Analogic to restructure ultrasound business

2016 09 12 16 43 10 514 Arrow 400

Analogic has announced plans to restructure its ultrasound business in the wake of persistent declining revenue in the first six months of its fiscal 2017 (end-January 31). The company said it will close a Canadian facility and consolidate its operations with two other sites.

In a move to improve profitability and overall long-term growth, Analogic will close its Vancouver, British Columbia, ultrasound facility by the end of fiscal 2017 and consolidate those activities with existing operations in Peabody, MA, and Copenhagen.

The actions will mean a workforce reduction of approximately 130 employees, which is expected to generate savings of $12 million to $15 million in fiscal 2018, principally in the ultrasound business.

"As discussed last quarter, we have completed the analysis of our Ultrasound business, and will resize the operating expense structure, consolidate R&D and service, and optimize sales/marketing expense, to match a more focused approach on those areas of the business with long-term growth opportunities," said Fred Parks, Analogic's president and CEO, in a prepared statement.

Revenue in Analogic's ultrasound segment decreased 7% to $40.3 million in the second fiscal quarter, compared with $43.3 million in the same quarter of fiscal 2016. For the six-month period, ultrasound revenue slipped 5% to $76.1 million, compared with $80 million in the same period of fiscal 2016.

Analogic blamed the revenue declines on delays in its general imaging segment, as well as "challenging" revenue in its OEM probe business, which was partially offset by direct sales growth in China and Europe. The restructuring could result in charges of up to $5 million in fiscal 2017, $500,000 of which was recorded in the second quarter. Additional noncash charges in the second half of fiscal 2017 also could occur, as Analogic finalizes its restructuring plan.

The company also plans to resize its U.S. sales and global marketing business, along with general and administrative organizations, as part of the restructuring and a renewed focus on its core markets of urology and surgery, as well as specific areas of the point-of-care market.

Despite problems in its ultrasound business, Analogic increased total revenue by 3% to $131.5 million in the second quarter, compared with $127.9 million in the same quarter of fiscal 2016. The company posted net income of $7.5 million, compared with a net loss of $3 million in the prior year's quarter.

For the six-month period, total revenue rose 4% to $252.6 million, compared with $242.8 million in the first half of fiscal 2016. Six-month net income totaled $10 million, compared with a net loss of $1.6 million in the same period of 2016.

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