American Medical Systems Delivers 18 Percent Revenue Growth and Leveraged Net Income Growth in Third Quarter of 2005; Women's Health Grows Over 40 Percent in the Quarter.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Medical Systems Holdings, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AMMD AMMD Aerodynamic Mass Median Diameter ) reported sales of $61.7 million for the third quarter of 2005, an 18 percent increase over sales of $52.3 million in the comparable quarter of 2004 (with less than one percentage point of the increase coming from currency exchange rate changes). The Company reported net income of $1.4 million, or $0.02 per share, including the effect of a $9.2 million, or $0.13 per share, in-process research and development (IPR&D) charge related to its July July: see month. 2005 acquisition of Ovion Inc. The prior year's third quarter earnings were reported as a net loss of $26.3 million, or $0.39 per share, including the effect of a $35.0 million IPR&D charge as the result of the TherMatrx acquisition completed in that year ago quarter. Net income for the quarter, excluding the impact of the Ovion IPR&D charge, was $10.6 million, or $0.15 per share. Net income for third quarter 2004, excluding the impact of the TherMatrx IPR&D charge, was $8.7 million, or $0.12 per share. Net income growth, excluding the impact of the IPR&D charges for both 2004 and 2005, was over 22 percent. A reconciliation of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). earnings to these adjusted results is included in the attached financial tables. Sales for the first nine months of 2005 were $189.5 million, up over 27 percent from sales of $148.7 million for the comparable period of 2004 (with 1.2 percentage points of the increase coming from currency exchange rate changes). Sales of TherMatrx, acquired in July 2004, contributed 8 percentage points to the first nine months' sales growth. Net income as reported for the nine month period totaled $24.7 million, or $0.34 per share, up from a 2004 net loss of $9.8 million, or $0.15 per share, reported for the comparable period. Net income in the nine month periods of 2004 and 2005 were reduced by the IPR&D charges for the TherMatrx and Ovion acquisitions respectively as previously quantified. Excluding these charges in both years, net income for the first nine months grew nearly 35 percent to $33.9 million, or $0.47 per share, in 2005 from $25.2 million, or $0.36 per share, in 2004. Martin J. Emerson, President and Chief Executive Officer, commented, "While our sales growth did come in under our plan, we are satisfied with our overall financial performance in the third quarter. Our 18 percent top line growth was virtually all organic and was sufficient to drive solid leverage in our income statement. Excluding the effect of IPR&D charges, our operating and net income lines both grew faster than sales. Our top line growth was again led by our innovative line of women's pelvic pelvic /pel·vic/ (pel´vik) pertaining to the pelvis. pel·vic adj. Of, relating to, or near the pelvis. health products, sales of which increased over 40 percent in the quarter. The AMS AMS - Andrew Message System commitment to bringing new office-based therapies to physicians was further reinforced re·in·force also re-en·force or re·en·force tr.v. re·in·forced, re·in·forc·ing, re·in·forc·es 1. To give more force or effectiveness to; strengthen: The news reinforced her hopes. by the closing of our acquisition of the Ovion permanent birth control technology." Emerson continued, "Our women's health Women's Health Definition Women's health is the effect of gender on disease and health that encompasses a broad range of biological and psychosocial issues. success has been, and will continue to be, driven by both our commitment to innovation and our investments in physician training and education. Our men's health Men's Health Definition Men's health is concerned with identifying, preventing, and treating conditions that are most common or specific to men. growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. will increase as we move into 2006 and as we focus on the delivery of new products that will grow this large and underserved market." Outlook For the full year 2005, the Company estimates revenue in the range of $258 to $261 million. The Company estimates earnings per share on these revenues of $0.66 to $0.67, prior to the third quarter inclusion of the in-process research and development charge resulting from the Ovion acquisition. For the fourth