/SECOND AND FINAL ADD - TO326 - MDS Inc./
05 Juni 2008 - 1:00PM
PR Newswire (US)
As mentioned in Note 2, in the fourth quarter of 2007 during the
preparation of the 2007 annual financial statements under US GAAP,
an error was identified in the prior interim financial statements
with respect to certain stock-based incentive compensation plans.
The Company has corrected this error of $1 million in these
consolidated financial statements. The previous Canadian GAAP to US
GAAP reconciliation is therefore amended by the below restated
reconciliation. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
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Recon- 2008 ciling As at April 30, 2008 Canadian Adjust- Refer-
2008 (millions of US dollars) GAAP ments ence US GAAP
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Assets Current Assets Cash and cash equivalents $ 143 $ (4) a $ 139
Short-term investments - - - Accounts receivable, net 261 (1) a,d
260 Note receivable 73 - 73 Unbilled revenue 111 - 111 Inventories,
net 121 (4) a 117 Income taxes recoverable 56 - 56 Current portion
of deferred tax assets 47 - 47 Prepaid expenses and other 33 (1) 32
Assets held for sale 27 - 27
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Total Current Assets $ 872 $ (10) $ 862 - Property, plant and
equipment, net 366 (2) a 364 Deferred tax assets 31 - 31 Long-term
investments and other 191 (13) a,b,g 178 Goodwill 820 (21) 799
Intangible assets, net 526 (16) a 510
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Total Assets $ 2,806 $ (62) $ 2,744
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LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts
payable and accrued liabilities $ 303 $ (15) a,d,h $ 288 Current
portion of deferred revenue 75 - 75 Income taxes payable 17 (1) 16
Current portion of long-term debt 20 - 20 Current portion of
deferred tax liabilities 33 - 33 Liabilities related to assets held
for sale 12 - 12
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Total Current Liabilities $ 460 $ (16) $ 444 Long-term debt 280 -
280 Deferred revenue 14 - 14 Other long-term obligations 30 - 30
Deferred tax liabilities 152 (13) f,h 139
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Total Liabilities $ 936 $ (29) $ 907
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Shareholders' equity Share capital 506 (12) h 494 Additional paid
in capital - 75 h 75 Retained earnings 961 (103) b,d,g,h 858
Accumulated other comprehensive income 403 7 a,f,g 410
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Total shareholders' equity $ 1,870 $ (33) $ 1,837
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Total liabilities and shareholders' equity $ 2,806 $ (62) $ 2,744
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
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Recon- 2007 ciling As at October 31 Canadian Adjust- Refer- 2007
(millions of US dollars) GAAP ments ence US GAAP
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ASSETS Current assets Cash and cash equivalents $ 259 $ (24) a $
235 Short-term investments 91 11 102 Accounts receivable 284 3 a,d
287 Unbilled revenue 99 - 99 Inventories, net 134 (6) a 128 Income
taxes recoverable 54 - 54 Current portion of income taxes 45 - 45
Prepaid expenses and other 21 1 22 Assets held for sale 1 - 1
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Total Current Assets 988 (15) 973 Property, plant and equipment,
net 390 (4) a 386 Deferred tax assets 4 - 4 Long-term investments
and other 284 6 a,b,g 290 Goodwill 797 (15) 782 Intangible assets,
net 601 (18) a 583
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Total Assets $ 3,064 $ (46) $ 3,018
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LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts
payable and accrued liabilities $ 391 $ (7) a,h $ 384 Current
portion of deferred revenue 71 - 71 Income taxes payable 57 - 57
Current portion of long-term debt 94 - 94 Current portion of
deferred tax liabilities 10 - 10
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Total Current Liabilities 623 (7) 616 Long-term debt 290 - 290
Deferred revenue 16 1 17 Other long-term obligations 29 1 30
Deferred tax liabilities 182 (14) f,h 168 Minority interest 1 (1) -
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Total Liabilities 1,141 (20) 1,121
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Shareholders' equity Share capital 502 (9) h 493 Additional paid-in
capital n/a 72 h 72 Retained earnings 945 (103) b,d,g,h 842
Accumulated other comprehensive income 476 14 a,f,g 490
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Total shareholders' equity 1,923 (26) 1,897
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Total liabilities and shareholders' equity $ 3,064 $ (46) $ 3,018
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CONSOLIDATED STATEMENTS OF OPERATIONS
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Three months ended Six months ended April 30, 2008 April 30, 2008
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(millions of US dollars except CDN Recon. US CDN Recon. US Refer-
per share amounts) GAAP Items(1) GAAP GAAP Items(1) GAAP ence
Revenues Products $ 180 $ (11) $ 169 $ 331 $ (11) $ 320 a Services
149 8 157 302 - 302 Reimbursement revenues 24 - 24 50 - 50
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Total revenues 353 (3) 350 683 (11) 672
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Costs and expenses Direct cost of products (106) - (106) (201) -
(201) a,c Direct cost of services (101) - (101) (193) - (193)
Reimbursed expenses (24) - (24) (50) - (50) Selling, general and
administration (73) (2) (75) (131) (8) (139) a,e,h Research and
