Nordion Inc. (TSX:NDN) (NYSE:NDZ), a leading provider of products and services to the global health science market, today reported results for the first quarter of fiscal 2014. The Company generated $70.8 million in revenue for the first quarter of fiscal 2014, an increase of $17.2 million, or 32%, from revenue of $53.7 million for the same period in fiscal 2013.
Nordion had GAAP net income of $35.3 million in the first quarter of fiscal 2014, compared with a GAAP net loss of $0.3 million in the first quarter of fiscal 2013. Excluding the specified items shown on the attached non-GAAP reconciliation table, adjusted net income for the first quarter increased to $36.5 million from adjusted net income of $2.9 million during the same period in the previous fiscal year. GAAP EPS of $0.57 were recorded in the first quarter of fiscal 2014 versus $nil in the same period last fiscal year. Excluding the specified items shown on the attached non-GAAP reconciliation table, first quarter adjusted non-GAAP EPS increased to $0.59 compared with $0.05 non-GAAP EPS in the first quarter of fiscal 2013. The U.S.-Canadian dollar currency exchange fluctuations had a positive non-cash after-tax impact of $0.31 per share on first quarter fiscal 2014 EPS.
"Nordion continued to execute on its business objectives during the first quarter, generating increased revenue and earnings over last year," said Mr. Steve West, Chief Executive Officer, Nordion Inc. "We continue to maintain our focus on completing our strategic review."
Strategic Review Update
During January 2013, Nordion initiated a review of strategic alternatives with a view to enhancing shareholder value. In Q3 2013, Nordion announced in May and completed in July the sale of the Targeted Therapies business to BTG plc (BTG), reaching the conclusion of the first phase of the strategic review. During Q4 2013 and to date in fiscal 2014, Nordion continued to advance the second phase of the review.
Completing the strategic review continues to be a priority for Nordion in fiscal 2014. Certain decisions, including the use of the Company's current cash, are expected to be made as part of or once the outcome of the strategic review has been finalized. While Nordion cannot provide the current status of, or address the timeline and potential results of the strategic review, the Company is working diligently with the objective of reaching a successful outcome.
In January 2014, Nordion signed a new two-year contract with Bracco Diagnostics to supply strontium-82 (Sr-82). In February 2014, Nordion signed a three-year customer contract to supply cobalt and a new one-year customer contract to supply molybdenum-99 (Mo-99), supporting the Company's annual revenue outlook for Medical Isotopes and Sterilization Technologies. These contracts include minimum purchase commitments, and the forecast revenues are reflected in Nordion's fiscal 2014 financial outlook.
First Quarter Fiscal 2014 Segment Results
Sterilization Technologies revenue for the first quarter of fiscal 2014 of $19.2 million increased by $2.7 million or 17% compared with the first quarter of fiscal 2013. Revenue from Cobalt of $19.0 million in the first quarter of fiscal 2014 increased by $3.6 million or 24% from the same period last year due to increased shipments of Cobalt-60 (Co-60), including sealed sources, and a shift in customer mix to customers that pay a higher price for Co-60. These increases were partially offset by unfavorable foreign exchange as a result of the weakening Canadian dollar compared to the U.S. dollar.
Sterilization-Other revenue of $0.2 million decreased by $0.9 million or 85% in the first quarter of fiscal 2014, compared with the first quarter of fiscal 2013 primarily due to a decrease in production irradiator refurbishments.
Medical Isotopes revenue in the first quarter of fiscal 2014 of $51.7 million, increased by $26.5 million or 105%, compared with the first quarter of fiscal 2013. Reactor isotopes revenue of $40.4 million in the first quarter of fiscal 2014 increased by $20.0 million or 98% from the same period last year primarily due to additional orders of Mo-99 received as a result of supply interruptions affecting some of Nordion's competitors. The primary reactor in Europe that supplies certain of the Company's competitors was shutdown in October 2013 and returned to service in February 2014. In addition, a competitor in South Africa that supplies Mo-99 returned to service in January 2014 after its supply interruption that started in November 2013. Additional orders resulting from these shutdowns had a positive impact on Reactor isotopes revenue of approximately $26 million in the first quarter of fiscal 2014.
As a result of the additional orders received due to competitor supply disruptions, Nordion expects fiscal 2014 revenue for Reactor isotopes to increase by approximately 40% from the previous fiscal year, which is at the top end of the 30 to 40% range initially forecasted for fiscal 2014.
Cyclotron isotopes revenue of $6.5 million increased by $3.6 million, or 128%, in the first quarter of fiscal 2014, compared with the same period of the prior year primarily due to an increase of Sr-82 sales, which Nordion resumed selling in April 2013.
Contract Manufacturing revenue of $4.8 million increased by $2.8 million, or 146%, in the first quarter of fiscal 2014, compared with the same period of the prior year mainly due to the contract manufacturing of TheraSphere® for BTG subsequent to the sale of the Targeted Therapies business in July 2013. Nordion discontinued the sale of Bexxar® for GSK in February 2014, subsequent to the Company's first fiscal quarter.
For fiscal 2014, Nordion expects Contract Manufacturing revenue to be approximately $20 million, as a result of $13 million in expected revenue for the manufacture of TheraSphere, and $7 million in expected revenue for the contract manufacture of Bexxar and the close out of the Bexxar manufacturing agreement. The Company's forecast for TheraSphere decreased from $14 million to $13 million due to the negative impact of the weakening Canadian dollar.
Corporate and Other
Corporate and Other segment earnings was $13.2 million in the first quarter of fiscal 2014, up $16.0 million compared with a segment loss of $2.8 million in the first quarter of fiscal 2013. The increase primarily represents foreign exchange gains during the first quarter of fiscal 2014 resulting from a revaluation of Nordion's cash and cash equivalents in U.S. dollars held in a Canadian dollar functional currency entity. This foreign exchange gain was partially offset by an increase in general and administrative costs associated with central functions previously allocated to the divested Targeted Therapies business, and higher stock-based compensation expense primarily reflecting the increase in the Company's stock price.
Foreign exchange impact
Nordion recorded foreign exchange gains of $20.9 million resulting from a revaluation of our cash and cash equivalents in U.S. dollars held in the Company's Canadian dollar functional currency entity. At the end of the first quarter of fiscal 2014, Nordion held over $300 million of cash and cash equivalents in U.S. dollars, including approximately $200 million in U.S. dollar cash proceeds from the sale of the Targeted Therapies business. Nordion recorded a non-cash gain of approximately $19 million related to this U.S. cash and cash equivalent balance as a result of the U.S. dollar strengthening approximately 7% compared to the Canadian dollar during the quarter. The remainder of the foreign exchange gain was a result of other net U.S. dollar denominated assets and liabilities, which primarily relates to U.S. dollar accounts receivable. The offset to these non-cash revaluation gains is reflected as foreign currency translation loss in accumulated other comprehensive income as part of shareholders' equity. Therefore, these foreign exchange gains do not affect Nordion's reported cash and cash equivalents balance or the Company's total shareholders' equity.
The 2014 AGM is scheduled to take place on Tuesday, April 29, 2014. The shareholder record date for the AGM is Wednesday, March 26, 2014.