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Intermagnetics Reports Record
Revenues, Earnings
Latham, NY, July 27:
Intermagnetics General Corporation (Nasdaq:
IMGC), today reported that fourth-quarter normalized net income increased to
$8.1 million, or $0.29 per diluted share-excluding acquisition and
integration-related expenses and certain other non-cash items. Reported net
income for the quarter ended May 29, 2005, was $3.4 million, or $0.12 per
diluted share. Fourth-quarter net sales were $78.1 million, compared with $52.4
million in the fiscal 2004 fourth quarter, excluding discontinued operations
from the divested Polycold subsidiary.
Fiscal 2005 normalized net
income before items rose to $29.7 million, or $1.06 per diluted share including
partial-year contributions from Polycold. Reported net income in fiscal 2005 was
$37.5 million, or $1.34 per diluted share. Reported net sales for the year rose
to a record $264.8 million excluding Polycold sales.
(See attached tables for
reconciliations to normalized operating results excluding acquisition- and
integration-related expenses and other non-cash items and for reconciliations of
operations with, and without, Polycold contributions. These tables are included
to better assist readers in understanding the company's quarterly and annual
performance.)
"All of our business
segments, both historical and those acquired in 2004, continued to deliver
exceptional performance, resulting in not only a record year, but also setting
the stage for a redefined Intermagnetics going forward," said Glenn H. Epstein,
chairman and chief executive officer. "Integration of the acquired businesses is
complete, and our attention now turns to focus on continuous improvement and
sustained growth.
"Our new Medical Devices
business segment has exceeded original expectations with opportunities for
continued gains. When combined with the new product introduction schedules from
our MRI magnet business, we have high confidence for another record performance
during our upcoming fiscal year."
Epstein also noted
Intermagnetics' balance sheet strength. "During the year, our strong cash flow
and proceeds from the Polycold sale enabled us to pay down the majority of the
'revolving' portion of our existing $130 million credit facility, leaving less
than $20 million in long-term debt, down from about $112 million following the
acquisitions in 2004," Epstein said. "Our expectations for FY2006 are for
continued improvements in free cash flow, net of increased capital investments,
including the expansion of our MRI magnet manufacturing facility.
"As a result, our interest
expense has been reduced dramatically, our cash balances should build fairly
rapidly, and we expect that we will remain in an even stronger financial
position to pursue a range of strategic initiatives that will further contribute
to Intermagnetics' long-term growth."
All Business Segments
Deliver Strong Results
Epstein said that all of the
company's continuing business segments had strong fourth quarters and full-year
performances.
Magnet systems sales rose
more than 25 percent during the quarter to $34.9 million from $27.6 million,
with an increase in operating profit approaching 35 percent. Full-year sales
increased 25 percent to $118.6 million from $95.2 million, with a nearly 30
percent increase in operating profit.
"Orders for our most recent
innovations-high-field 3.0 Tesla magnets and 1.0 Tesla high-field open (HFO)
magnets-continue to ramp up and provide a strong platform for continued growth,"
Epstein said. "As forecast previously, the MRI segment delivered record results,
and we are in the process of instituting a multi-stage capital and personnel
expansion plan to meet anticipated increases in demand."
Medical Devices sales
growth, enhanced primarily by the acquisition of MRI Devices and expansion of
direct sales personnel, increased to $40.5 million in the fourth quarter, from
$22.9 million. For the year, Medical Devices sales were $135.3 million, up from
$38.1 million. Year-to-date results in fiscal 2005 include slightly more than 10
months of MRID operations and a full year of Invivo operations. Fiscal 2004
included four months of Invivo-only operations.
The divested Polycold
Systems subsidiary, formerly comprising the Instrumentation segment, contributed
$23.4 million in sales for a partial year through February 2005, with operating
profits of $6.3 million.
(The attached reconciling
table labeled "normalized ongoing operations" depicts company performance during
FY2005, excluding the discontinued operations from Polycold and any
acquisition-related and non-cash performance- based stock compensation and other
charges or benefits of $26.6 million, or $0.95 per diluted share. An additional
table representing quarterly performance is also attached in order to assist
readers to view "normalized ongoing operations" on a quarterly basis.)
Intermagnetics' Energy
Technology subsidiary, SuperPower, Inc., generated fourth-quarter revenue of
$2.7 million, compared with $1.9 million the prior year. The company's loss due
to investment in SuperPower's operations remained stable at about $2.0 million
in both periods.
Year-to-date revenues for
SuperPower totaled $10.8 million, up from $6.5 million the prior year.