development (11) (11) (22) (20) (22) (42) a,b,c Depreciation and
amortization (26) 3 (23) (56) 6 (50) a Restructuring charges - net
(1) - (1) (1) - (1) Other expense - net 6 4 10 3 3 6 b,d
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Total costs and expenses (336) (6) (342) (649) (21) (670)
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Operating income (loss) from continuing operations 17 (9) 8 34 (32)
2 Interest expense (5) (1) (6) (11) (1) (12) Interest income 4 - 4
10 - 10 Mark-to-market on interest rate swaps - - - - 2 2 Equity
earnings - 10 10 - 24 24 a
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Income (loss) from continuing operations before income taxes 16 -
16 33 (7) 26 Income tax (expense) recovery - current (7) 4 (3) (31)
6 (25) - deferred (2) - (2) 26 1 27
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Income (loss) from continuing operations 7 4 11 28 - 28 Income from
discontinued operations - net of income tax - - - - - -
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Net income $ 7 $ 4 $ 11 $ 28 $ - $ 28
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Basic earnings (loss) per share - from continuing operations $ 0.06
$(0.03) $ 0.09 $ 0.23 $ - $ 0.23 - from discontinued operations - -
- - - -
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Basic earnings (loss) per share $ 0.06 $(0.03) $ 0.09 $ 0.23 $ - $
0.23
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Diluted earnings (loss) per share - from continuing operations $
0.06 $(0.03) $ 0.09 $ 0.23 $ - $ 0.23 - from discontinued
operations - - - - - -
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Diluted earnings (loss) per share $ 0.06 $(0.03) $ 0.09 $ 0.23 $ -
$ 0.23
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(1) Reconciling items between Canadian GAAP and US GAAP
CONSOLIDATED STATEMENTS OF OPERATIONS
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Three months ended Six months ended April 30, 2007 April 30, 2007
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(millions of US Restated Restated dollars except CDN Recon. US GAAP
CDN Recon. US GAAP Refer- per share amounts) GAAP Items(1) (Note 2)
GAAP Items(1) (Note 2) ence Revenues Products $ - $ - $ 129 $ - $ -
$ 234 a Services - - 134 - - 270 Reimbursement revenues - - 23 - -
46
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Total revenues 273 13 286 523 27 550
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Costs and expenses Direct cost of products - (83) (83) - (154)
(154) a,c Direct cost of services (164) 82 (82) (324) 152 (172)
Reimbursed expenses - (23) (23) - (46) (46) Selling, general and
administration (67) 6 (61) (120) 5 (115) a,e,h Research and
development (7) (9) (16) (12) (16) (28) a,b,c Depreciation and
amortization (20) 2 (18) (37) 5 (32) a,b Restructuring charges -
net (28) 3 (25) (41) 3 (38) Other expenses - net (67) (7) (74) (66)
(4) (70) b,d
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Total costs and expenses (353) (29) (382) (600) (55) (655)
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Operating loss from continuing operations (80) (16) (96) (77) (28)
(105) Interest expense (8) - (8) (14) - (14) Interest income 10 -
10 14 - 14 Mark-to-market on interest note swaps - 1 1 - 1 1 Equity
earnings - 11 11 - 25 25 a
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Loss from continuing operations before income taxes (78) (4) (82)
(77) (2) (79) Income tax (expense) recovery - current 21 10 31 18
11 29 deferred (4) (4) - (5) (5)
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Income (loss) from continuing operations (57) 2 (55) (59) 4 (55)
Income from discontinued operations - net of income tax 793 (1) 792
809 (1) 808
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Net income $ 736 $ 1 $ 737 $ 750 $ 3 $ 753
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Basic earnings (loss) per share - from continuing operations
$(0.42) $ 0.02 $(0.40) $(0.42) $ 0.03 $(0.39) - from discontinued
operations 5.77 - 5.77 5.74 (0.01) 5.73
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Basic earnings (loss) per share $ 5.35 $ 0.02 $ 5.37 $ 5.32 $ 0.02
$ 5.34
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Diluted earnings (loss) per share - from continuing operations
$(0.41) $ 0.01 $(0.40) $(0.42) $ 0.03 $(0.39) - from discontinued
operations 5.75 - 5.75 5.72 - 5.72
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Diluted earnings (loss) per share $ 5.34 $ 0.01 $ 5.35 $ 5.30 $
0.03 $ 5.33
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CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended April 30,
2008
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CDN Recon. US (millions of US dollars) GAAP Items(1) GAAP
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Operating activities Net income $ 7 $ 4 $ 11 Less: Income from
discontinued operations - net of tax - - -
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Income (loss) from continuing operations 7 4 11 Adjustments to
reconcile net income to cash provided (used in) operating
activities relating to continuing operations Items not affecting
current cash flow 33 (34) (1) Changes in non-cash working capital
balances relating to operations (26) 2 (24)
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Cash provided by (used in) operating activities of continuing
operations 14 (28) (14) Cash provided by operating activities of
discontinued operations - - -
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14 (28) (14)
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Investing activities Acquisitions - (2) (2) Increase in deferred
development charges - - - Purchase of property, plant and equipment
