ArthroCare Reports 23 Percent Revenue Growth in Fiscal 2001; Reports EPS of $0.43 for the Year, $0.10 for the Fourth Quarter.Business Editors SUNNYVALE Sunnyvale, city (1990 pop. 117,229), Santa Clara co., W Calif., near San Francisco; settled 1849, inc. 1912. A city in Silicon Valley, its many manufactures include semiconductors; machinery and instruments; electrical, electronic, and aerospace products; , Calif.--(BUSINESS WIRE)--Jan. 29, 2002 ArthroCare Corporation (Nasdaq:ARTC ARTC Arthrocare Corp (stock symbol) ARTC Australian Rail Track Corporation ARTC Air Route Traffic Control ARTC Association de la Recherche Theatrale au Canada ARTC Andean Root and Tuber Crops ) today reported that in fiscal 2001, ended December December: see month. 29, 2001, the company grew total revenues 23 percent compared with fiscal 2000. Product sales in 2001 increased 18 percent compared with the previous year. The company posted earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share of $0.43 for the year and $0.10 for the fourth quarter of 2001. ArthroCare remained cash flow positive from operations in the fourth quarter, bringing total cash generated from operations during fiscal 2001 to $12.9 million. ArthroCare reported total revenues of $83.3 million for the year and $18.7 million for the fourth quarter of fiscal 2001. This compares with total revenues of $67.6 million and $17.0 million for the year and fourth quarter of 2000, respectively. Product sales in fiscal 2001 reached $75.2 million compared with $64.0 million in fiscal 2000. For the fourth quarter of 2001, product sales were $17.7 million, compared with $16.3 million in the same quarter of fiscal 2000. Net income for the fourth quarter of 2001 was $2.3 million, or $0.10 per diluted share, a 25 percent increase over the $1.8 million, or $0.08 per diluted share, reported in the fourth quarter a year ago. For fiscal 2001, ArthroCare reported net income of $10.1 million or $0.43 per diluted share. In fiscal 2000, the company posted net income of $11.5 million, or $0.50 per diluted share. On a fully taxed basis, the company would have reported EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $0.40 per diluted share for fiscal 2001 and $0.32 per diluted share for fiscal 2000. Diluted net income per share for fiscal 2000 before the cumulative effect of a change in accounting principle and assuming a 36 percent effective income tax rate would have been $0.34 per diluted share. Arthroscopy Arthroscopy Definition Arthroscopy is the examination of a joint, specifically, the inside structures. The procedure is performed by inserting a specifically designed illuminated device into the joint through a small incision. sales grew approximately 15 percent in fiscal 2001, compared with fiscal 2000, representing 84 and 83 percent of product sales in the fourth quarter and fiscal 2001, respectively. ArthroCare's ear, nose, and throat business showed strong growth with product sales more than doubling to $7.1 million for fiscal 2001, and representing 12 percent and 9 percent of product sales for the fourth quarter and fiscal 2001, respectively. Spinal spinal /spi·nal/ (spi´n'l) 1. pertaining to a spine or to the vertebral column. 2. pertaining to the spinal cord's functioning independently from the brain. spi·nal adj. surgery sales also more than doubled in fiscal 2001 compared with the previous year, representing 5 and 6 percent of product sales in the fourth quarter and fiscal year, respectively. "While revenues in the fourth quarter fell short of our initial goals, we had some non-operating gains that allowed us to meet our bottom line objectives without compromising our strategic initiatives," said Michael A. Baker Michael Allen Baker (Captain, USN, Ret.) is the International Space Station Program Manager for International and Crew Operations, at NASA's Johnson Space Center. He is responsible for the coordination of program operations, integration and flight crew training and support , president and chief executive officer. "We believe that we have identified the major issues responsible for the shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. and are taking decisive actions to address them." Corporate Developments In the fourth quarter: -- ArthroCare announced that the company has established a new division, ArthroCare ENDO, which is marketing products for the general surgery and laparoscopic surgery markets. -- The company entered into a strategic relationship with the GYNECARE division of ETHICON to commercialize Coblation(R)-based products for laparoscopic and open surgical procedures for gynecological applications. -- ArthroCare expanded the company's direct selling efforts internationally by moving to establish a direct spinal sales force in Germany. -- The company moved into a new corporate headquarters and domestic manufacturing location in Sunnyvale, California; and began construction of an offshore manufacturing facility. Business Outlook The following statements are based on current expectations on January 29, 2002. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any new businesses or license agreements the company may enter in future periods. The company's business outlook remains unchanged from that published on October 29, 2001. -- In fiscal 2002, ArthroCare anticipates product sales will increase approximately 20 percent compared with fiscal 2001. -- The company is budgeting for net income to grow by 30 percent in fiscal 2002. About Arthrocare ArthroCare's products allow surgeons to operate with a high level of precision and control, limiting damage to surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. tissue. The company's products operate at lower temperatures than traditional electrosurgical or laser surgery tools and enable surgeons to remove, thermally treat, or sculpt sculpt v. sculpt·ed, sculpt·ing, sculpts v.tr. 1. To sculpture (an object). 2. To shape, mold, or fashion especially with artistry or precision: soft tissue and to seal bleeding vessels. ArthroCare is a medical device company that develops, manufactures and markets products based on its patented Coblation technology. ArthroCare's soft-tissue surgery systems consist of a controller unit and an assortment assortment /as·sort·ment/ (ah-sort´ment) the random distribution of nonhomologous chromosomes to daughter cells in metaphase of the first meiotic division. as·sort·ment n. of single-use disposable disposable Nursing adjective Referring to that which is discarded or disposed of noun An item used in health care-related Pt contact which is discarded after use–eg masks, gloves, gowns, needles, paper products, syringes, wipes. See Biohazardous waste. devices that are specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. for specific types of surgery. The company believes its Coblation technology can replace the multiple surgical tools traditionally used in soft-tissue surgery with one multi-purpose surgical system. Coblation technology is applicable across many soft-tissue surgical markets. The company's strategy includes applying its patented Coblation technology to a broad range of soft-tissue surgical markets, including arthroscopic surgery Arthroscopic Surgery Definition Arthroscopic surgery is a procedure to visualize, diagnose, and treat joint problems. The name is derived from the Greek words arthron, which means joint, and skopein, which means to look at. , cosmetic surgery cosmetic surgery, plastic surgery for cosmetic purposes, such as the improvement of the appearance of the face by removing wrinkles or reshaping the nose. , ear, nose and throat surgery, spinal surgery, neurosurgery neurosurgery /neu·ro·sur·gery/ (noor´o-sur?jer-e) surgery of the nervous system. neu·ro·sur·ger·y n. Surgery on any part of the nervous system. , general and gynecology gynecology (gīn'əkŏl`əjē), branch of medicine specializing in the disorders of the female reproductive system. Modern gynecology deals with menstrual disorders, menopause, infectious disease and maldevelopment of the surgery (including open and laparoscopic Laparoscopic A minimally-invasive surgical or diagnostic procedure that uses a flexible endoscope (laparoscope) to view and operate on structures in the abdomen. Mentioned in: Obstetrical Emergencies approaches), and various cardiology cardiology Medical specialty dealing with heart diseases and disorders. It began with the 1749 publication by Jean Baptiste de Sénac of contemporary knowledge of the heart. Diagnostic methods improved in the 19th century, and in 1905 the electrocardiograph was invented. applications. The company's website is www.arthrocare.com. 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. Statements Except for historical information, this press release includes 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. . These statements include, but are not limited to, the expectations regarding trends in newly commercialized markets, the company's belief that certain surgical products and procedures will enhance achievement of the company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. potential, the sustainability of 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. in certain markets, the affect of anticipated government regulatory clearances, continued success of product diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. efforts, and other statements that involve risks and uncertainties. These risks and uncertainties include, but are not limited to the uncertainty of success of the company's non-arthroscopic products, competitive risk, uncertainty over reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. , need for governmental clearances or approvals before selling products, and the uncertainty of protecting the company's patent position. These and other risks and uncertainties are detailed from time to time in the company's Securities and Exchange Commission filings, including ArthroCare's 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 30, 2000 and the 10-Q for the quarter ended September 29, 2001. Forward-looking statements are indicated by words or phrases such as "anticipates", "estimates", "projects", "believes", "intends", "expects", and similar words and phrases Words and Phrases® A multivolume set of law books published by West Group containing thousands of judicial definitions of words and phrases, arranged alphabetically, from 1658 to the present. . Actual results may differ materially from management plans.
