Cytyc Reports Record First Quarter 2006 Results; Revenue Increases 24 Percent to $140.5 Million and Net Income Increases 41 Percent to $29.4 Million.MARLBOROUGH Marl·bor·ough or Marl·bo·ro A city of east-central Massachusetts east-northeast of Worcester. Settled in 1657, it was nearly destroyed in 1676 during King Philip's War. Population: 38,100. , Mass. -- Cytyc Cytyc Corporation (NASDAQ: CYTC) engages in the design, development, manufacture, and marketing of clinical products that focus on women’s health. Its products cover a range of women's health applications, including cervical cancer screening, breast cancer risk Corporation (Nasdaq: CYTC), a leading women's health Women's Health Definition Women's health is the effect of gender on disease and health that encompasses a broad range of biological and psychosocial issues. company, today announced results for the first quarter ended March 31, 2006. Revenue for the quarter ended March 31, 2006 rose to $140.5 million, compared to revenue of $113.4 million for the same period of 2005. Net income for the quarter was $29.4 million, or $0.24 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to net income for the same period in 2005 of $20.9 million, or $0.18 per diluted share. The table below shows the impact of stock-based compensation expense, which began in the first quarter of 2006, and the charge in the first quarter of 2005 related to an arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the decision.
Reconciliation of Non-GAAP Measures
(in thousands, except per share data)
Three Months Ended
March 31,
2006 2005
---------------------
Net income reconciliation:
--------------------------
Net income, as reported $29,364 $20,891
Stock-based compensation under new accounting
rules (1) 4,062 --
Arbitration decision (2) -- 4,957
---------------------
Adjusted net income $33,426 $25,848
=====================
Net income per common share reconciliation:
-------------------------------------------
Net income per common share, diluted, as reported $0.24 $0.18
Stock-based compensation under new accounting
rules (1) 0.03 --
Arbitration decision (2) -- 0.03
---------------------
Adjusted net income per common share, diluted $0.27 $0.21
=====================
Weighted average diluted shares outstanding
reconciliation:
-------------------------------------------
Weighted average diluted shares outstanding, as
reported 125,877 125,771
Stock-based compensation under new accounting
rules (1) 1,998 --
---------------------
Adjusted weighted average diluted shares
outstanding 127,875 125,771
=====================
Notes to Reconciliation of Non-GAAP Measures:
---------------------------------------------
(1) Cytyc adopted new accounting guidelines requiring expensing of
stock-based compensation beginning in Q1 2006, which resulted in
expense of $6.0 million, before tax benefit of $1.9 million. These
new rules also resulted in a reduction of weighted average diluted
shares outstanding of 2.0 million shares.
(2) Charge in the first quarter of 2005 related to the DEKA
Partnership arbitration panel decision, which was $7.8 million,
offset by the related $2.8 million tax benefit.
First Quarter Highlights: --Domestic surgical products revenue increased 73 percent over first quarter 2005 to $44.7 million, representing 32 percent of total Company revenue. --Domestic diagnostic products revenue increased 8 percent over first quarter 2005 to $80.7 million and included shipment of 8.8 million ThinPrep ThinPrep™ Cytology A proprietary system–Cytec, Inc, in which specimens are obtained with a special fluid collection system and the slides for cytologic examination are spread in one-cell-thick layers. See thin prep. (R) Pap Tests Pap test, Pap smear, or Papanicolaou test (păp'ənē`kəlou), medical procedure used to detect cancer of the uterine cervix. and 44 new ThinPrep(R) Imaging Systems. --International diagnostic and surgical products revenue increased 21 percent over first quarter 2005 to $15.1 million. --The business generated cash from operations of $42.5 million in the first quarter, net of an $11.4 million arbitration payment. Patrick J. Sullivan, Cytyc's chairman, president, and chief executive officer, stated, "The Company once again had strong financial and operating results for the first quarter, headlined by our domestic surgical products and international business segments, which performed extremely well. Domestically, our surgical products segment continued its impressive revenue growth at a 73 percent increase compared to the first quarter of 2005 and contributed 32 percent of total Company revenue in the quarter. The NovaSure(R) endometrial ablation Endometrial ablation is a medical procedure that is used to remove (ablate) or destroy the endometrial lining of a woman's uterus. This technique is most often employed for women who suffer from excessive or prolonged bleeding during their menstrual cycle but can not or do not wish product continues to gain share in this expanding market. Sales of the MammoSite(R) Radiation Therapy System are on track, and we expect increased adoption as the clinical data matures. The international sales of our diagnostic products showed strong growth as evidenced by the exclusive agreements signed in Scotland Scotland, political division of Great Britain (1991 pop. 4,957,000), 30,414 sq mi (78,772 sq km), comprising the northern portion of the island of Great Britain and many surrounding islands. and Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. during the first quarter." Mr. Sullivan added, "In our domestic diagnostic business we continued to see widespread adoption of the ThinPrep Imaging System during the first quarter and shipped 44 units to U.S. customers. During the first quarter, approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 33 percent of ThinPrep(R) Pap Test slides were imaged. As we celebrate the tenth Tenth can mean: In mathematics:
Cervical cancer is a disease in which the cells of the cervix become abnormal and start to grow uncontrollably, forming tumors. screening." Mr. Sullivan concluded, "Overall, I am very pleased with the performance of each of our business segments and look forward to further growth of our surgical products and international business segments alongside our flagship This article is about the lead ship, store, or product of a group. For other uses, see Flagship (disambiguation). A flagship is the ship used by the commanding officer of a group of naval ships. ThinPrep products."