(15) - (15) Proceeds from sale of property, plant and equipment 2 -
2 Proceeds on sale of short-term investments - - - Proceeds on sale
of long-term investment 4 - 4 Other (3) 1 (2)
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Cash provided by (used in) investing activities of continuing
operations (12) (1) (13)
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Cash provided by investing activities of discontinued operations -
- -
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Financing activities Repayment of long-term debt (1) - (1) Increase
(decrease) in deferred revenue and other long-term obligations (1)
- (1) Issuance of shares 4 - 4 Repurchase of shares (12) - (12)
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Cash used in financing activities of continuing operations (10) -
(10)
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Cash used in financing activities of discontinued operations - - -
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Effect of foreign exchange rate changes on cash and cash
equivalents 1 31 32
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Increase (decrease) in cash and cash equivalents during the period
(7) 2 (5) Cash and cash equivalents, beginning of period 150 (6)
144
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Cash and cash equivalents, end of period $ 143 $ (4) $ 139
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Six months ended April 30, 2008
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CDN Recon. US (millions of US dollars) GAAP Items(1) GAAP
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Operating activities Net income $ 28 $ - $ 28 Less: Income from
discontinued operations - net of tax - - -
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Income (loss) from continuing operations 28 - 28 Adjustments to
reconcile net income to cash provided (used in) operating
activities relating to continuing operations Items not affecting
current cash flow 11 18 29 Changes in non-cash working capital
balances relating to operations (123) (5) (128)
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Cash provided by (used in) operating activities of continuing
operations (84) 13 (71) Cash provided by operating activities of
discontinued operations - - -
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(84) 13 (71)
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Investing activities Acquisitions (2) - (2) Increase in deferred
development charges (5) 5 - Purchase of property, plant and
equipment (28) - (28) Proceeds from sale of property, plant and
equipment 3 - 3 Proceeds on sale of short-term investments 101 -
101 Proceeds on sale of long-term investment 7 - 7 Other (2) - (2)
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Cash provided by (used in) investing activities of continuing
operations 74 5 79
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Cash provided by investing activities of discontinued operations -
- -
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Financing activities Repayment of long-term debt (81) - (81)
Increase (decrease) in deferred revenue and other long-term
obligations - - - Issuance of shares 5 - 5 Repurchase of shares
(17) (17)
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Cash used in financing activities of continuing operations (93) -
(93)
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Cash used in financing activities of discontinued operations - - -
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Effect of foreign exchange rate changes on cash and cash
equivalents (2) (9) (11)
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Increase (decrease) in cash and cash equivalents during the period
(105) 9 (96) Cash and cash equivalents, beginning of period 248
(13) 235
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Cash and cash equivalents, end of period $ 143 $ (4) $ 139
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(1) Reconciling items between Canadian GAAP and US GAAP
CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended April 30,
2007
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Restated CDN Recon. US GAAP (millions of US dollars) GAAP Items(1)
(Note 2)
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Cash flows from operating activities Net income $ 736 $ 1 $ 737
Less: Income from discontinued operations - net of tax 793 (1) 792
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Income (loss) from continuing operations (57) 2 (55) Adjustments to
reconcile net income to cash provided by operating activities
relating to continuing operations Items not affecting current cash
flow 143 (11) 132 Changes in non-cash working capital balances
relating to operations 37 (3) 34
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Cash provided by (used in) operating activities of continuing
operations 123 (12) 111 Cash used in operating activities of
discontinued operations (69) - (69)
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54 (12) 42
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Investing activities Acquisitions (603) - (603) Increase in
deferred development charges - - - Purchase of property, plant and
equipment (9) 2 (7) Proceeds from sale of property, plant and
equipment - - - Proceeds on sale of short-term investments 25 - 25
Purchase of short-term investments (15) - (15) Proceeds on sale of
long-term investments - 2 2 Other 1 (2) (1)
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Cash provided by investing activities of continuing operations
(601) 2 (599)
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Cash provided by (used in) investing activities of discontinued
operations 929 - 929
