Aspect Medical Systems, Inc. Announces Operating Results for Third Quarter 2002.Business Editors and Health/Medical Writers NEWTON Newton, cities, United States Newton. 1 City (1990 pop. 16,700), seat of Harvey co., S central Kans., in an agricultural area; inc. 1872. , Mass.--(BUSINESS WIRE)--Oct. 17, 2002 Aspect Medical Systems, 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 : ASPM ASPM Abnormal Spindle-Like Microcephaly Associated ASPM Asociación del Secretariado Profesional de Madrid (Spanish: Association of the Professional Secretaryship of Madrid) ASPM Armed Services Procurement Regulation Manual ): Highlights of the Quarter -- Worldwide revenue increased 17 percent in Q3 2002 vs. Q3 2001 -- Worldwide sensor revenue increased 18 percent in Q3 2002 vs. Q3 2001 -- Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. percentage increased to 72.0 percent in Q3 2002 compared to 64.2 percent in Q3 2001 -- Gross profit margin increased by 31 percent in Q3 2002 vs. Q3 2001 -- Loss from operations for Q3 2002 declined by 32 percent compared to the loss from operations in Q3 2001 -- Completed strategic alliance with Boston Scientific The Boston Scientific Corporation (NYSE: BSX) (abbreviated BSC), is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a range of interventional medical specialties, including interventional cardiology, peripheral interventions, Corporation (NYSE NYSE See: New York Stock Exchange :BSX BSX Bermuda Stock Exchange BSX Bandai Satellaview-X BSX Bicycle Super-X (Cross) ) to introduce new sedation Sedation Definition Sedation is the act of calming by administration of a sedative. A sedative is a medication that commonly induces the nervous system to calm. Purpose The process of sedation has two primary intentions. management technology to interventional and specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. , less-invasive medical procedure suites. As part of the agreement, Boston Scientific Corporation made a $10.0 million strategic investment in Aspect Aspect Medical Systems, Inc. (NASDAQ: ASPM), today reported results of operations for the third quarter and the nine months ended September September: see month. 28, 2002. Third Quarter Financial Results For the third quarter ended September 28, 2002, revenue was $10.0 million, an increase of 17 percent over revenue of $8.5 million in the third quarter of 2001. The total increase in revenue reflects a 15 percent increase in revenue from the sale of monitors, modules, XP upgrade kits and related accessories (collectively referred to as equipment) to $3.1 million in the third quarter of 2002 from $2.7 million in the third quarter of 2001, and an 18 percent increase in revenue from the sale of sensors
Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. in the third quarter of 2002. Although monitor unit volume decreased 35 percent to 339 monitors in the third quarter of 2002 compared to 520 monitors in the third quarter of 2001, the average unit price increased 27 percent from the prior year period. The decrease in monitor unit volume was primarily related to a reduction of sales in Japan from 125 monitors in the third quarter of 2001 to none in the third quarter of 2002 as Nihon Kohden delays additional monitor purchases pending Japanese Japanese (jăp'ənēz`), language of uncertain origin that is spoken by more than 125 million people, most of whom live in Japan. There are also many speakers of Japanese in the Ryukyu Islands, Korea, Taiwan, parts of the United States, and Ministry of Health, Labor & Welfare approval of the XP technology. The combination of a 16 percent increase in sensor A device that measures or detects a real-world condition, such as motion, heat or light and converts the condition into an analog or digital representation. An optical sensor detects the intensity or brightness of light, or the intensity of red, green and blue for color systems. unit volume and a 1 percent increase in the average unit price accounted for the 18 percent increase in sensor revenue from Q3 2001 to Q3 2002. "We are pleased with the 17 percent revenue growth in the third quarter compared to the prior year," said Nassib Chamoun, president and chief executive officer. "Sensor revenue grew 18 percent in the quarter compared to last year, and our worldwide sensor volume of 532,000 exceeded our previous record established in Q2 of this year by 20,000 sensors. We are also very pleased that our BIS XP technology continues to gain acceptance in the marketplace through the sale of stand alone monitors, upgrades to the installed base of existing monitors and the placement of OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and modules." Domestic revenue increased 20 percent in the third quarter of 2002 to $8.3 million from $6.9 million in the third quarter of 2001. Equipment revenue increased 36 percent in the third quarter of 2002 compared to the third quarter of 2001 primarily as a result of increased sales of XP upgrade kits and a 33 percent increase in the average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. of monitors on a 12 percent decrease in monitor unit volume. Sensor revenue increased 16 percent in the third quarter of 2002 compared to the third quarter of 2001 driven by a 14 percent increase in unit volume and a 1 percent increase in the average unit price. International revenue, exclusive of Japan, increased 38 percent in the third quarter of 2002 to $1.4 million compared to $1.0 million in