HOLOGIC INC - FORM 8-K - EX-99.1

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8-K - FORM 8-K - HOLOGIC INC	d495775d8k.htm

Presentation to Lenders

March 5, 2013

Exhibit 99.1

Forward-Looking Statements

This presentation 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 anticipated benefits of the Gen-Probe acquisition, including anticipated

synergies; the expected timing of the completion of the Company's LIFECODES' sale; the anticipated timing of a reimbursement code for 3D tomosynthesis and

any other governmental or regulatory approvals or clearances; 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: U.S., European and general worldwide economic conditions 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; uncertainties regarding the recently enacted or

future healthcare reform legislation, including associated tax provisions, or budget reduction or other cost containment efforts; 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 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, the risks that acquisitions may involve unexpected costs or unexpected liabilities, including the risks and

challenges associated with the Company’s recent acquisition of Gen-Probe and operations in China; the risk that prospective acquisitions or dispositions may not

close when anticipated, if at all, including as a result of failure to fulfill conditions closing, obtaining the necessary regulatory approvals or clearances, or otherwise;

manufacturing risks, including the Company’s reliance on a single or limited source of supply for key components, and the need to comply with especially high

standards for the manufacture of many of its products; 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; 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; competition;

the risks of conducting business internationally, including the effect of exchange rate fluctuations on those operations; and the Company’s ability to attract and

retain qualified personnel.

The risks included above are not exhaustive. Other factors that could adversely affect the combined 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.

Hologic, APTIMA, Dimensions, Gen-Probe, LIFECODES, PANTHER, Prodesse ProGastro SSCS and TIGRIS and associated logos, as may be used throughout

this presentation, are trademarks and/or registered trademarks of Hologic, Inc. and/or its subsidiaries in the United States and/or other countries.

Transaction Overview

See the definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP in the Appendix.

Hologic, Inc. ("Hologic" or "the Company") (NASDAQ: HOLX) is a leading developer, manufacturer

and supplier of premium diagnostics products, medical imaging systems and surgical products

dedicated to serving the healthcare needs of women

Hologic has continued to demonstrate strong financial performance

Hologic is seeking to reprice its Revolver and Term Loan A pricing

In conjunction with the repricing, the Company is seeking an amendment to certain other provisions of

the Credit Agreement

For the LTM period ended December 29, 2012, the Company generated $2,186 million of non-

GAAP revenue, $761 million of Adjusted EBITDA and $980 million of Consolidated Adjusted

EBITDA as defined in the Credit Agreement. The Company's GAAP Revenue and GAAP net

Hologic has total secured leverage of 2.5x and net total leverage of 4.9x

loss for the same LTM period were $2,161 million and $91 million, respectively

Pro Forma Capitalization

Leverage

Current

CCR: B1 / BB

Amount

Coupon

Floor

Cash

$718.5

Revolver ($300)

L+300

Term Loan A

979.7

L+300

Term Loan B

1,482.0

L+350

1.00%

Total Secured Debt

2,461.7

2.5 x

Senior Unsecured Notes

1,000.0

6.25%

Total Guaranteed Debt

3,461.7

3.5 x

2.00%

Convertible

Sr.

Notes

(1)

734.5

2.00%

Exchange

Convertible

Sr.

Notes

(2)

379.8

2.00%

Exchange

Convertible

Sr.

Notes

(3)

460.0

2.00%

Total Debt

5,036.0

5.1 x

Net

Debt

(4)

4,786.0

4.9 x

LTM

12/29/12

Consolidated

Adjusted EBITDA

(5)

$ 980.0

Maturity

Put Date

Aug-17

Aug-19

Aug-20

Dec-37

Dec-13

Dec-37

Dec-16

Mar-42

Mar-18

Amounts as of December 29, 2012

($ in millions)

Source: Public filings

Principal amount is $775 million. Principal amount listed net of the unamortized discount. Conversion price of approximately $38.59 per share. Effective 02/21/2013, the

Company retired $370 million of notes due 2037 in exchange for $370 million of new notes due 2043. Leverage ratios could change once the accounting for the exchange

is completed.

