American Medical Systems Reports Record Quarterly Results On 22 Percent Sales Increase; New Products Accelerate Sales Growth and Profitability.Business Editors MINNEAPOLIS--(BUSINESS WIRE)--Oct. 24, 2001 American Medical Systems Holdings Inc. (Nasdaq:AMMD AMMD Aerodynamic Mass Median Diameter ) reported net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the third quarter of $28.6 million, a $5.1 million, or 22 percent, increase over sales of $23.5 million in the same quarter last year. Net income in the third quarter was $2.0 million, or $0.06 per share on a fully diluted basis, a $2.3 million increase from the $0.3 million loss in the year-ago quarter. Third quarter earnings before interest, taxes, and amortization (EBITA EBITA Earnings Before Interest Taxes Amortization ) increased by 52 percent compared to the year-ago quarter, while the company's EBITA margin expanded to 23 percent of sales, compared to 18 percent in the year-ago quarter. The company booked a $1.0 million charge to account for certain transition and reorganization decisions made in the third quarter. Without this charge, the company's EBITA margin would have been 26 percent of sales. Douglas W. Kohrs, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , commented, "We are pleased with our record-setting third-quarter performance, which is our fourth consecutive quarter of sales and earnings growth--every quarter since our initial public offering. This 22 percent growth, in what is traditionally our weakest quarter, is an important milestone for the company and confirms the success of the new product development programs we initiated two years ago." Sales in the third quarter were fueled by significant growth in the company's incontinence and 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. product lines: sales of the company's combined male and female incontinence lines increased 19 percent from 2000, erectile dysfunction product lines rose 26 percent, and prostate product lines rose 9 percent. "Each of our three product categories benefited from our new product launches this year," Kohrs commented. "Three important new products--the SPARC (Scalable Performance ARChitecture) A family of RISC CPUs from Sun that runs mostly under Sun's Solaris, but also under Linux and BSD operating systems. After development began in the mid-1980s by David Patterson of the University of California at Berkeley and Bill (TM) urethral urethral pertaining to or emanating from urethra. urethral agenesis, urethral atresia failure of development of all or part of the urethra: characterized by complete urine retention. A rare cause of neonatal uremia. sling sling (sling) a bandage or suspensory for supporting a part. mandibular sling a structure suspending the mandible, formed by the medial pterygoid and masseter muscles and aiding in system for female incontinence, the Prostaject(TM) ethanol injection system for enlarged prostate Enlarged Prostate Definition A non-cancerous condition that affects many men past 50 years of age, enlarged prostate makes urinating more difficult by narrowing the urethra, a tube running from the bladder through the prostate gland. disease, and a new penile prostheses Penile Prostheses Definition Penile prostheses are semirigid or inflatable devices that are implanted into penises to alleviate impotence. Purpose product line with enhanced durability and anti-microbial properties--contributed greatly to our record third quarter revenues." The improvement in third-quarter profitability was partly driven by a gross margin expansion to 81 percent of sales compared to 79 percent of sales in the year-ago quarter, an expansion that resulted from a higher-margin product mix and higher manufacturing volume. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. before transition and reorganization costs and amortization of intangibles declined as a percent of sales, representing 57 percent of third-quarter 2001 sales compared to 65 percent of sales in the year-ago period. Amortization expense increased slightly in the second quarter to $2.4 million compared to $2.2 million in the year-ago quarter. In early July, the Company received net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $53.8 million from a secondary stock offering, allowing the company to reduce debt by $12.5 million, and net interest expense to $0.4 million from $1.8 million in the year-ago quarter. "We are very pleased that our profitability is continuing to improve as we manage our operating expenses and leverage our operating infrastructure with solid sales growth," added Kohrs. Product Development Update "Our product development accomplishments had a big impact in our third quarter revenue," said Kohrs. "Overall, we have introduced seven new products in 2001. Obtaining 510(k) approval for the SPARC system in the third quarter was a major milestone for the company as it will open up a new physician market for our products." The SPARC system offers a novel, minimally invasive surgical approach that may provide greater safety over other leading sling treatments for women with stress incontinence stress incontinence n. A sudden, involuntary release of urine caused by muscular strain accompanying laughing, sneezing, coughing, or exercise, seen primarily in older women with weakened pelvic musculature. . AMS AMS - Andrew Message System began selling this product in Europe in May, and in the U.S. after FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. clearance