12. Segmented Information Three months to July 31, 2006 ------------------------------------------------------------------------- Pharmaceutical Instru- Diag- Corporate Services Isotopes ments nostics and Other Total ------------------------------------------------------------------------- Net revenues $ 126 $ 88 $ 74 $ 89 $ - $ 377 Cost of revenues (105) (45) (46) (51) - (247) Selling, general and administration (35) (14) (7) (11) (10) (77) Research and development - (1) (4) - - (5) Depreciation and amortization (9) (4) (5) (2) - (20) Restructuring charges (1) - - - (1) (2) Other income (expense) 5 - - - - 5 Equity earnings (loss) - - - 1 - 1 ------------------------------------------------------------------------- Operating income (loss) $ (19) $ 24 $ 12 $ 26 $ (11) $ 32 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets $ 912 $ 724 $ 205 $ 240 $ 544 $ 2,625 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital expenditures $ 14 $ - $ 2 $ 1 $ 3 $ 20 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months to July 31, 2005 ------------------------------------------------------------------------- Pharmaceutical Instru- Diag- Corporate Services Isotopes ments nostics and Other Total ------------------------------------------------------------------------- Net revenues $ 133 $ 79 $ 74 $ 82 $ - $ 368 Cost of revenues (95) (43) (42) (53) - (233) Selling, general and administration (40) (7) (6) (16) (3) (72) Research and development (1) (2) (4) - 1 (6) Depreciation and amortization (8) (4) (2) (4) - (18) Restructuring charges (5) - - - - (5) Other income (expense) (8) - - - - (8) Equity earnings (loss) - - - - - - ------------------------------------------------------------------------- Operating income (loss) $ (24) $ 23 $ 20 $ 9 $ (2) $ 26 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets $ 1,000 $ 799 $ 228 $ 307 $ 452 $ 2,786 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital expenditures $ 9 $ 23 $ 1 $ - $ 9 $ 42 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nine months to July 31, 2006 ------------------------------------------------------------------------- Pharmaceutical Instru- Diag- Corporate Services Isotopes ments nostics and Other Total ------------------------------------------------------------------------- Net revenues $ 385 $ 253 $ 211 $ 262 $ - $ 1,111 Cost of revenues (295) (128) (128) (153) - (704) Selling, general and administration (98) (42) (15) (34) (29) (218) Research and development - (2) (10) - - (12) Depreciation and amortization (24) (12) (15) (6) - (57) Restructuring charges (1) - - (1) (3) (5) Other income (expense) 5 (10) - - (3) (8) Equity earnings (loss) (1) - - 2 (4) (3) ------------------------------------------------------------------------- Operating income (loss) $ (29) $ 59 $ 43 $ 70 $ (39) $ 104 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital expenditures $ 31 $ - $ 5 $ 3 $ 9 $ 48 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nine months to July 31, 2005 ------------------------------------------------------------------------- Pharmaceutical Instru- Diag- Corporate Services Isotopes ments nostics and Other Total ------------------------------------------------------------------------- Net revenues $ 408 $ 229 $ 213 $ 249 $ - $ 1,099 Cost of revenues (286) (118) (121) (156) - (681) Selling, general and administration (115) (37) (16) (44) (11) (223) Research and development (2) (4) (18) - 2 (22) Depreciation and amortization (22) (11) (9) (8) (1) (51) Restructuring charges (4) - - - (1) (5) Other income (expense) (8) - - - - (8) Equity earnings (loss) - - 1 1 - 2 ------------------------------------------------------------------------- Operating income (loss) $ (29) $ 59 $ 50 $ 42 $ (11) $ 111 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital expenditures $ 17 $ 36 $ 5 $ - $ 20 $ 78 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 13. Financial Instruments The carrying amounts and fair values for all derivative financial instruments are as follows: As at July 31 2006 2005 ------------------------------------------------------------------------- Carrying Fair Carrying Fair amount Value Amount Value ------------------------------------------------------------------------- Asset (liability) position: Currency forward and option - asset $ 1 $ 4 $ 4 $ 10 Currency forward and option - liabilities $ (1) $ (1) $ (2) $ (2) Interest rate swap and option contracts $ (3) $ (4) $ - $ - ------------------------------------------------------------------------- ------------------------------------------------------------------------- As of July 31, 2006, the Company had outstanding foreign exchange contracts and options in place to sell up to US$105 million, and in certain circumstances up to US$158 million, at a weighted average exchange rate of C$1.1590 maturing over the next six months. The Company also had interest rate swap contracts that economically convert a notional amount of US$80 million of debt from a fixed to a floating interest rate. Foreign exchange options and interest rate swaps not eligible for hedge accounting are included in accounts payable and are marked to market each period. 14. Income Taxes A reconciliation of expected income taxes to reported income tax expense is provided below. The effective rate for the quarter was 16% (2005 - 30%). Three months to July 31 2006 2005 ------------------------------------------------------------------------- Expected income taxes expense at MDS's 35% (2005 - 35%) statutory rate $ 11 $ 8 Increase (decrease) to tax expense as a result of: Benefit of tax losses previously not recognized (4) (4) Impact on federal tax rate decrease on future tax balances (3) - Other 1 3 ------------------------------------------------------------------------- Reported income tax expense $ 5 $ 7 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 15. Commitments As at October 31, 2005, MDS had a remaining five-year commitment of $211 million related to the outsourcing of the information technology infrastructure. During the quarter, MDS reached an agreement with the current service provider and has begun to transition these services to new providers. The Company has entered into contracts totaling $50 million over five years associated with these new agreements. During the quarter, the Company pledged a $15 million letter of credit in support of future site remediation costs for our Kanata facility. 16. Comparative Figures Certain figures for the previous year have been reclassified to conform with the current year's financial statement presentation. In addition, segmented information for 2005 has been restated to reflect the discontinued operations reported. DATASOURCE: MDS Inc. CONTACT: PRNewswire - - 09/07/2006

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