quarter of 2005, AMS expects revenue to be in the range of $69 to $72 million, with earnings per share of $0.18 to $0.19. The Company will provide specific guidance for 2006 during its 2005 year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. earnings conference call in February February: see month. and remains committed to its previously stated goal of 18 to 22 percent long term organic growth. Earnings Call Information American Medical Systems will host a conference call today at 5:00 p.m. eastern time to discuss its third quarter results for 2005. Those without internet access See how to access the Internet. may join the call from within the U.S. by dialing 800-886-7217; outside the U.S., dial 706-679-3821. A live webcast of the call will be available through the Company's corporate website at www.AmericanMedicalSystems.com and available for replay three hours after the completion of the call. About American Medical Systems American Medical Systems, headquartered in Minnetonka, Minnesota For other uses, see Minnetonka (disambiguation). Minnetonka is a suburban community located eight miles west of Minneapolis in Hennepin County. Its 2000 population of 51,480 makes it the fourteenth largest city in Minnesota. is a diversified diversified (di·verˑ·s supplier of medical devices and procedures to cure erectile dysfunction Erectile Dysfunction Definition Erectile dysfunction (ED), formerly known as impotence, is the inability to achieve or maintain an erection long enough to engage in sexual intercourse. , benign prostatic hyperplasia benign prostatic hyperplasia n. Abbr. BPH A nonmalignant enlargement of the prostate gland commonly occurring in men after the age of 50, and sometimes leading to compression of the urethra and obstruction of the flow of urine. , incontinence incontinence Inability to control excretion. Starting and stopping urination relies on normal function in pelvic and abdominal muscles, diaphragm, and control nerves. Babies' nervous systems are too immature for urinary control. Later incontinence may reflect disorders (e.g. , menorrhagia menorrhagia /men·or·rha·gia/ (men?ah-ra´jah) hypermenorrhea. men·or·rha·gia n. See hypermenorrhea. , prolapse prolapse Protrusion of an internal organ out of its normal place, usually of the rectum or uterus outside the body when supporting muscles weaken. The membrane lining the rectum can push out through the anus, most often in old people with constipation who strain during and other pelvic disorders A
the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time number of people seeking treatment has increased markedly as a result of longer lives, higher quality-of-life expectations and greater awareness of new treatment alternatives. American Medical Systems' products reduce or eliminate the incapacitating in·ca·pac·i·tate tr.v. in·ca·pac·i·tat·ed, in·ca·pac·i·tat·ing, in·ca·pac·i·tates 1. To deprive of strength or ability; disable. 2. To make legally ineligible; disqualify. effects of these diseases, often through minimally invasive invasive /in·va·sive/ (-siv) 1. having the quality of invasiveness. 2. involving puncture of the skin or insertion of an instrument or foreign material into the body; said of diagnostic techniques. therapies. The Company's products were used to treat over 132,000 patients in 54 countries during 2004. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Statements about the Company's market opportunities, future products, sales and financial results are forward-looking statements subject to risks and uncertainties such as the timing and success of new product introductions; physician acceptance, endorsement A signature on a Commercial Paper or document. An endorsement on a negotiable instrument, such as a check or a promissory note, has the effect of transferring all the rights represented by the instrument to another individual. , and use of the Company's products; regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. matters; competitor activities; changes in and adoption of reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. rates; potential product recalls and other risks and uncertainties described in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended January January: see month. 1, 2005 and its other SEC filings. Actual results may differ materially from anticipated results. More information about the Company and its products can be found at its website www.AmericanMedicalSystems.com and in the Company's Annual Report on Form 10-K for 2004 and its other SEC filings.