Principal amount is $450 million. Principal amount listed net of the unamortized discount. Conversion price of approximately $23.03 per share.

³ Principal amount is $500 million. Principal amount listed net of the unamortized discount. Conversion price of approximately $31.18 per share.

Debt net of $250 million of cash as permitted by Credit Agreement for covenant compliance.

As defined in the Credit Agreement. Includes an increase to the Company’s non-GAAP Adjusted EBITDA of $219 million, as calculated pursuant to the terms of the Credit

Agreement, to reflect the Company's acquisition of Gen-Probe and certain other adjustments.

Non-GAAP

Adjusted

Q1’13

Revenues

$644.6M

(unaudited)

Consumables/Service ~81%

Capital Equipment ~19%

Consumables/Service ~81%

Capital Equipment ~19%

Total Diagnostics $319.2M*

49%

Breast Health $220.8M

34%

GYN Surgical $80.9M

13%

Skeletal Health $23.7M

* See the definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP in the Appendix.

Total Revenues by Business Segment

Consumables

$427.9

Service

$96.2M

Capital

$120.5M

Consolidated

Business and Product Update

PANTHER launch progressing smoothly with positive early traction

FDA

approval

APTIMA

18/45

Genotype

Assay

for

use

TIGRIS

announced

October 16, 2012

Definitive agreement announced on January 3, 2013 to sell the Company’s LIFECODES

business to Immucor, Inc. for $85 million in cash, subject to certain adjustments, and

$10 million in a potential contingent payment

FDA clearance of APTIMA Trichomonas vaginalis Assay for use on our fully-automated

PANTHER System announced on January 14, 2013

FDA clearance of Prodesse ProGastro SSCS assay, a real-time multiplex polymerase

chain reaction (PCR) in vitro diagnostic test for the qualitative detection of the most

common bacterial pathogens associated with gastroenteritis

Oslo

study

published

January

2013,

Radiology,

reporting

that

the

addition

the

Company’s 3D mammography screening technology to a 2D breast screening exam

significantly increased cancer detection while reducing the number of false positives

—

Expected to close in Q2 FY 2013

Advancing Breast Cancer Screening

3D Dimensions Tomosynthesis

Superior

Next-Generation

Digital

Mammography

Superiority

over 2D Digital

Mammography

Improved

Tissue

Visualization

and Detection

Lower

Recall Rates

Tomosynthesis…uptake ahead of expectations

•

U.S.

installed

base

11,000

digital

systems

–

potential

for

conversion

Tomo

•

On track to ship 500 to 700 units within first two years of approval

(by end of fiscal Q2’13)

•

Expect to double installed base during FY’13

Tomosynthesis Clinical Efficacy

Oslo Tomosynthesis Screening Trial

reported breast cancer screening

with Hologic’s Tomosynthesis significantly

improves

cancer

detection

•

All

age

groups

and

breast

densities

benefit

from

the

addition

Hologic’s

Tomosynthesis

screening

•

Body of clinical evidence continuing to grow

Compared to 2D, U.S. sites report a

significant reduction in recalls with

Hologic’s

tomosynthesis

2-3

in invasive

cancer detection

40%

overall in

cancer detection

27%

20-40% reduction

in recall rates

(based on site practices)

Skaane P. et. al. Comparison of Digital Mammography Alone and Digital Mammography Plus Tomosynthesis in a Population-based Screening Program. Radiology. 2013 Jan 7

(published electronically).

Philpotts

al.

Initial

Experience

With

Digital

Breast Tomosynthesis

Screening

Mammography.

Presented

the

ARRS

2012,

Scientific

Session

Breast

Imaging:

Screening/Emerging Technologies.

Destounis S. et al. Experience with Combination 2D/3D Breast Tomosynthesis vs FFDM in the Screening Environment. Radiological Society of North America annual meeting.

Chicago, Il, 2012.

Q1 2013 Financial Results

Consolidated non-GAAP adjusted revenues were $644.6 million, a year-over-year

increase of $171.9 million, or 36.4%, and at the high-end of our guidance range of $640

$645

million.

