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Press release from Business Wire

Nordion Reports Fiscal Third Quarter 2012 Financial Results

Wednesday, September 05, 2012

Nordion Reports Fiscal Third Quarter 2012 Financial Results16:00 EDT Wednesday, September 05, 2012 OTTAWA, Ontario (Business Wire) -- Nordion Inc. (TSX: NDN) (NYSE: NDZ): Revenue of $67.1 million, an increase of 0.5% over Q3 2011Adjusted earnings per share, excluding specified items, increased to $0.25, up from $0.15 in the third quarter fiscal 2011TheraSphere revenue of $13.0 million, an increase of 13% over Q3 2011 and 5% over Q2 2012Cobalt-60 shipments in Q3 exceeded total shipments in the first half of fiscal 2012Nordion reports in U.S. dollars unless otherwise specified. Please also refer to the Management's Discussion and Analysis and Consolidated Financial Statements. Nordion Inc. (TSX: NDN) (NYSE: NDZ), a leading provider of products and services to the global health science market, today reported results for the fiscal third quarter ended July 31, 2012. The Company generated $67.1 million in revenue for the third quarter, an increase of $0.3 million, or 0.5%, over revenue of $66.8 million for the same period in 2011. Excluding the specified items shown on the attached quarterly non-GAAP reconciliation table, adjusted net income for the third quarter increased to $15.5 million from $9.8 million during the same period in the previous fiscal year. Nordion generated GAAP net income of $12.3 million in its third quarter, compared with a net loss of $4.1 million in the third quarter of fiscal 2011 when Nordion recorded a loss from discontinued operations, net of income taxes, of $8.8 million. Third-quarter adjusted earnings per share, excluding specified items, increased to $0.25 compared with $0.15 in the third quarter of 2011. GAAP earnings per share were $0.20 in the third quarter of 2012, versus a $0.06 loss per share in the same period last year. “Nordion delivered improved and solid performance across our businesses,” said Mr. Steve West, Chief Executive Officer, Nordion Inc. “We increased our margins and generated double-digit TheraSphere growth. Management continues to focus on building the business and improving alignment within each of our portfolios.” Consolidated Financial Results             Three months ended July 31   Nine months ended July 31(thousands of U.S. dollars, except when noted)     2012     2011   % Change     2012     2011   % Change Revenues $ 67,141   $ 66,807   - $ 170,169   $ 200,027   (15%)   Gross margin 55% 53% 2% 53% 53% -   Net income (loss) $ 12,302 $ (4,121) 399% $ 14,636 $ 9,946 47%   Diluted earnings (loss) per share $ 0.20 $ (0.06) 433% $ 0.24 $ 0.15 60%   Adjusted diluted earnings per share $ 0.25 $ 0.15 67% $ 0.44 $ 0.48 (8%)   Cash and cash equivalents $ 81,896 $ 69,038 19% $ 81,896 $ 69,038 19%   Weighted average number of Common shares outstanding – diluted (thousands of shares)     61,968     64,283   (4%)     62,065     65,461   (5%) Segment Financial Results (with reconciliation to operating income)             Three months endedJuly 31   Nine months endedJuly 31(thousands of U.S. dollars, except per share amounts)     2012     2011     2012     2011 Revenues     Targeted Therapies $ 15,297 $ 13,301 $ 42,518 $ 45,465 Sterilization Technologies 32,145 32,120 63,123 76,195 Medical Isotopes     19,699     21,386     64,528     78,367 Consolidated segment revenues from continuing operations   $ 67,141   $ 66,807   $ 170,169   $ 200,027   Segment earnings (loss) Targeted Therapies $ 3,618 $ 2,123 $ 8,763 $ 10,445 Sterilization Technologies 14,403 15,311 22,361 31,660 Medical Isotopes 5,290 4,794 20,694 26,942 Corporate and Other     (2,703)     (3,040)     (7,433)     (12,031) Total segment earnings   $ 20,608   $ 19,188   $ 44,385   $ 57,016   Depreciation and amortization 3,509 5,666 13,847 16,675 Gain on sale of investment - - - (1,691) Restructuring (recovery) charges, net (46) 41 (699) 576 AECL arbitration and legal costs 955 3,127 4,774 9,706 Internal investigation cost 1,356 - 1,356 - Loss on Celerion note receivable - - 2,411 - Change in fair value of embedded