in August. The company also expects to introduce In-Fast Ultra(TM), a lower-profile bone-fixation urethral sling system for women, late in the fourth quarter, with commercial sales beginning in early 2002. The company's supply of the Urogen(TM) dermis dermis: see skin. allograft allograft: see transplantation, medical. sling material for both men and women continued to improve in the third quarter, and the company expects sufficient supply to meet its customers' needs going forward in early 2002. In the erectile dysfunction area, AMS began selling the first-ever, FDA-approved antibiotic treatment on an implantable product in the third quarter. This proprietary treatment provides antibiotic action both on the device's surface and in the area immediately surrounding the implant, and follows the second-quarter launch of more durable, parylene-coated products. The company is also aiming for a fourth-quarter introduction of an easier-to-use control mechanism that will be especially valuable for individuals with limited manual dexterity. Kohrs added that the company is continuing to gain experience in treating prostate disease with its CE-marked ProstaJect system, launched into European markets in May 2001. The company suspended enrollment in its Phase I /II clinical trial in the U.S. during the third quarter to modify the protocol based upon this early European data. All patients treated in the U.S. trial have done well and the company expects to restart U.S. enrollment by the end of the year. The company also expects to begin U.S. clinical trials in the fourth quarter with the BioFlow(TM), a unique degradable de·grad·a·ble adj. That can be chemically degraded: degradable plastic wastes. de·grad stent stent (stent) 1. a device or mold of a suitable material, used to hold a skin graft in place. 2. a slender rodlike or threadlike device used to provide support for tubular structures that are being anastomosed, or designed to eliminate the need for urethral catheters following treatments to reduce the symptoms of benign prostate hyperplasia Benign prostate hyperplasia (BPH) Enlargement of the prostate gland. Mentioned in: Paruresis (BPH BPH abbr. benign prostatic hyperplasia BPH Benign prostatic hypertrophy, a very common noncancerous cause of prostatic enlargement in older men. ). Outlook For the fourth quarter of 2001, Kohrs said AMS expects net sales between $30.8 million and $32.5 million, with an EBITA margin greater than in the fourth quarter of 2000. For the full year 2001, management expects net sales growth of between 15 and 17 percent. Urological Disorders The three most prevalent urological disorders are male and female incontinence, erectile dysfunction, and enlarged prostate disease. Approximately 60 million people in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. suffer from one or more of these disorders. An estimated 11 million of these people have a disorder severe enough to be candidates for treatment with AMS products. Although not life-threatening, these disorders can significantly diminish one's quality of life. In recent years, the Years, The 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 life expectancy Life Expectancy 1. The age until which a person is expected to live. 2. The remaining number of years an individual is expected to live, based on IRS issued life expectancy tables. , higher quality-of-life expectations, and greater awareness of new treatment alternatives. About AMS 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 medical technology company with 500 employees worldwide. AMS products include a large portfolio of devices to treat both male and female incontinence, devices for the diagnosis and treatment of erectile dysfunction, devices for urethral obstruction urethral obstruction Acute bilateral obstructive uropathy, see there caused by 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. (BPH or enlarged prostate disease), and advanced surgical products used in transurethral resection of the prostate Transurethral resection of the prostate (TURP) Surgical removal of a portion of the prostate through the urethra, a method of treating the symptoms of an enlarged prostate, whether from BPH or cancer. Mentioned in: Prostate Cancer . The company sells to physicians in more than 60 countries worldwide. For more information about AMS, visit our Web site at http://www.visitAMS.com. 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. Except for historical information contained herein, the disclosures in this news release are forward-looking statements made under the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties include: continued use of non-invasive treatment alternatives, continued physician use and endorsement of the company's products, increased supply of sling material, increasing penetration of the penile implant Noun 1. penile implant - an implant that creates an artificial erection implant - a prosthesis placed permanently in tissue market, successful introduction of new products and product improvements, actions related to reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. for the company's products, potential product recalls, and foreign currency fluctuations. These risks and other relevant risks are described in more detail in the company's Registration Statement on Form S-1 dated June 26, 2001, and its 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 December 31, 2000.