The

Company's

GAAP

revenues

for

the

same

period

were

$631.4

million

Non-GAAP adjusted EPS was $0.38, a year-over-year increase of $0.04, or 11.8%, and

exceeded our guidance of $0.37. The Company's GAAP EPS for the same period was

$0.01

Year-over-year growth in each of our three primary business segments

On track to achieve over $40 million in first-year cost synergies related to the Gen-Probe

acquisition

Cash and equivalents totaled $721 million, up $154 million from the end of fiscal 2012

reflecting

another

quarter

focused

working

capital

management

and

solid

operational

results, both of which contributed to strong free cash flow generation

See the definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP in the Appendix.

—

Reinstatement of federal research tax credit added $0.01 to non-GAAP adjusted EPS

Key Performance Metrics

Q1 FY 2013

Revenues

GAAP revenues of $631.4 million and non-GAAP

revenues of $644.6 million

Net Income

GAAP net income of $3.1 million and

non-GAAP net income of $101.8 million

Adjusted EBITDA

$227.5 million

Quarter Ended December 29, 2012 (unaudited)

On a constant currency basis, total revenues would have increased to $631.7M*, or 33.6% (non-GAAP revenues would have increased to $645.0M*, or 36.4%) compared to

Q1’12. The constant currency revenue amount for Q1’13 is a non-GAAP number that reflects what revenues in that quarter would have been had the Company applied the foreign

currency exchange rates it used for determining its revenues in Q1’12.

See the definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP in the Appendix.

Q1 FY 2013 Overview

•

Non-GAAP

revenues

$171.9

million,

36.4%,

vs.

Q1’12

•

Non-GAAP revenues up $44.5 million, or 7.4%, vs. Q4’12

•

Non-GAAP net income up $11.7 million, or 13.0%, vs. Q1’12

•

Non-GAAP net income up $3.4 million, or 3.5%, vs. Q4’12

•

Up $65.2 million, or 40.2%, vs. Q1’12

•

Up $17.5 million, or 8.3%, vs. Q4’12

Fiscal 2013 Guidance

Non-GAAP

$s in millions

(except EPS)

FY 2013

(Guidance)*

Q2 2013

(Guidance) *

Revenues

$2,610 –

$2,640

$635 –

$640

Gross Margins

63.0%

62.5% –

63.0%

Operating Expenses

$785 –

$810

$205 –

$210

Interest Expense

$220

$56

Diluted EPS

$1.58 –

$1.60

$0.33 -

$0.34

Quarter Ending March 30, 2013 and Year Ending September 28, 2013

Note: Estimate diluted shares outstanding of approximately 271 million and 272 million for Q2’13 and FY 2013, respectively. Estimate a 32% annual effective tax rate.

* See the definition of non-GAAP financial measures and discussion of future non-GAAP adjustments in the Appendix.

Balance Sheet & Debt Paydown Road Map

Focus on de-leveraging

—

Total

debt

obligations

$5.0

billion,

including

$3.5

billion

borrowed

for

acquisition

of Gen-Probe

—

Goal to reduce total debt to EBITDA from approximately 5.1x to 2.5x during the

three-year period post-acquisition (down to 4.5x at the end of Q1’13)

Expect to generate $600 million in free cash flow in FY’13

Debt paydown roadmap

—

Initial focus on $405 million tranche of our convertible notes putable in December

2013

—

$65 million in scheduled payments for Term Loan A and Term Loan B in FY’13

—

Build cash through FY’13 and FY’14, then focus on paying down remaining Gen-

Probe-related debt

Amendment Overview

Hologic is seeking to reprice its Revolver and Term Loan A

In addition, the amendment would make certain other changes in the Credit Agreement, including:

—

Allow the Company to purchase or repurchase its Convertible Notes during the eighteen months

prior to their respective put dates and at any such time such Convertible Notes are otherwise

callable, subject to no event of default and pro forma covenant compliance

—

Modify the Asset Sale covenant general basket to remove the transaction and annual caps on

asset sales

—

Allow unsecured debt to be assumed as part of a Permitted Acquisition, subject to no event of

default and pro forma covenant compliance

In thousands, except earnings per share

Continued on next page

Reconciliation of GAAP to Non-GAAP (unaudited)