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Financing activities Repayment of long-term debt (1) - (1) Increase
(decrease) in deferred revenue and other long-term obligations (1)
- (1) Payment of cash dividends - - - Issuance of shares 6 - 6
Repurchase of shares (441) - (441)
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Cash used in financing activities of continuing operations (437) -
(437)
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Cash used in financing activities of discontinued operations - - -
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Effect of foreign exchange rate changes on cash and cash
equivalents 16 12 28
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Net increase in cash and cash equivalents during the period (39) 2
(37) Cash and cash equivalents, beginning of period 340 (5) 335
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Cash and cash equivalents, end of period $ 301 $ (3) $ 298
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Six months ended April 30, 2007
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Restated CDN Recon. US GAAP (millions of US dollars) GAAP Items(1)
(Note 2)
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Cash flows from operating activities Net income $ 750 $ 3 $ 753
Less: Income from discontinued operations - net of tax 809 (1) 808
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Income (loss) from continuing operations (59) 4 (55) Adjustments to
reconcile net income to cash provided by operating activities
relating to continuing operations Items not affecting current cash
flow 156 4 160 Changes in non-cash working capital balances
relating to operations 9 (8) 1
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Cash provided by (used in) operating activities of continuing
operations 106 - 106 Cash used in operating activities of
discontinued operations (53) - (53)
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53 - 53
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Investing activities Acquisitions (603) - (603) Increase in
deferred development charges (2) 2 - Purchase of property, plant
and equipment (17) 1 (16) Proceeds from sale of property, plant and
equipment - - - Proceeds on sale of short-term investments 151 -
151 Purchase of short-term investments (37) - (37) Proceeds on sale
of long-term investments 13 - 13 Other - - -
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Cash provided by investing activities of continuing operations
(495) 3 (492)
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Cash provided by (used in) investing activities of discontinued
operations 929 - 929
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Financing activities Repayment of long-term debt (7) - (7) Increase
(decrease) in deferred revenue and other long-term obligations - -
- Payment of cash dividends (3) - (3) Issuance of shares 10 - 10
Repurchase of shares (441) - (441)
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Cash used in financing activities of continuing operations (441) -
(441)
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Cash used in financing activities of discontinued operations (2) -
(2)
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Effect of foreign exchange rate changes on cash and cash
equivalents 4 - 4
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Net increase in cash and cash equivalents during the period 48 3 51
Cash and cash equivalents, beginning of period 253 (6) 247
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Cash and cash equivalents, end of period $ 301 $ (3) $ 298
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(1) Reconciling items between Canadian GAAP and US GAAP Three
months Six months ended April 30 ended April 30
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Restated Restated Note 2 Note 2 2008 2007 2008 2007
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Net income (loss) from continuing operations in accordance with US
GAAP $ 11 $ (55) $ 28 $ (55) US GAAP adjustments: Deferred
development costs - net 2 (2) 6 (2) Mid term incentive plan
reversal (2) (1) (6) (3) Mark-to-market on embedded derivatives (3)
- 1 - Defined benefit pension plans - - 1 - Reduction in income tax
expense arising from GAAP adjustments (1) 1 (2) 1
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Net income (loss) from continuing operations in accordance with
Canadian GAAP 7 (57) 28 (59) Income from discontinued operations in
accordance with Canadian and US GAAP - net of tax - 793 - 809
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Net income in accordance with Canadian GAAP $ 7 $ 736 $ 28 $ 750
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Basic earnings (loss) per share in accordance with Canadian GAAP -
from continuing operations $ 0.06 $ (0.42) $ 0.23 $ (0.42) - from
discontinued operations - 5.77 - 5.74
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Basic earnings per share $ 0.06 $ 5.35 $ 0.23 $ 5.32
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Diluted earnings (loss) per share in accordance with Canadian GAAP
- from continuing operations $ 0.06 $ (0.41) $ 0.23 $ (0.42) - from
discontinued operations - 5.75 - 5.72
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Diluted earnings per share $ 0.06 $ 5.34 $ 0.23 $ 5.30
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Recent Canadian Accounting Pronouncements a. Capital disclosures -
The CICA issued Section 1535, "Capital Disclosures", which requires
the disclosure of both the qualitative and quantitative information
that enables users of financial statements to evaluate the entity's
objectives, policies, and processes for managing capital. b.