the third quarter of 2001. Equipment revenue increased 44 percent in the third quarter of 2002 compared to the third quarter of 2001 and sensor revenue increased 25 percent in the third quarter of 2002 compared to the third quarter of 2001. Total revenue in Japan, however, declined from $595,000 in the third quarter of 2001 to $266,000 in the third quarter of 2002. In the third quarter of 2002, gross profit margin percentage was 72.0 percent compared to 64.2 percent in the comparable period of 2001 and 69.9 percent in the second quarter of 2002. Higher revenue and gross profit margin combined with flat 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. reduced the net loss to $3.4 million, or $0.18 per share on 18.7 million basic and 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. shares outstanding in the third quarter of 2002, compared to a net loss of $4.8 million, or $0.27 per share on 17.7 million basic and diluted shares outstanding in the third quarter of 2001. Nine Month Financial Results For the nine months ended September 28, 2002, revenue was $29.7 million, an increase of 13 percent compared to the first nine months of 2001. The year-over-year increase was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a 22 percent increase in equipment revenue and a 9 percent increase in sensor revenue. For the nine months ended September 28, 2002, domestic revenue increased 21 percent compared to the first nine months of 2001. The increase was primarily attributable to an 88 percent increase in equipment revenue and an 8 percent increase in sensor revenue. For the nine months ended September 28, 2002, international revenue decreased 15 percent compared to the first nine months of 2001. The decrease was primarily attributable to a 24 percent decrease in equipment revenue which reflected a decrease in revenue from the sale of monitors partially offset by an increase in revenue from the sale of modules and related accessories and XP upgrade kits, and a 25 percent increase in sensor revenue. Gross profit margin percentage for the first nine months of 2002 was 68.6 percent compared to 67.0 percent in the first nine months of 2001. For the first nine months of 2002 gross profit margin increased 15 percent versus the comparable period of 2001. For the first nine months of 2002, the increase in gross profit margin and a slight increase in operating expenses resulted in a 17 percent reduction in the loss from operations for the first nine months of 2002 versus the comparable period of 2001. Net interest income for the first nine months of 2002 decreased 66 percent to $732,000 compared to $2.2 million in the first nine months of 2001, based on a lower average cash balance and lower interest rates. The improved loss from operations and decreased net interest income for the first nine months of 2002 resulted in a net loss for the first nine months of 2002 of $11.8 million, or $0.65 per share on 18.1 million basic and diluted shares outstanding, compared to a net loss of $12.9 million, or $0.73 per share on 17.6 million basic and diluted shares outstanding in the comparable period of 2001. Liquidity and Capital Resources At the end of the third quarter of 2002, the Company had cash, cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has of $38.9 million, stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. of $40.2 million and total debt of $1.8 million. At the end of 2001, the Company had cash, cash equivalents and marketable securities of $41.5 million. During the third quarter of 2002, the Company entered into a strategic alliance with Boston Scientific Corporation. In connection with the strategic alliance, Boston Scientific Corporation purchased 1.4 million newly issued shares of Aspect's common stock for an aggregate purchase price of $10.0 million. As part of the strategic alliance between the Company and Boston Scientific Corporation, Boston Scientific Corporation provided an additional $5.0 million credit facility. To date, the Company has not borrowed under this credit facility. Outlook for the Fourth Quarter of 2002 The Company expects operating expenses will increase slightly in the fourth quarter of 2002 compared to the third quarter of 2002. The Company believes that revenue for the fourth quarter will be within a range of $9.5 to $10.5 million and that the net loss per share for the quarter will be within a range of $0.19 to $0.24. Accordingly, the Company expects total revenue for 2002 to be within a range of $39.5 to $40.5 million and that the net loss per share for 2002 to be within a range of $0.85 to $0.90. The Company had previously indicated that it believed total revenue for 2002 would fall within a range of $41.0 to $43.0 million and that the net loss per share would be in a range of $0.85 to $0.90. The reduction in the Company's outlook for 2002 is primarily attributable to the impact on equipment revenue from the transition from monitors to modules and uncertainty in equipment sales in Japan pending Ministry of Health, Labor & Welfare approval of the Company's XP technology. Conference Call Set for 10AM ET Today Aspect will hold a conference call to discuss third quarter results and management's outlook for the fourth quarter of 2002 at 10:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT today, Thursday Thursday: see week. , October October: see month. 