American Medical Systems Holdings, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
--------------------- ---------------------
October 1, October 2, October 1, October 2,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net sales $61,738 $52,326 $189,520 $148,732
Cost of sales 11,156 9,508 34,130 27,485
---------- ---------- ---------- ----------
Gross profit 50,582 42,818 155,390 121,247
Operating expenses
Marketing and
selling 22,341 18,349 67,491 52,092
Research and
development 4,995 4,305 14,499 11,466
In-process
research and
development 9,220 35,000 9,220 35,000
General and
administrative 5,217 5,120 16,213 15,206
Amortization of
intangibles 2,200 1,850 5,938 3,969
---------- ---------- ---------- ----------
Total operating
expenses 43,973 64,624 113,361 117,733
Operating income
(loss) 6,609 (21,806) 42,029 3,514
Other income
(expense)
Royalty income 505 627 1,491 1,548
Interest income 298 231 933 541
Interest expense (44) (357) (140) (806)
Other expense (28) 3 (1,104) (184)
---------- ---------- ---------- ----------
Total other income 731 504 1,180 1,099
Income (loss) before
income taxes 7,340 (21,302) 43,209 4,613
Provision for income
taxes 5,925 5,000 18,544 14,459
---------- ---------- ---------- ----------
Net income (loss) $1,415 ($26,302) $24,665 ($9,846)
========== ========== ========== ==========
Net income (loss)
per share
Basic $0.02 ($0.39) $0.36 ($0.15)
Diluted $0.02 ($0.39) $0.34 ($0.15)
Weighted average
common shares
outstanding
Basic 69,344 67,338 (A) 68,741 66,858 (A)
Diluted 72,096 67,338 (A) 71,658 66,858 (A)
Note
(A) October 4, 2004 average common shares have been adjusted for the
stock split effective March 21, 2005.
American Medical Systems Holdings, Inc.
Condensed Balance Sheets
(In thousands)
(Unaudited)
October 1, 2005 January 1, 2005
--------------- ---------------
Assets
Current assets
Cash and short-term investments $48,233 $51,168
Accounts receivable, net 44,900 46,984
Inventories 19,426 21,719
Deferred taxes and other current
assets 10,397 7,956
--------------- ---------------
Total current assets 122,956 127,827
Property, plant and equipment, net 21,451 22,065
Goodwill and intangibles, net 189,813 147,157
Deferred taxes and other assets 3,821 3,501
--------------- ---------------
Total assets $338,041 $300,550
=============== ===============
Liabilities and stockholders' equity
Current liabilities
Accounts payable $3,693 $4,237
Accrued liabilities and taxes 43,594 44,015
--------------- ---------------
Total current liabilities 47,287 48,252
Other long term liabilities 3,126 3,126
--------------- ---------------
Total liabilities 50,413 51,378
Stockholders' equity 287,628 249,172
--------------- ---------------
Total liabilities and stockholders'
equity $338,041 $300,550
=============== ===============
American Medical Systems Holdings, Inc.
Condensed Statements of Cash Flow
(In thousands)
(Unaudited)
Nine Months Ended
-------------------------------
October 1, 2005 October 2, 2004
--------------- ---------------
Cash flows from operating activities
Net income $24,665 ($9,846)
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation 4,030 5,338
Loss on asset disposals 232 16
Amortization of intangibles,
including deferred financing costs 5,938 4,419
Non-cash in-process research and
development charge 9,220 35,000
Non-cash deferred compensation 61 53
Income tax benefit related to stock
options 4,079 1,477
Change in net deferred taxes 912 2,496
Changes in operating assets and
liabilities
Accounts receivable 654 (1,076)
Inventories 1,991 (50)
Accounts payable and accrued
expenses (1,654) (4,172)
Other assets (4,211) (257)
--------------- ---------------
Net cash provided by operating
activities 45,917 33,398
--------------- ---------------
Cash flows from investing activities
Purchase of property, plant and
equipment (3,703) (1,804)
Purchase of business, net of cash
acquired (56,309) (40,075)
Purchase of investments in technology (1,620) (2,500)
Purchase of investments (30,340) (12,634)
Sale of short term investments 30,204 -
--------------- ---------------
Net cash used in investing activities (61,768) (57,013)
Cash flows from financing activities
Issuance of common stock 11,926 5,326
Payments on long-term debt - (16,364)
--------------- ---------------
Net cash provided by financing
activities 11,926 (11,038)
Effect of currency exchange rates on
cash 855 (529)
--------------- ---------------
Net increase in cash and cash
equivalents (3,070) (35,182)
Cash and cash equivalents at beginning
of period 35,689 58,953
--------------- ---------------
Cash and cash equivalents at end of
period $32,619 $23,771
=============== ===============
Supplemental disclosure
Cash paid for interest $0 $314
Cash paid for taxes $14,843 $13,111
American Medical Systems Holdings, Inc.