Inventories - The CICA issued Section 3031, "Inventories", which
replaces existing Section 3030 and harmonizes the Canadian
standards related to inventories with International Financial
Reporting Standards. The new Section includes changes to the
measurement of inventories, including guidance on costing,
impairment testing, and disclosure requirements. c. Financial
instruments - The CICA issued Section 3862 "Financial Instruments -
Disclosure" and Section 3863, "Financial Instruments -
Presentation" to replace Section 3861, "Financial Instruments -
Disclosure and Presentation". The Company has adopted Sections
1535, 3862 and 3863 effective for its fiscal year beginning
November 1, 2007 and these sections affect disclosures only. The
Company is required to adopt Section 3031 effective November 1,
2008. The Company is currently evaluating the effects that the
adoption of Section 3031 will have on its consolidated results of
operations and financial condition and is not yet in a position to
determine such effects. 20. Comparative Figures All comparative
financial information has been restated to reflect the Company's
results as if they had been historically reported in US dollars and
in accordance with US GAAP. Certain figures for the previous year
have been reclassified to conform to the current year's financial
statement presentation. In addition, segmented information for 2006
has been revised to reflect the discontinued operations reported.
21. Subsequent Events - MAPLE Reactor On May 16, 2008, Atomic
Energy of Canada Limited (AECL), a Canadian crown corporation, and
the Government of Canada, publicly announced their intention to
discontinue the development work on the MAPLE reactors located at
Chalk River laboratories, effective immediately. The MAPLE reactors
were to replace AECL's current National Research Universal reactor
(NRU) and provide MDS Nordion with a long-term source of supply of
medical isotopes. AECL and the Government of Canada have also
publicly announced that they will work closely with MDS Nordion and
continue to supply medical isotopes using the NRU and will pursue
an extension of the NRU operation beyond its current expiry date of
October 31, 2011. MDS has substantial financial interests in the
success of the MAPLE reactor project, primarily through a related
40-year supply agreement with AECL, as a result of an exchange of
non-monetary assets in February 2006 (see below). The Company was
neither consulted nor informed in advance by AECL or the Canadian
government about their decision. AECL's announcement and position
represents a different perspective on the contract than that held
by MDS. The Company will evaluate all options and pursue
appropriate steps to protect the interests of patients, its
customers and its shareholders. On February 22, 2006, the Company
had announced an agreement resulting from a comprehensive mediation
process with AECL related to the MAPLE reactor project. Under the
agreement, AECL paid the Company $22 million, and assumed ownership
of the MAPLE facilities and took responsibility for all costs
associated with completing the project and the future production of
medical isotopes from the MAPLE facilities. The parties retained
certain rights related to existing claims. In addition, AECL
acquired $47 million of MAPLE-related inventories in exchange for a
non-interest bearing note having a net present value of $38
million, to be repaid over four years commencing in 2008. The
agreement requires AECL to supply medical isotopes to MDS Nordion
over a 40-year period, upon the MAPLE facilities meeting certain
operational criteria, in exchange for a fixed percentage of the
selling price. In accordance with SFAS # 153, "Exchanges of
Non-Monetary Assets", the Company exchanged the MAPLE asset for the
40-year supply agreement which was recorded as an intangible asset
at its fair value of $308 million. This amount is to be amortized
on a straight-line basis over a 40-year period once commercial
production of MAPLE isotopes begins. The Company recorded a loss on
this transaction of $36 million in 2006. As a result of the May 16,
2008 announcement by AECL and the Government of Canada, MDS is
reviewing the impact on its business from an operational and
financial reporting perspective. The Company will evaluate all
options and pursue appropriate steps to protect the interests of
patients, its customers and its shareholders. The principal US GAAP
reporting exposure for MDS related to the announcement is its
intangible asset associated with the 40-year supply agreement
currently carried at $342 million (revalued at the April 30, 2008
exchange rate). MDS will continue to evaluate the intangible asset
for possible impairment and the relevant financial reporting
implications based upon the progress of any dialogue, negotiations
or legal proceedings between AECL, the Government of Canada and the
Company. DATASOURCE: MDS Inc. CONTACT: PRNewswire - - 06/05/2008
Copyright