derivatives     1,992     3,697     8,417     (15,619) Consolidated operating income from continuing operations   $ 12,842   $ 6,657   $ 14,279   $ 47,369 Targeted Therapies The Company's Targeted Therapies business generated revenue of $15.3 million in the third quarter of 2012, an increase of $2.0 million or 15%, from the third quarter of 2011. TheraSphere generated revenue of $13.0 million, an increase of $1.5 million or 13%, in the third quarter from the same time period in 2011. Contract Manufacturing generated revenue of $2.3 million, an increase of $0.5 million or 28%, compared with the same period in the prior year due to an increase in Bexxar revenue. Increased revenue of TheraSphere in the third quarter of fiscal 2012 was primarily due to adoption by new clinics. Management continues to expect 2012 TheraSphere revenue growth to be approximately 15% higher than revenue generated in 2011. Sustained growth in TheraSphere supports management's belief that Nordion can create significant value by building a leadership position in the emerging Interventional Oncology market. Sterilization Technologies Sterilization Technologies delivered third quarter revenue of $32.1 million, which was relatively flat from the same period in 2011. Cobalt generated third quarter revenue of $31.8 million, an increase of $1.0 million or 3%. The increase in Cobalt revenue was primarily due to increased cobalt-60 shipments to customers. Sterilization-Other reported revenue of $0.3 million, a decline of $0.9 million or 76%, compared with the same period in 2011. This decline was due to no production irradiators being shipped during the quarter, as compared to one production irradiator shipment in the third quarter of 2011. Management continues to expect a similar level of Cobalt revenue in fiscal 2012 compared with fiscal 2011, and Sterilization Technologies overall segment revenue to be approximately 10% lower in fiscal 2012 compared with fiscal 2011. Medical Isotopes Medical Isotopes generated revenue of $19.7 million, in the third quarter of 2012, a decrease of $1.7 million or 8% compared with the same period in 2011. Reactor isotopes generated revenue of $14.5 million in third quarter 2012, a decrease of $1.2 million or 8%. Revenue for Cyclotron isotopes was $5.2 million, a decrease of $0.5 million or 9%, compared with the same period of the prior year. Cyclotron isotopes were lower mainly due to lower shipments of Strontium-82 and lower customer demand for Thallium-201, Gallium-67 and Iodine-123. On May 16, 2012, Nordion's primary supplier of medical isotopes, AECL, reported that the National Research Universal (NRU) reactor at Chalk River, Ontario, returned to service from its planned maintenance shutdown, which lasted 31 days. The one-month shutdown resulted in an interruption in the supply of medical isotopes during Q2 and Q3 2012. The Company's production and sales have resumed as expected, and planned Mo-99 shipments began during the week of May 21, 2012. Nordion experienced lower demand from customers during the period in the third quarter that the NRU reactor was operational. This was due to a number of factors, including customers' requirement to diversify supply, a slower ramp of demand after the NRU reactor resumed production and lower levels of demand from Nordion's largest customer.. Management continues to forecast Reactor isotopes revenue to decline 10% to 12% in fiscal 2012 compared with 2011. Corporate and Other Corporate and Other reported a segment loss of $2.7 million in the third quarter, a decrease of $0.3 million from the third quarter 2011. Corporate selling, general and administrative (SG&A) expenses were $3.5 million in the third quarter an increase of $0.9 million compared with third quarter fiscal 2011, primarily due to higher stock based compensation costs. Quarterly Dividend The Board of Directors for Nordion will be addressing the quarterly dividend at the regular scheduled Board meeting on September 11, 2012. MAPLE Arbitration Based on confirmation received from the arbitration tribunal, and as disclosed by Nordion on Monday, August 27, 2012, Nordion expects to announce the