The Company's segment revenue was as follows:
Three Months Ended
March 31,
-----------------------------
2006 2005 % Change
-----------------------------
($ in millions)
Domestic Diagnostic Products $80.7 $75.0 8%
Domestic Surgical Products 44.7 25.8 73%
International 15.1 12.6 21%
-----------------------------
Total Company Revenue $140.5 $113.4 24%
=============================
Domestic diagnostic products revenue consists primarily of revenue from sales of the ThinPrep Pap Test and use of the ThinPrep Imaging System. Domestic surgical products revenue consists of revenue from sales of the NovaSure Endometrial Ablation System and the MammoSite and GliaSite(R) Radiation Therapy Systems. International revenue consists primarily of revenue from sales of the ThinPrep Pap Test, use of the ThinPrep Imaging System, the NovaSure Endometrial Ablation System, and the MammoSite Radiation Therapy System. During the first quarter, the business generated $42.5 million of cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , net of an $11.4 million arbitration payment, bringing the total cash and investments at the end of the quarter to $222.8 million. The Company also made a $21 million earn-out Earn-out Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement. payment for Proxima Noun 1. Proxima - the nearest star to the sun; distance: 4.3 light years Proxima Centauri Centaurus, Centaur - a conspicuous constellation in the southern hemisphere near the Southern Cross Therapeutics therapeutics Treatment and care to combat disease or alleviate pain or injury. Its tools include drugs, surgery, radiation therapy, mechanical devices, diet, and psychiatry. , Inc. (acquired in March 2005) and invested $22 million in a share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program in the first quarter of 2006. Non-GAAP Information In addition to disclosing results determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , or GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , Cytyc also discloses adjusted, or non-GAAP, results of operations that exclude certain items. By disclosing this non-GAAP information, management intends to provide investors with additional information to further analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. Cytyc's performance and underlying trends. In order to better assess operating trends, management utilizes a measure of adjusted net income and adjusted diluted net income per common share on a non-GAAP basis that excludes for the applicable period stock options expensed under new accounting guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. adopted January January: see month. 1, 2006, net of tax effects, and a charge, net of tax effects, related to the DEKA DEKA Dean Kamen (of DEKA Research and Development Corporation, Manchester, NH, USA) DEKA Deutsche Kapitalanlagegesellschaft Mbh (German investment fund) Products Limited Partnership arbitration panel arbitration panel A group of individuals charged with resolving a dispute between individuals and/or organizations. Arbitration panels to resolve investment disputes are sponsored by self-regulatory organizations such as NASD. decision in the first quarter of 2005. Management believes adjusted net income provides useful supplemental information to management and investors regarding the performance and underlying trends of Cytyc's business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets and facilitates comparisons to its historical operating results. Management uses this information internally for forecasting, budgeting, evaluating the effectiveness of Cytyc's operational strategies, and performance measurement for compensation of management and employees. Management believes it is important to provide investors with the same metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. used by management to measure operating performance, which assists investors in analyzing the underlying trends in Cytyc's business over time. Non-GAAP information should not be viewed as a substitute for, or superior to, net income or other data prepared in accordance with GAAP as measures of Cytyc's profitability or liquidity. Users of this financial information should consider the types of events and transactions for which adjustments have been made. See the table in this press release for a reconciliation of non-GAAP amounts to amounts reported under GAAP. Cytyc management will discuss first quarter results, business highlights and future expectations during a conference call on April 27, at 8:30 a.m. (Eastern). The call will be hosted by Patrick Sullivan, chairman, president and chief executive officer; Daniel Daniel, book of the Bible Daniel, book of the Bible. It combines "court" tales, perhaps originating from the 6th cent. B.C., and a series of apocalyptic visions arising from the time of the Maccabean emergency (167–164 B.C. Levangie, executive vice president and chief commercial officer; and Timothy Adams