In thousands, except earnings per share

Three Months Ended

Last Twelve Months

December 29, 2012

December 24, 2011

September 29, 2012

December 29, 2012

OPERATING EXPENSES

GAAP operating expenses

$218,444

$182,611

$318,020

$916,553

Adjustments:

Amortization of intangible assets

(28,526)

(14,842)

(24,832)

(85,720)

Contingent consideration

(39,526)

(15,563)

(40,399)

(143,460)

Acquisition-related costs

(4,380)

(913)

(37,901)

(47,772)

Restructuring costs

(3,933)

(16,697)

(21,060)

Goodwill impairment

(5,826)

Gain on sale of intellectual property, net

53,884

66,308

In-process research and development

(4,500)

Fair value adjustment for depreciation expense

(892)

(1,300)

(2,192)

Other gains (charges)

3,200

(2)

2,269

Non-GAAP adjusted net operating expenses

$198,271

$151,384

$186,563

$674,600

INTEREST EXPENSE, NET

GAAP interest expense

$72,081

$29,509

$56,673

$182,859

Adjustment for non-cash interest expense relating to

convertible notes

(15,644)

(18,953)

(16,514)

(65,223)

Other interest expense

(171)

(357)

Non-GAAP interest expense, net

$56,437

$10,385

$40,159

$117,279

PRE-TAX (LOSS) INCOME

GAAP pre-tax (loss) income

$(7,353)

$39,904

$(97,964)

$(108,918)

Adjustments to pre-tax (loss) income as detailed above

157,193

96,522

246,955

637,193

Other gains

(167)

Non-GAAP pre-tax income

$149,673

$136,426

$148,991

$570,455

NET INCOME (LOSS)

GAAP net income (loss)

$3,118

$20,812

$(77,767)

$(91,328)

Adjustments to pre-tax (loss) income as detailed above

157,026

96,522

246,955

679,373

Income tax effect of reconciling items

(58,366) ³

(27,293) ³

(70,854) ³

(208,551)

Non-GAAP adjusted net income

$101,778

$90,041

$98,334

$379,494

EBITDA

Non-GAAP adjusted net income

$101,778

$90,041

$98,334

$379,494

Interest expense, net, not adjusted above

56,177

9,723

39,766

115,341

Provision for income taxes

47,895

46,385

50,657

190,961

Depreciation expense, not adjusted above

21,653

16,110

21,241

74,891

Adjusted EBITDA

$227,503

$162,259

$209,998

$760,687

Reconciliation of GAAP to Non-GAAP (unaudited)

Continued on next page

Reconciliation

GAAP

Non-GAAP

(unaudited)

Footnotes:

To primarily reflect a fair value adjustment recorded in purchase accounting relating to contingent revenue earned and

received under the Novartis collaboration post acquisition, which was eliminated under purchase accounting.

Non-GAAP adjusted earnings per share was calculated based on: 269,379; 264,958; and 268,106 weighted average

diluted shares outstanding for the three months ended December 29, 2012, December 24, 2011, and September 29,

2012, respectively.

To reflect an annual effective tax rate of 32.0%, 34.0% and 34.0% on a non-GAAP basis for the three months ended

December 29, 2012, December 24, 2011, and September 29, 2012, respectively.

The breakdown of this expense by P&L line item is as follows:

In thousands, except tax rates

Three Months Ended

Last Twelve Months

December 29, 2012

December 24, 2011

September 29, 2012

December 29, 2012

Acquisition-related costs

R&D

$1,253

$805

$2,291

S&M

770

691

1,495

G&A

2,357

$913

36,405

43,986

Total OpEx

$4,380

$913

$37,901

$47,772

COGS

1,141

612

1,941

Total Adjustment

$5,521

$913

$38,513

$49,713

Fair value adjustment for depreciation expense

R&D

$439

$293

$732

S&M

110

G&A

387

963

1,350

Total OpEx

$892

$1,300

$2,192

COGS

1,797

1,203

3,000

Total Adjustment

$2,689

$2,503

$5,192

Use of Non-GAAP Financial Measures

Hologic has presented the following non-GAAP financial measures in this presentation: adjusted revenues; adjusted gross margins; adjusted

