset impairment charges (Note 5)   (15)    -      13      -   
Valuation Allowance Tax Effect (Note 6)   (72)    -      (161)    -   
Transition Tax Impact (Note 6)   6,482      6,610      6,482      6,610   
Non-GAAP Net Income$  15,961   $  12,588   $  25,279   $  17,964   
Percentage of Total Net Revenue 12.4%   10%   10.7%   7.1%  
         
GAAP Diluted EPS$  0.52   $  0.59   $  0.97   $  0.79   
Effect of non-GAAP adjustments$  0.75   $  0.40      1.04      0.62   
Non-GAAP Diluted EPS$  1.27   $  0.99   $  2.01   $  1.41   
         
         
Note 1: Exclusion of variable share-based compensation expense allows consistency of operating results between periods and other companies.  
         
Note 2: During fiscal years 2017 and 2018, we incurred acquisition costs related to the Ultrasonix Medical Corporation, PocketSonics, Inc., and Oncura Partners Diagnostics, LLC acquisitions, which we closed on March 2, 2013, September 20, 2013, and January 8, 2016, respectively. Costs included the amortization of intangibles of $1.5 million and $2.9 million for the three and six months ended January 31, 2018, respectively.
 
         
Note 3: During the three and six months ended January 31, 2018, we incurred $77 thousand and $654 thousand, respectively, of pre-tax strategic alternative related costs.  Additionally, during the three and six months ended January 31, 2018, we incurred $0 of pre-tax inquiry-related costs, associated with the BK matter, as initially disclosed in our annual report on Form 10-K for the fiscal year ended July 31, 2011. This matter relates to transactions we identified involving our Danish subsidiary, BK Medical, and certain of its foreign distributors, regarding compliance with the law.
 
         
Note 4: During the three and six months ended January 31, 2018, we incurred pre-tax charges of $197 thousand and $731 thousand, respectively, primarily due to facility exit costs associated with exiting the Vancouver facility.
 
         
Note 5:  As a result of continuing losses in the Oncura business and the related business outlook, the Company evaluated the net realizability of all of the related assets at December 31, 2016.  As a result, the company recorded a pre-tax asset impairment charge of $10.4 million, primarily associated with the write-down of the Oncura goodwill to its estimated fair values.   
         
Note 6: The quarter to date Q2 FY 2018 non-GAAP tax rate differs from the GAAP tax rate primarily due to the transition tax impact from the 2017 Tax Reform Bill, acquisition related adjustments and stock compensation expenses.  The quarter to date Q2 FY 2018 non-GAAP tax rates differ from the GAAP tax rates primarily due to the transition tax impact from the 2017 Tax Reform Bill, acquisition related amortization expenses and stock compensation expenses. 
         

For Further Information:

Investor and Financial Media Contact: 
Mark Namaroff 
Senior Director of Investor Relations and Corporate Communications 
(978) 326-4058 
investorrelations@analogic.com