Timothy Adams (born August 4, 1967 in Bellville, New Jersey) is an American actor. , chief financial officer. A live webcast of the call may be accessed at Cytyc's website, http://ir.cytyc.com, and the event will be available for replay at this site approximately two hours following the call until May 11, 2006. Those without web access may access the call by dialing 201-689-8560. A telephonic replay of the call will be available through May 11, 2006, by dialing 201-612-7415; enter account # 3055 and conference ID # 198671. Cytyc Corporation is a leading women's health company that designs, develops, manufactures, and markets innovative and clinically effective products for cervical cancer screening, breast cancer risk assessment, treatment of excessive menstrual menstrual /men·stru·al/ (men´stroo-al) pertaining to the menses or to menstruation. men·stru·al or men·stru·ous adj. Of or relating to menstruation. bleeding bleeding /bleed·ing/ (-ing) 1. the escape of blood, as from an injured vessel. 2. phlebotomy. dysfunctional uterine bleeding , and treatment of breast cancer. Cytyc is traded on The Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. under the symbol CYTC. Cytyc, ThinPrep, NovaSure, MammoSite, and GliaSite are registered trademarks of Cytyc Corporation. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. in this press release are made pursuant to the provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release which are not strictly historical statements, including, without limitation, statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Cytyc's future financial condition, operating results and economic performance, and management's expectations regarding key customer relationships, future growth opportunities, product acceptance and business strategy, constitute forward-looking statements. These statements are based on current expectations, forecasts and assumptions that are subject to risks and uncertainties, which could cause actual outcomes and results to differ materially from those statements. Risks and uncertainties include, among others, dependence on key personnel and customers as well as reliance on proprietary technology, uncertainty of product development efforts and product acceptance, management of growth and product diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. , entry into new market segments domestically and new markets internationally, risks associated with litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , the effective integration of acquired businesses and technologies, competition and competitive pricing pressures, risks associated with the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approval processes and healthcare reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. policies in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and abroad, introduction of technologies that are disruptive disruptive /dis·rup·tive/ (-tiv) 1. bursting apart; rending. 2. causing confusion or disorder. to Cytyc's business and operations, the impact of new accounting requirements and governmental rules and regulations, as well as other risks detailed in Cytyc's filings with the Securities and Exchange Commission, including those under the heading "Risk Factors" in its 2005 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Commission. Cytyc cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they were made. Cytyc disclaims any obligation to publicly update or revise any such statements to reflect any change in its expectations or events, conditions, or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
Cytyc Corporation
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
2006 2005
----------- -----------
Net sales $ 140,540 $ 113,405
Cost of sales (1) 29,789 23,927
----------- -----------
Gross profit 110,751 89,478
----------- -----------
Operating expenses:
Research and development (1) 10,311 6,799
Sales and marketing (1) 40,133 29,683
General and administrative (1) 14,025 10,707
Arbitration decision - 7,807
----------- -----------
Total operating expenses 64,469 54,996
----------- -----------
Income from operations 46,282 34,482
Other expense, net:
Interest income 1,830 892
Interest expense (1,792) (1,792)
Other expense (77) (683)
----------- -----------
Total other expense, net (39) (1,583)
----------- -----------
Income before provision for income taxes 46,243 32,899
Provision for income taxes (1) 16,879 12,008
----------- -----------
Net income $ 29,364 $ 20,891
