MDS reports revenues of $46M for first-quarter fiscal 2010

MDS Inc. (TSX: MDS; NYSE: MDZ), a leading provider of products and services to the global health science markets, today reported financial results and filed its unaudited interim consolidated financial statements and related Management Discussion & Analysis for the three months ended January 31, 2010. In order to simplify our disclosures, we have discontinued the use of non-GAAP measures such as adjusted EBITDA.

As a result of the strategic repositioning announced in September 2009, including the sale of MDS Analytical Technologies and the sale of MDS Pharma Services Early Stage, the Company has reported the results for these businesses as discontinued operations. Continuing operations now focus solely on the MDS Nordion business, as well as Corporate and Other functions.

For the first quarter of fiscal 2010, MDS reported revenues from continuing operations of $46 million, and a loss from continuing operations of $43 million, which includes a $33 million pre-tax restructuring charge, and a basic loss per share from continuing operations of $0.36. This result compares with revenues from continuing operations of $66 million, income from continuing operations of $3 million, and basic earnings per share from continuing operations of $0.03 in the corresponding quarter in fiscal 2009.

Including discontinued operations for the first quarter of fiscal 2010, MDS reported a loss of $143 million compared with income of $2 million last year. The current quarter includes an incremental estimated after-tax loss of $50 million related to the sale of MDS Pharma Services Early Stage, which closed on March 5, 2010. It also includes the current best estimate of proceeds being equivalent to the carrying value on the sale of MDS Analytical Technologies. Management will be finalizing both estimates based on post closing adjustments.

First Quarter Fiscal 2010 Highlights

- MDS reported revenues from continuing operations of $46 million for the first quarter of 2010, down from revenues of $66 million in the corresponding quarter in fiscal 2009. Excluding the impact of foreign exchange, revenues decreased by 35%. - MDS Nordion continues to be adversely impacted by the prolonged shutdown of Atomic Energy of Canada Limited's (AECL) National Research Universal (NRU) reactor. As a result, operating income in the first quarter of fiscal 2010 for MDS Nordion was $3 million compared to $15 million in the same quarter last year. - On January 8, 2010, Steve West became Chief Executive Officer of MDS Inc., and on February 1, 2010, Peter Dans became Chief Financial Officer. - On January 29, 2010, MDS completed the divestiture of MDS Analytical Technologies for $641 million in cash including a $9 million reduction related to preliminary working capital adjustments. - As of the end of the first quarter of fiscal 2010, MDS had a cash balance of $871 million. Subsequent to the end of our first quarter of fiscal 2010, the following key events occurred: - On February 3, 2010, MDS repaid in full its remaining outstanding senior unsecured notes for $223 million. - On February 19, 2010, the Company launched a Substantial Issuer Bid to repurchase up to $450 million of MDS's Common shares with an anticipated expiry date of March 29, 2010. - On March 5, 2010, MDS completed the divestiture of MDS Pharma Services Early Stage for $45 million including $20 million in cash, which based on preliminary adjustments for working capital and other items was reduced to $13 million, a five-year, $25 million principal amount note and certain other minority interests. - MDS completed its strategic repositioning and disbanded its Special Committee, however, MDS continues to provide transitional services to the businesses it has sold and the Company will continue to see the effects of the strategic repositioning in its financial results for the next few quarters.

"With the completion of the Company's strategic repositioning, we are now focused on transitioning the remaining corporate functions to Ottawa, which we expect to be complete by the end of the year," said Mr. Steve West, Chief Executive Officer, MDS Inc. "We are encouraged by the growth in radiotherapeutics and sterilization operations in the first quarter of fiscal 2010."

Revenues in the first quarter of fiscal 2010 were $46 million, compared with $66 million last year. The reduction in revenue was primarily driven by AECL's shutdown of the NRU reactor in May 2009 and higher revenues reported in the first quarter of 2009 due to competitor supply disruptions. MDS Nordion's results were positively impacted by strength in its radiotherapeutics operations, largely driven by TheraSphere(R), a targeted liver cancer treatment, as well as increased cobalt volumes. Operating income was $3 million compared to $15 million in the same quarter last year, as the impact of lower revenues was partially offset by productivity and the year-over-year change in the fair value of embedded derivatives. During the current quarter, operating income included $2 million of restructuring charges related to accelerated vesting of stock-based compensation awards associated with the Company's strategic repositioning.