Arthrocare Net Income Up 186 Percent in Fiscal 2000; Product Sales Driven By Strong Growth In Arthroscopy.Business Editors/Medical Writers 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, 2001 ArthroCare Corporation (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 :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 announced that in fiscal 2000, ended December December: see month. 30, 2000, the company achieved $15.8 million, or $0.68 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. This represents a 186 percent increase over the $5.5 million, or $0.27 per diluted share, recorded in the prior year. Net income in the fourth quarter of 2000 was $1.8 million, or $0.08 per diluted share compared with $2.8 million, or $0.12 per diluted share in the same quarter of 1999. The fourth quarter of 2000 was the first quarter in which the company's earnings were fully taxed at 36 percent. In the third quarter of fiscal 2000 the company adopted SAB SAB Spontaneous abortion. See Abortion. 101 which affects timing of recognition of certain previously received payments. The adoption of SAB101 has no effect on operations but does require the company to report a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma adjustment in fiscal 2000 to reflect the impact of certain one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. payments received in prior years. Including this adjustment net income for fiscal 2000, on a pro forma basis, was $11.5 million, or $0.50 per diluted share. The company reported $67.6 million in total revenue for the year, compared with $49.1 million in 1999. In fiscal 2000, the company reported net product sales of $64.0 million compared with $44.2 million in net product sales a year ago. Product sales in 2000 were driven by continued growth in 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. , where sales from that business increased 36 percent year over year. Strength in arthroscopy was worldwide, as both domestic and international arthroscopy revenues grew at approximately the same rate, despite increased competition that emerged during the year and significant changes in the company's distribution strategy. In the fourth quarter of 2000, ArthroCare reported $17.0 million in total revenue, of which $16.3 million represented net product sales. In the same quarter of 1999, the company reported total revenue of $14.6 million and net product sales of $13.5 million. During the year, ArthroCare made significant progress in broadening the company's presence in other markets. For the fiscal year, businesses other than arthroscopy represented approximately 15 percent of net product sales. 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. comprised six percent of net product sales, most of which came in the first half of the year. The ENT ENT ears, nose, and throat (otorhinolaryngology). ENT abbr. ear, nose, and throat ENT ear, nose and throat. ENT Ears, nose & throat; formally, otorhinolaryngology (ear, nose and throat) market comprised five percent and 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 comprised three percent of net product sales in 2000. "Fiscal 2000 was a pivotal year for ArthroCare," 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 , ArthroCare's president and chief executive officer. "We established the company as a consistently-profitable, cash-flow-positive, multi-market medical device company. We are aggressively implementing a new distribution strategy both domestically and internationally and are building the team and infrastructure to support our growth over the next three to five years. The arthroscopy business remains strong, we believe our new businesses are now positioned to grow rapidly, and we look forward to the coming year with growing confidence and considerable excitement." CORPORATE ACCOMPLISHMENTS IN 2000 -- ArthroCare shipped over 100,000 disposable products in each quarter of the year and celebrated cumulative disposable product shipments of over 1 million in the fourth quarter. -- The company received FDA clearance to market products for neurosurgery, skin resurfacing for the purpose of reducing wrinkles, plastic and reconstructive surgery, and several specific ENT indications including the treatment of turbinates and snoring. -- ArthroCare introduced 22 new products in five markets during 2000. -- The company entered into a strategic partnership, which included an equity investment, with Integra Life Sciences to market ArthroCare's products in neurosurgery. -- The company been aggressively executing a new global distribution strategy expanding its direct sales presence in the arthroscopy, spinal surgery, and ENT markets. -- ArthroCare collaborated with leading ENT surgeons to pioneer two innovative procedures based on Coblation technology to simplify and improve patient outcomes in tonsilectomies and tonsilotomies. -- The company developed and introduced a novel approach to percutaneous microdiscectomy, called Nucleoplasty(TM), which is based on the company's proprietary Coblation Channeling technique. -- ArthroCare received recognition from the business community as the company was added to both the S&P Small Cap 600 and the Russell 2000 indices. The company was also named to the Deloitte & Touche Fast Fifty and was awarded the Phoenix Emerging Growth Company Award at the Medical Device and Diagnostic Conference for Chief Executive Officers. BUSINESS OUTLOOK The following statements are based on current expectations on January January: see month. 