=========== ===========
Net income per common and potential
common share:
Basic $ 0.25 $ 0.18
=========== ===========
Diluted $ 0.24 $ 0.18
=========== ===========
Weighted average common and potential
common shares outstanding:
Basic 115,481 113,661
=========== ===========
Diluted 125,877 125,771
=========== ===========
(1) Balance includes stock-based
compensation expense under
Statement of Financial
Accounting Standards No. 123R as
follows:
Cost of sales $ 361 $ -
Research and development 844 -
Sales and marketing 2,651 -
General and administrative 2,169 -
----------- -----------
Stock-based compensation expense,
gross 6,025 -
Effect on income taxes (1,963) -
----------- -----------
Stock-based compensation expense,
net $ 4,062 $ -
=========== ===========
Cytyc Corporation
Condensed Consolidated Balance Sheets
(in thousands)
March 31, December 31,
2006 2005
---------- ----------
(unaudited)
Assets:
Current assets:
Cash and investment securities $ 222,802 $ 220,619
Accounts receivable, net 81,616 82,833
Inventories, net 26,888 24,033
Other current assets 12,637 9,805
---------- ----------
Total current assets 343,943 337,290
---------- ----------
Property and equipment:
Property and equipment 107,355 101,604
Equipment under customer usage
agreements 74,090 66,832
Less: accumulated depreciation and
amortization (60,158) (54,826)
---------- ----------
Total property and equipment, net 121,287 113,610
---------- ----------
Goodwill and other intangible assets, net 577,837 581,957
Other assets, net 7,487 7,022
---------- ----------
Total Assets $1,050,554 $1,039,879
========== ==========
Liabilities and Stockholders' Equity:
Current liabilities $ 58,916 $ 89,183
Long-term debt and other non-current
liabilities 331,490 322,345
Stockholders' equity 660,148 628,351
---------- ----------
Total Liabilities and Stockholders' Equity $1,050,554 $1,039,879
========== ==========
Cytyc Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31,
2006 2005
--------- ---------
Cash flows from operating activities:
Net income $29,364 $20,891
Depreciation, amortization and other non-cash
expense 8,110 20,709
Stock-based compensation expense pursuant to SFAS
No. 123R 6,025 -
Accounts receivable 1,384 (2,660)
Inventories (2,833) (1,165)
Other assets and liabilities (2,390) (2,979)
Tax benefit from exercise of stock options 2,798 2,132
--------- ---------
Net cash provided by operating activities 42,458 36,928
--------- ---------
Cash flows from investing activities:
Acquisition of Proxima, net (21,074) (155,838)
(Increase) decrease in other assets (463) 46
Increase in equipment under customer usage
agreements (7,254) (7,055)
Purchases of property and equipment, net (4,118) (3,820)
(Purchases) sales of investment securities, net (3,328) 95,487
Increase in patents and developed technology (473) -
--------- ---------
Net cash used in investing activities (36,710) (71,180)
--------- ---------
Cash flows from financing activities:
Purchase of treasury shares (22,269) -
Proceeds from exercise of stock options 15,292 5,517
Tax benefit from exercise of stock options 63 -
--------- ---------
Net cash (used in) provided by financing
activities (6,914) 5,517
--------- ---------
Effect of exchange rate changes on cash (10) (159)
--------- ---------
Net decrease in cash and cash equivalents (1,176) (28,894)
Net increase (decrease) in investment securities 3,359 (95,498)
--------- ---------
2,183 (124,392)
Beginning cash and investment securities 220,619 232,295
--------- ---------
Ending cash and investment securities $222,802 $107,903
========= =========
Cytyc Corporation
Reconciliation of Net Income per Common Share
(in thousands, except per share data)
(unaudited)
The following tables provide reconciliations of the net income and
weighted average common shares used in calculating basic and diluted
net income per share (using the if-converted method):
Three Months Ended
March 31,
2006 2005
--------- ---------
Numerator:
Net income, as reported, for basic earnings per
share $ 29,364 $ 20,891
Interest expense, net of tax 1,138 1,138
--------- ---------
Net income, as adjusted, for diluted
earnings per share $ 30,502 $ 22,029
========= =========
Denominator:
Basic weighted average common shares outstanding 115,481 113,661
Dilutive effect of assumed exercise of stock
options 1,970 3,684
Dilutive effect of assumed conversion of
convertible debt 8,426 8,426
--------- ---------
Weighted average common shares outstanding
assuming dilution 125,877 125,771
========= =========
Basic net income per common share $ 0.25 $ 0.18
========= =========
Diluted net income per common and potential
common share $ 0.24 $ 0.18
========= =========
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