operating expenses; adjusted operating income; adjusted interest expense; adjusted pre-tax income; adjusted net income; adjusted EPS; and

adjusted EBITDA. Hologic defines adjusted EBITDA as its non-GAAP adjusted net income plus interest expense, net, income taxes, and

depreciation and amortization expense included in its non-GAAP adjusted net income. Hologic defines its non-GAAP adjusted revenues to

primarily include contingent revenue earned under the Novartis collaboration post-acquisition which was eliminated under purchase accounting.

Hologic defines its non-GAAP adjusted gross margins, adjusted operating expenses, adjusted operating income, adjusted interest expense,

adjusted pre-tax income and adjusted EPS to exclude, as applicable: (i) the amortization of intangible assets; (ii) acquisition-related charges and

effects, such as charges for contingent consideration (comprised of (a) adjustments for changes in the fair value of the contingent consideration

liabilities initially recorded as part of the purchase price of an acquisition as required by GAAP, and (b) contingent consideration that is tied to

continuing employment of the former shareholders and employees which is recorded as compensation expense), transaction costs, integration

costs including retention, and credits and/or charges associated with the write-up of acquired inventory and fixed assets to fair value, and the

effect of a reduction in revenue related to contingent revenue under the Novartis collaboration, described above; (iii) non-cash interest expense

related to amortization of the debt discount for convertible debt securities; (iv) divestiture and restructuring charges; (v) non-cash loss on exchange

of convertible notes; (vi) litigation settlement charges (benefits); (vii) other-than-temporary impairment losses on investments; and (viii) other one-

time, nonrecurring, unusual or infrequent charges, expenses or gains that may not be indicative of Hologic’s core business results; and to include

income taxes related to such adjustments.

Hologic believes the use of non-GAAP adjusted net revenues is useful to investors as it eliminates certain effects of purchase accounting on its

recognition of revenue. Hologic believes the use of non-GAAP adjusted net income is useful to investors by eliminating certain of the more

significant effects of its acquisitions and related activities, non-cash charges resulting from the application of GAAP to convertible debt instruments

with cash settlement features, charges related to debt extinguishment losses, investment impairments, litigation settlements, and divestiture and

restructuring initiatives. These non-GAAP measures also reflect how Hologic manages its businesses internally. In addition to the adjustments set

forth in the calculation of Hologic’s non-GAAP adjusted net income and adjusted EPS, its non-GAAP adjusted EBITDA eliminates the effects of

financing, income taxes and the accounting effects of capital spending. As with the items eliminated in its calculation of non-GAAP adjusted net

income, these items may vary for different companies for reasons unrelated to the overall operating performance of a company’s business. When

analyzing Hologic’s operating performance, investors should not consider these non-GAAP financial measures as a substitute for net income

(loss) prepared in accordance with GAAP.

Financial Guidance

The Company’s guidance includes its current operations, including revenues from its

approved/cleared products and its recently acquired businesses.

Hologic may not generate expected revenues and may incur expenses or charges, realize income or

gains, or execute acquisitions or dispositions in fiscal 2013 that could cause actual results to vary

from the guidance provided in this presentation. In addition, the Company is continuing to monitor the

effects

the

U.S.,

European

and

general

worldwide

economic

and

regulatory

conditions

and

uncertainties, including the implementation of healthcare cost containment measures and healthcare

reform legislation, as well as foreign currency fluctuations, which, along with other uncertainties

facing the Company’s business including those referenced elsewhere herein and its filings with the

Securities and Exchange Commission, could adversely affect anticipated results.

Future Non-GAAP Adjustments:

Future GAAP EPS may be affected by changes in ongoing assumptions and judgments relating to

the

Company’s

acquired

businesses,

and

may

also

affected

nonrecurring,

unusual

unanticipated charges, expenses or gains, all of which are excluded in the calculation of non-GAAP

adjusted EPS as described in this presentation. It is therefore not practicable to reconcile non-GAAP

adjusted EPS guidance to the most comparable GAAP measure.

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