tribunal's decision via news release before markets open on Monday, September 10, 2012. There are a variety of potential outcomes associated with the arbitration that cannot be predicted with any certainty at this time. Upon the release of the arbitration panel decision, Nordion intends to carefully review and consider the implications of the ruling in formulating a plan that supports the needs of our shareholders and our business strategy. Under the arbitration provisions included in the 2006 Interim and Long Term Supply Agreement between Nordion and Atomic Energy of Canada Limited (AECL) and the additional arbitration agreements between them, the parties have limited appeal rights relating to certain matters of law. Under the Commercial Arbitration Act (Canada), which applies, if either party wishes to initiate an appeal, it must do so within three months of the arbitration decision. If initiated by a party, the timeframe for an appeal to be heard and decided is indeterminate at this time. Internal Investigation On August 8, 2012, subsequent to the third quarter of 2012, Nordion voluntarily disclosed that it was conducting an internal inquiry and investigation of a foreign supplier and other third parties focusing on compliance with the Canadian Corruption of Foreign Public Officials Act and the U.S. Foreign Corrupt Practices Act. The Company continues investigating this matter and is cooperating with regulatory and enforcement authorities. Based on the investigation conducted to date, Nordion currently does not expect an impact on revenue in 2012 or 2013 or a material impact on supplies necessary for current business operations. A full copy of Nordion's third quarter fiscal 2012 financial statements and notes and the related Management's Discussion and Analysis can be downloaded at www.nordion.com/investors/financial_results.asp or found on www.sedar.com or www.edgar.com. Conference Call Nordion will hold a conference call on Thursday, September 6, 2012 at 10:00 a.m. ET to discuss its third quarter fiscal 2012 results. This call will be webcast live at www.nordion.com, and will be available after the call in archived format at http://www.nordion.com/webcasts. To participate, please dial 1-866-225-0198 (toll-free North America) or 1-416-340-8061 (International). About Nordion Inc. Nordion Inc. (TSX: NDN) (NYSE: NDZ) is a global health science company that provides market-leading products used for the prevention, diagnosis and treatment of disease. We are a leading provider of medical isotopes, targeted therapies and sterilization technologies that benefit the lives of millions of people in more than 60 countries around the world. Our products are used daily by pharmaceutical and biotechnology companies, medical-device manufacturers, hospitals, clinics and research laboratories. Nordion has more than 500 highly skilled employees in three locations. Find out more at www.nordion.com and follow us at http://twitter.com/NordionInc. Caution Concerning Forward-Looking Statements This releasecontains forward-looking statements, within the meaning of applicable securities laws, including under applicable Canadian securities laws and the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical fact. The words “may”, “will”, “could”, “should”, “would”, “outlook”, “believe”, “plan”, “anticipate”, “estimate”, “project”, “expect”, “intend”, “indicate”, “forecast”, “objective”, “optimistic”, and similar words and expressions are also intended to identify forward-looking statements. Forward-looking statements are necessarily based on estimates and assumptions made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate in the circumstances, but which are inherently subject to significant business, political, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Accordingly, this release is subject to the disclaimer and qualified by the assumptions, qualifications and risk factors referred to in our 2011 Annual Information Form (AIF). Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to, fluctuations in supply and demand, pricing pressures and rising costs, changes in currency and exchange rates and potential adverse developments in new and pending legal proceedings or regulatory investigations,as well asthe risk factors which are described in section 5 of our 2011 AIF and in our other filings with the Canadian provincial securities commissions and the US Securities and Exchange Commission, and our success in anticipating and managing those risks. We caution readers not to place undue reliance on the Company's forward-looking statements, as a number of factors could cause our actual results, performance or achievements to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. The Company does not assume any obligation to update or revise any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf, except as required by applicable law. Non-GAAP Information To supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures such as adjusted net income and adjusted earnings per share. Non-GAAP financial measures exclude certain items, such as restructuring charges and recovery, change in fair value of embedded derivatives, AECL arbitration and legal fees, loss and gains on sales of investments, loss or gains on discontinued operations, and tax effects on adjusted items. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP. Therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Non-GAAP Reconciliation         Three months ended July 31     Nine months ended July 31(thousands of U.S. dollars, except per share amounts)     2012     2011   % Change     2012     2011   % Change Net income (loss)   $ 12,302   $ (4,121)   399%   $ 14,636   $ 9,946   47% Adjusted for specified items: Restructuring (recovery) charges, net (46) 41 (212%) (699) 576 (221%) Change in fair value of embedded derivatives 1,992 3,697 (46%) 8,417 (15,619) (154%) AECL arbitration and legal fees 955 3,127 (69%) 4,774 9,706 (51%) Loss on Celerion note receivable - - - 2,411 - 100% Internal investigation costs 1,356 - 100% 1,356 - 100% Gain on sale of investment - - - - (1,691) (100%) Tax effect on specified items listed above (1,080) (1,797) (40%) (3,497) 1,200 (391%) Loss on discontinued operations, net of tax     -     8,814   (100%)     -     27,057   (100%) Adjusted net income   $ 15,479   $ 9,761   59%   $ 27,398   $ 31,175   (69%)   Diluted earnings (loss) per share0.20 (0.06) 433% 0.24 0.15 60% Adjusted diluted earnings per share0.25 0.15 67% 0.44 0.48 (8%) Weighted average number of Common shares outstanding – diluted (thousands of shares)     61,968     64,283   (4%)     62,065     65,461   (5%) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION[UNAUDITED]     July 31     October 31 (thousands of U.S. dollars, except share amounts)   2012   2011 ASSETS     Current assets Cash and cash equivalents $ 81,896 $ 74,067 Accounts receivable 40,462 38,999 Notes receivable 6,254 16,061 Inventories 33,581 30,595 Income taxes recoverable 21,242 22,857 Current portion of deferred tax assets 6,354 7,661 Other current assets 8,077 13,842 Assets of discontinued operations     -     936 Total current assets197,866 205,018   Property, plant and equipment, net 90,179 97,690 Deferred tax assets 70,338 73,237 Long-term investments 1,450 1,473 Other long-term assets     75,532     81,245 Total assets   $ 435,365   $ 458,663   LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities Accounts payable $ 16,332 $ 13,661 Accrued liabilities 47,158 52,914 Income taxes payable 9,396 13,607 Current portion of long-term debt 4,176 4,156 Current portion of deferred revenue 1,048 1,820 Liabilities of discontinued operations     -     4,079 Total current liabilities78,110 90,237   Long-term debt 40,277 40,174 Deferred revenue 2,324 3,855 Other long-term liabilities     39,061     39,619 Total liabilities     159,772     173,885   Shareholders' equity Common shares at par – Authorized shares: unlimited; Issued and outstanding shares: 61,960,021 and 62,378,521, respectively; 252,374 254,076 Additional paid-in capital 84,318 83,159 Accumulated deficit (221,937) (216,789) Accumulated other comprehensive income     160,838     164,332 Total shareholders' equity     275,593     284,778 Total liabilities and shareholders' equity   $ 435,365   $ 458,663   