EmailAlign Tech (ALGN $28.50 -6.91) reported third quarter earnings of $0.28 per share, $0.01 worse than the Capital IQ consensus of $0.29, while revenues rose 8.4% year/year to $136.5 million versus the $140.77 mln consensus. The company issued downside guidance for fourth quarter with EPS of $0.21-0.23 versus the $0.31 Capital IQ Consensus Estimate and revenues of $134.2-137.8 versus the $147.88 million consensus. The discontinuation of Align's distribution relationship with Straumann in Europe and North America, announced in a separate press release today, and the decline in results of operations of the Company's Scanner and CAD/CAM Services reporting unit triggers the risk of impairment of goodwill associated with the acquisition of Cadent. As a result, Align is in the process of conducting step one of a goodwill impairment test as prescribed by GAAP. Any difference between an estimate and the final step two evaluation, would be recorded in the fourth quarter 2012.
The Company's evaluation could result in a non-cash impairment charge for a substantial portion of the $135.3 million book value of goodwill which would negatively affect net income although revenue and cash flow from operations would not be impacted. "Q3 is historically a slower period for North American GP Dentists and International doctors due to summer vacations. This year summer seasonality was more pronounced in North America and as a result, we did not see the expected ramp in Invisalign cases for GP Dentists and Orthodontists. This softness has continued through October and is reflected in our Q4 guidance, which despite that slowdown, still projects a healthy annual growth rate for the company overall, with volume growth of at least 16%."