Intermagnetics' operating loss for investment in energy technology initiatives
during the year increased to $7.2 million, up from $6.2 million, as the
subsidiary ramps efforts to commercialize the manufacture of second-generation
(2G) high-temperature superconducting (HTS) wire.
SuperPower is in the major
construction and installation phase of the Albany HTS Cable Project, with
significant milestones toward the physical demonstration of HTS technology in
Niagara Mohawk's power grid scheduled during calendar year 2006. The project is
a key component in SuperPower's goal of demonstrating the commercial feasibility
of HTS wire and devices designed for the transmission and distribution of
electrical power.
Most Key Performance
Indicators Exceeded
Epstein said that
Intermagnetics' focus on its most rapidly growing and profitable product
opportunities, as well as continued cost-control efforts, enabled the company to
once again surpass most performance goals on a normalized basis.
For the full year, gross
margin was 47 percent, compared with a goal of 45 percent; operating margin was
17 percent, compared with a goal of 15 percent; and sales as a percentage of net
operating assets was 51 percent, versus a target of 50 percent. Return on equity
was 13 percent versus a target of 15 percent. Working capital efficiency was 18
percent, versus a goal of requiring less than 15 percent. All of these metrics
have been calculated net of integration-related expenses.
"While normalized gross
margins continue to exceed our previously established goal of 45 percent, we are
not going to raise this target at this time," Epstein said. "This conservative
posture is due to margins that we have budgeted to produce introductory batches
of 1.0T HFO magnets. Our experience leads us to believe that we may be able to
move a higher overall average consolidated gross margin target early in calendar
2006."
Forecasting A Record Fiscal
2006, Earnings Growth Outlook Raised
"Based on our strong showing
during the recently completed quarter and fiscal year, our successes in
integrating the new businesses, rationalizing our existing product lines,
expanding our sales force and introducing new products, we expect revenues to
increase about 15 percent from ongoing revenues of $265 million this year,"
Epstein said. "Also, we currently anticipate fiscal 2006 operating earnings per
share to increase in excess of 20 percent over this year's normalized $0.95 per
share from ongoing operations.
"We continue to expect
moderate seasonality in our businesses resulting from typically slower summer
months (Q1) and a significant number of globally observed holidays (Q3). The
second and fourth quarters are expected to be our strongest reporting periods.
We also expect highly favorable year-over-year comparisons for each quarter
throughout fiscal 2006.
"Specifically for Q1, we
currently envision both sales and earnings to be about 20 percent greater than
last year's normalized ongoing levels of $51.5 million and $0.16 per share
respectively."
Normalized Operating EPS
Reconciliation Information
Normalized operating EPS for
FY05 includes partial-year operating results from the divested Polycold
subsidiary, but excludes the one-time gain from the sale. It also excludes
acquisition-related and non-cash performance-based stock compensation and other
charges or benefits.
Acquisition charges related
to Invivo were $0.06 for fiscal 2005, with no additional charges during the
fourth quarter. No further charges are anticipated.
Charges related to the
acquisition of MRI Devices (MRID) have now been finalized at $0.24 for the year
with a Q4 charge of $0.12. These charges result primarily from a change in
accounting for stock distributed to the MRID employee base by the original
owners of MRID prior to acquisition, a write- down of acquired assets (value of
MRID name) due to the re-branding of MRID to Invivo Diagnostic Imaging, a
discretionary realignment of the Medical Devices segment's management structure
under the new president and acceleration of certain product rationalization
decisions, including inventory write-downs. The majority of the charges were
non-cash. No additional charges are expected during fiscal 2006.
The Polycold divestiture
resulted in a $0.69 gain on the sale with $0.02 of charges not attributable to
deal costs, all of which were recognized in Q3.
The non-cash charge for
Intermagnetics' performance-based restricted stock plan for the year was $3.7
million post-tax, or $0.13 per share ($0.03 recognized in Q1, $0.04 in Q2, $0.02
in Q3 and $0.04 in Q4), based on the closing stock price on May 27, 2005.
Performance criteria for these restricted stock units was fulfilled based on
independently audited financials and was authorized by Intermagnetics'
compensation committee of the board of directors to be converted into common
stock effective July 25, 2005.
Also excluded is a non-cash
gain of $0.03 resulting from a favorable adjustment to an environmental reserve
recognized in Q1.
Operating EPS for fiscal
2006 will exclude the estimated non-cash charge for performance-based restricted
stock that is currently expected to vest if forecast performance is achieved. A
current estimate for the non-cash charge, based on the closing stock price on
July 26, 2005, is $6.2 million post-tax, or approximately $0.21 per share.
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