29, 2001. These statements are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. , 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 expects product sales for fiscal 2001 to increase by approximately 35 percent from fiscal 2000 product sales with the year-over-year quarterly growth rate increasing each quarter throughout the year and accelerating in the second half. -- Royalty income, which is booked one quarter in arrears Adv. 1. in arrears - in debt; "he fell behind with his mortgage payments"; "a month behind in the rent"; "a company that has been run behindhand for years"; "in arrears with their utility bills" behindhand, behind , has historically been between $300,000 and $500,000 per quarter and is currently anticipated to remain in that range through the end of fiscal 2001. -- Amortization of certain previously received license fees and milestone payments attributable to the adoption of SAB 101 is expected to approximate $200,000 per quarter through the end of 2001. -- The company expects product gross margin percentage for fiscal 2001 to increase by approximately three percentage points compared with fiscal 2000. -- The tax rate through 2001 is expected to be approximately 36 percent. -- The company has set a goal of increasing earnings before taxes by approximately 50 percent in fiscal 2001 compared with fiscal 2000. ArthroCare will hold a conference call with the financial community at 4:15 PM Eastern time today. The call will be simultaneously webcast on www.streetfusion.com and will remain posted through February 5. A copy of this press release and a link to www.streetfusion.com is available on the company's website at www.arthrocare.com. A telephonic replay of the conference call can be accessed by dialing 800-633-8284 and entering reservation number 17574121. 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 and thereby potentially reducing pain and speeding recovery for the patient. The company's products operate at lower temperatures than traditional electrosurgical or laser surgery tools and enable surgeons to remove, shrink shrink Vox populi noun A psychiatrist 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, 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 surgery, 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 company's stated business outlook for fiscal 2001, continued strength of the company's fundamental position, the strength of the company's technology, the company's belief that strategic moves will enhance achievement of the company's long term potential, the potential rate of growth of new businesses, and other statements that involve risks and uncertainties. These 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 January 1, 2000 and Form 10-Q Form 10-Q See 10-Q. for the quarter ended September 30, 2000. 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 expectations.
ARTHROCARE CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
For the Three Months Ended For the Year Ended
December 31, December 31,
2000 1999 2000 1999
(unaudited) (unaudited)
Revenue:
Product sales $ 16,251 $ 13,511 $ 64,012 $ 44,219
Royalties, fees and
other 750 1,101 3,615 4,857
Total revenue 17,001 14,612 67,627 49,076
Cost of product sales 6,318 5,747 25,662 19,185
Gross profit 10,683 8,865 41,965 29,891
Operating expenses:
Research and
development 1,533 1,475 7,145 4,929
Sales and
marketing 6,410 4,471 22,472 15,493
General and
administrative 1,316 845 4,850 4,820
Total operating
expenses 9,259 6,791 34,467 25,242
Income from operations 1,424 2,074 7,498 4,649
Interest and other
income, net 1,341 861 4,903 1,125
Income before income
tax provision 2,765 2,935 12,401 5,774
Income tax provision/
(benefit) 995 117 (3,444) 231
Net income before
cumulative effect of a change
in accounting principle $ 1,770 $ 2,818 $ 15,845 $ 5,543
Earnings per share-diluted:
Net income per share
before cumulative effect of
a change in
accounting principle $ 0.08 $ 0.12 $ 0.68 $ 0.27
Shares used in computing
diluted net income
per share 23,338 23,000 23,167 20,474
Net income after
cumulative effect
of adoption of SAB101 $ 11,545
Diluted earnings
per share after
cumulative effect of
adoption of SAB101 $ 0.50
ARTHROCARE CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
December 31,
2000 1999
ASSETS
Current assets:
Cash, cash equivalents,
and available-for-sale securities $ 68,037 $ 70,457
Accounts receivable, net 16,209 13,917
Inventory 13,702 6,960
Deferred tax asset 9,558 --
Prepaid expenses and other
current assets 1,680 719
-------- --------
Total current assets 109,186 92,053
Property and equipment, net 9,469 7,366
Related party receivables 1,205 1,205
Other assets 242 265
Deferred tax asset 1,584 --
Available-for-sale securities 18,776 9,150
-------- --------
Total assets $140,462 $110,039
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,985 $ 2,930
Deferred revenue 825 --
Accrued liabilities 4,550 4,005
-------- --------
Total current
liabilities 9,360 6,935
Capital lease obligations 22 87
Deferred rent 84 134
Deferred revenue 4,651 --
-------- --------
Total
liabilities 14,117 7,156
-------- --------
Stockholders' equity 126,345 102,883
-------- --------
Total liabilities
and stockholders' equity $140,462 $110,039
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