Selected Sales Information
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
--------------------- ---------------------
October 1, October 2, October 1, October 2,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Sales
Product Line
Men's pelvic health
Erectile restoration $18,766 $18,620 $60,140 $54,004
Continence 12,239 11,143 38,889 35,575
Prostate treatment 6,719 5,514 20,101 7,769
---------- ---------- ---------- ----------
Total men's pelvic
health 37,724 35,277 119,130 97,348
Women's pelvic health 24,014 17,049 70,390 51,384
---------- ---------- ---------- ----------
Total $61,738 $52,326 $189,520 $148,732
========== ========== ========== ==========
Geography
United States $49,640 $43,271 $148,710 $117,512
Outside United States 12,098 9,055 40,810 31,220
---------- ---------- ---------- ----------
Total $61,738 $52,326 $189,520 $148,732
========== ========== ========== ==========
Percent of total sales
Product Line Three Months Ended Nine Months Ended
--------------------- ---------------------
Men's pelvic health October 1, October 2, October 1, October 2,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Erectile restoration 30% 36% 32% 36%
Continence 20% 21% 21% 24%
Prostate treatment 11% 11% 11% 5%
---------- ---------- ---------- ----------
Total men's pelvic
health 61% 67% 63% 65%
Women's pelvic health 39% 33% 37% 35%
---------- ---------- ---------- ----------
Total 100% 100% 100% 100%
========== ========== ========== ==========
Geography
United States 80% 83% 78% 79%
Outside United States 20% 17% 22% 21%
---------- ---------- ---------- ----------
Total 100% 100% 100% 100%
========== ========== ========== ==========
American Medical Systems Holdings, Inc.
Adjustments to Operating Income, Net Income and Earnings per Share for
Consistent Presentation
(In thousands, except per share data)
Three Months Ended Nine Months Ended
--------------------- ---------------------
October 1, October 2, October 1, October 2,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Reported (GAAP)
operating income
(loss) $6,609 ($21,806) $42,029 $3,514
Adjust for in-process
research and
development charge 9,220 35,000 9,220 35,000
---------- ---------- ---------- ----------
Adjusted operating
income $15,829 $13,194 $51,249 $38,514
========== ========== ========== ==========
Reported (GAAP) income
(loss) before income
taxes $7,340 ($21,302) $43,209 $4,613
Adjust for in-process
research and
development charge 9,220 35,000 9,220 35,000
---------- ---------- ---------- ----------
Adjusted income
(loss) before income
taxes $16,560 $13,698 $52,429 $39,613
Provision for income
taxes 5,925 5,000 18,544 14,459
---------- ---------- ---------- ----------
Adjusted effective
tax rate 35.8% 36.5% 35.4% 36.5%
========== ========== ========== ==========
Reported (GAAP) net
income (loss) $1,415 ($26,302) $24,665 ($9,846)
Adjust for in-process
research and
development charge 9,220 35,000 9,220 35,000
---------- ---------- ---------- ----------
Adjusted net income $10,635 8,698 33,885 25,154
========== ========== ========== ==========
Adjusted net income
per share
Basic $0.15 $0.13 $0.49 $0.38
Diluted $0.15 $0.12 $0.47 $0.36
Weighted average
common
shares used in
calculation
Basic 69,344 67,338 (A) 68,741 66,858 (A)
Diluted 72,096 70,570 (A) 71,658 70,176 (A)
Note
(A) October 4, 2004 average common shares have been adjusted for the
stock split effective March 21, 2005.
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