Please refer to the complete set of Consolidated Financial Statements for Q3 2012CONSOLIDATED STATEMENTS OF OPERATIONS[UNAUDITED]     Three months ended July 31     Nine months ended July 31(thousands of U.S. dollars, except per share amounts)     2012     2011     2012     2011 Revenues   $ 67,141   $ 66,807   $ 170,169   $ 200,027 Costs and expenses         Direct cost of revenues 30,384 31,628 80,428 94,033 Selling, general and administration 17,362 17,172 47,988 49,364 Depreciation and amortization 3,509 5,666 13,847 16,675 Restructuring (recovery) charges (46) 41 (699) 576 Change in fair value of embedded derivatives 1,992 3,697 8,417 (15,619) Other expenses, net     1,098     1,946     5,909     7,629 Total costs and expenses     54,299     60,150     155,890     152,658   Operating income from continuing operations12,842 6,657 14,279 47,369 Interest expense (1,197) (493) (3,489) (1,610) Interest income 1,335 2,525 4,610 7,794 Equity loss     -     -     -     (128) Income from continuing operations before income taxes12,980 8,689 15,400 53,425 Income tax expense     678     3,996     764     16,422 Income from continuing operations12,302 4,693 14,636 37,003 Loss from discontinued operations, net of income taxes     -     (8,814)     -     (27,057) Net income (loss)   $ 12,302   $ (4,121)   $ 14,636   $ 9,946   Basic and diluted earnings (loss) per share - from continuing operations $ 0.20 $ 0.07 $ 0.24 $ 0.56 - from discontinued operations     -     (0.13)     -     (0.41) Basic and diluted earnings (loss) per share   $ 0.20   $ (0.06)   $ 0.24   $ 0.15   Please refer to the complete set of Consolidated Financial Statements for Q3 2012CONSOLIDATED STATEMENTS OF CASH FLOWS[UNAUDITED]     Three months ended July 31     Nine months ended July 31(thousands of U.S. dollars)     2012   2011     2012   2011 Operating activities         Net income (loss) $ 12,302 $ (4,121) $ 14,636 $ 9,946 Loss from discontinued operations, net of income taxes     -     (8,814)     -     (27,057) Income from continuing operations 12,302 4,693 14,636 37,003 Adjustments to reconcile net income to cash provided by operating activities relating to continuing operations: Items not affecting current cash flows 1,989 3,922 15,921 10,460 Changes in operating assets and liabilities     (2,352)     (64)     4,611     (33,510) Cash provided by operating activities of continuing operations 11,939 8,551 35,168 13,953 Cash used in operating activities of discontinued operations     -     (8,210)     -     (18,436) Cash provided by (used in) operating activities     11,939     341     35,168     (4,483) Investing activities Purchase of property, plant and equipment (1,172) (1,152) (5,828) (2,854) Decrease in restricted cash 795 20,018 1,261 18,969 Proceeds on sale of long term investments     -     -     -     1,678 Cash (used in) provided by investing activities of continuing operations (377) 18,866 (4,567) 17,793 Cash used in investing activities of discontinued operations     -     -     -     (18,411) Cash (used in) provided by investing activities     (377)     18,866     (4,567)     (618) Financing activities Payment of cash dividends (6,196) (6,440) (18,632) (12,880) Repurchase and cancellation of Common shares     (170)     (7,219)     (3,691)     (39,945) Cash used in financing activities of continuing operations (6,366) (13,659) (22,323) (52,825) Cash used in financing activities of discontinued operations     -     -     -     (1,193) Cash used in financing activities     (6,366)     (13,659)     (22,323)     (54,018) Effect of foreign exchange rate changes on cash and cash equivalents     (1,100)     (402)     (449)     5,355 Net increase (decrease) in cash and cash equivalents during the period4,096 5,146 7,829 (53,764) Cash and cash equivalents, beginning of period     77,800     63,892     74,067     122,802 Cash and cash equivalents, end of period   $ 81,896   $ 69,038   $ 81,896   $ 69,038   Please refer to the complete set of Consolidated Financial Statements for Q3 2012Nordion Inc.INVESTORS:Ana Raman, 613-595-4580investor.relations@nordion.comorMEDIA:Tanya Pobuda, 613-592-3400 x 2280tanya.pobuda@nordion.com