ARTHROCARE CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
Dec. 29, Dec. 30,
2001 2000
ASSETS
Current assets:
Cash, cash equivalents,
and available-for-sale securities $ 68,169 $ 68,038
Accounts receivable, net 18,567 16,209
Inventories 14,207 13,702
Deferred income taxes 7,494 9,558
Prepaid expenses and other current assets 2,171 1,679
-------- --------
Total current assets 110,608 109,186
Property and equipment, net 13,068 9,469
Related party receivables 1,205 1,205
Other assets 290 242
Deferred income taxes -- 1,584
Available-for-sale securities 8,526 18,776
-------- --------
Total assets $133,697 $140,462
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,142 $ 3,985
Accrued liabilities 4,948 4,549
Deferred revenue -- 825
-------- --------
Total current liabilities 8,090 9,359
Long-term liabilities 514 4,758
-------- --------
Total liabilities 8,604 14,117
-------- --------
Stockholders' equity 125,093 126,345
-------- --------
Total liabilities
and stockholders' equity $133,697 $140,462
======== ========
ARTHROCARE CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share data; unaudited)
For the Three For the Years
Months Ended Ended
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2001 2000 2001 2000
Revenue:
Product sales $ 17,721 $ 16,251 $ 75,247 $ 64,012
Royalties,
fees and other 1,000 750 8,075 3,615
-------- -------- -------- --------
Total revenue 18,721 17,001 83,322 67,627
Cost of product sales 6,301 6,318 27,691 25,662
-------- -------- -------- --------
Gross profit 12,420 10,683 55,631 41,965
-------- -------- -------- --------
Operating expenses:
Research and
development 2,167 1,533 8,036 7,145
Sales and marketing 8,107 6,410 34,599 22,472
General and
administrative 1,550 1,316 5,306 4,850
-------- -------- -------- --------
Total operating
expenses 11,824 9,259 47,941 34,467
-------- -------- -------- --------
Income from operations 596 1,424 7,690 7,498
Interest and
other income, net 2,944 1,341 8,047 4,903
-------- -------- -------- --------
Income before
income tax provision 3,540 2,765 15,737 12,401
Income tax (benefit)
provision 1,275 995 5,677 (3,444)
-------- -------- -------- --------
Net income
before cumulative
effect of a change in
accounting principle 2,265 1,770 10,060 15,845
Cumulative effect on
prior years of the
application of SAB101
"Revenue Recognition
in Financial
Statements" -- -- -- (4,300)
-------- -------- -------- --------
Net income $ 2,265 $ 1,770 $ 10,060 $ 11,545
======== ======== ======== ========
Basic net income
per share $ 0.10 $ 0.08 $ 0.45 $ 0.53 *
======== ======== ======== ========
Diluted net
income per share $ 0.10 $ 0.08 $ 0.43 $ 0.50 *
======== ======== ======== ========
Shares used in
computing basic
net income
per share 21,883 22,158 22,222 21,923
======== ======== ======== ========
Shares used
in computing
diluted net
income per share 22,972 23,338 23,182 23,167
======== ======== ======== ========
*For the year ended December 30, 2000, basic and diluted net income
per share before the cumulative effect of a change in accounting
principle was $0.72 and $0.68, respectively
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