STATEMENTS OF OPERATIONS
(In thousands, except per-share data)
(Unaudited)
Three months ended Nine months ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
--------- --------- --------- ---------
2001 2000 2001 2000
------- ------- ------- -------
Net sales $28,637 $23,539 $84,623 $73,618
Cost of sales 5,438 4,911 16,622 16,426
------- ------- ------- -------
Gross earnings 23,199 18,628 68,001 57,192
Operating expenses:
Marketing and sales 10,732 9,059 33,352 28,942
General and administrative 2,646 3,105 8,449 8,734
Research and development 3,046 3,021 9,127 9,014
Transition and reorganization 1,000 -- 1,000 1,000
Amortization of intangibles 2,356 2,234 6,917 6,235
------- ------- ------- -------
Total operating expenses 19,780 17,419 58,845 53,925
------- ------- ------- -------
Operating income 3,419 1,209 9,156 3,267
Royalty and other income 692 801 2,542 2,228
Interest expense, net (369) (1,823) (2,412) (5,904)
------- ------- ------- -------
Income (loss) before income
taxes 3,742 187 9,286 (409)
Income tax expense (1,735) (535) (4,341) (495)
------- ------- ------- -------
Net income (loss) $2,007 ($348) $4,945 ($904)
======= ======= ======= =======
Net income (loss) per share -
Basic $0.06 ($0.02) $0.17 ($0.06)
Diluted $0.06 ($0.02) $0.16 ($0.06)
Weighted average shares used in
computation -
Basic 31,491 14,056 29,101 14,056
Diluted 34,193 31,631
EBITA (a) $6,467 $4,244 $18,615 $11,730
EBITA as a percent of net sales 22.6% 18.0% 22.0% 15.9%
NOTES
-----
(a) EBITA consists of net income excluding net interest, taxes, and
amortization of intangibles.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
Assets Sept. 29, Dec. 31,
2001 2000
-------- --------
Current assets: (Unaudited)
Cash and cash equivalents $49,350 $12,165
Accounts receivable, net 24,428 23,616
Inventories 13,218 9,674
Deferred taxes and other current assets 6,944 6,050
-------- --------
Total current assets 93,940 51,505
Property, plant and equipment, net 23,598 24,773
Intangibles, net 100,469 97,731
Deferred taxes and other assets 15,372 7,253
-------- --------
Total assets $233,379 $181,262
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $2,068 $2,431
Accrued liabilities and taxes 27,819 24,295
Current portion of notes payable 4,909 6,033
-------- --------
Total current liabilities 34,796 32,759
Long-term notes payable 24,000 38,459
Minority interest -- 521
Other long-term liability 2,016 --
Stockholder's equity 172,567 109,523
-------- --------
Total liabilities and stockholders' equity $233,379 $181,262
======== ========
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
(Unaudited)
For the 9 months ended
----------------------
Sept. 29, Sept. 30,
2001 2000
---------- ----------
Cash flows from operating activities:
Net income (loss) $4,945 ($904)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,755 2,817
Amortization of intangibles, including deferred
financing costs 7,120 6,358
Noncash pension charge 890 1,295
Noncash deferred compensation 344 318
Noncash transition and reorganization 747 --
Income tax benefit related to stock option plans 175 --
Change in net deferred taxes (882) 726
Changes in operating assets and liabilities (2,721) (3,948)
-------- --------
Net cash provided by operating activities 13,373 6,662
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,580) (1,310)
Purchase of businesses, net of cash acquired (13,653) (4,111)
Purchase of investments in technology (4,500) --
Purchase of other intangibles -- (3,135)
-------- --------
Net cash used in investing activities (19,733) (8,556)
-------- --------
Cash flows from financing activities:
Issuance of common stock 57,950 63,306
Net borrowings on long-term debt (15,583) (55,300)
-------- --------
Net cash provided by financing activities 42,367 8,006
-------- --------
Effect of exchange rates 1,178 (944)
-------- --------
Net increase in cash and cash equivalents $37,185 $5,168
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