17, 2002. The call can be accessed live by dialing 888-277-8636 or 973-582-2783, or access the webcast at http://www.aspectmedical.com on the Investor page or http://www.StreetEvents.com. It also will be available for replay from October 17, 2002, until October 24, 2002, by dialing 877-519-4471 or 973-341-3080, access code 3527148. The webcast replay will also be available on Aspect's website at http://www.aspectmedical.com on the news releases page under investor information. About the Company Aspect Medical Systems, Inc. (NASDAQ: ASPM) is a global market leader in brain monitoring technology. To date, the Company's Bispectral Index A Bispectral index (BIS) monitor is a modern neurophysiological monitoring device which continually analyses a patient's electroencephalograms during general anaesthesia to assess the level of consciousness during anaesthesia. (BIS) technology has been used to assess more than 5.5 million patients and has been the subject of more than 1,000 published articles and abstracts. The worldwide installed base of monitors and BIS modules was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 15,500 at September 28, 2002. BIS technology is installed in approximately 27 percent of all domestic operating rooms operating room n. Abbr. OR A room equipped for performing surgical operations. . BIS is currently in use in more than 50 percent of the best hospitals with operating rooms in the U.S. (based on a U.S. News & World Report U.S. News & World Report Weekly newsmagazine published in Washington, D.C. U.S. News was founded in 1933 by David Lawrence (1888–1973) to cover important domestic events; he founded World Report in 1945 to treat world news. The two magazines were merged in 1948. ranking) and is available in more than 160 countries. Aspect Medical Systems has OEM agreements with the six largest manufacturers of patient monitoring systems and partnerships with six of the largest group purchasing organizations A group purchasing organization is an entity that leverages the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members. Many GPOs are funded by administrative fees that are actually paid by the vendors. 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. . 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. Statement Certain statements in this release 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 may involve risks and uncertainties, including statements with respect to the worldwide market acceptance of the Company's products, and statements concerning the Company's expected results of operations for future periods. There are a number of factors that could cause actual results to differ materially from those indicated by these 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. . For example, the Company may not be able to achieve widespread market acceptance of its BIS monitoring technology or to compete with new products or alternative techniques that may be developed by others, including the third-party anesthesia anesthesia (ănĭsthē`zhə) [Gr.,=insensibility], loss of sensation, especially that of pain, induced by drugs, especially as a means of facilitating safe surgical procedures. monitoring product approved by the 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. , and also faces competitive and 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. risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc its ability to successfully develop and introduce enhancements and new products, including regulatory approval of its XP technology in Japan. In addition, the Company has limited sales and marketing experience both in the U.S. and internationally and if it is unable to develop and implement a successful sales and marketing strategy, including with respect to its own sales force, domestic and international distributors, original equipment manufacturers and other direct and indirect sales channels, it will not be able to generate meaningful product revenue. In addition, the Company's ability to become and remain profitable will depend upon its ability to promote frequent use of the BIS system so that sales of its BIS sensors increase. The Company will not be profitable if hospitals and anesthesia providers do not buy and use its BIS systems in sufficient quantities. Cases of surgical awareness during monitoring with the BIS system and significant product liability claims are among the factors that could limit market acceptance. There are other factors that could cause the Company's actual results to vary from its forward-looking statements, including without limitation those set forth under the heading "Factors Affecting Future Operating Results" in the Company's Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the fiscal quarter ended June June: see month. 29, 2002, as filed with the Securities and Exchange Commission. In addition, the statements in this press release represent the Company's expectations and beliefs as of the date of this press release. The Company anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's expectations or beliefs as of any date subsequent to the date of this press release. For further information regarding Aspect Medical Systems, Inc., visit the Aspect Medical Systems, Inc. website at www.aspectmedical.com
ASPECT MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
--------------------------
Sept. 28, Sept. 29,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
Revenue $ 9,995,213 $ 8,528,080
Costs and expenses:
Costs of revenue 2,803,279 3,051,077
Research and
development 1,885,866 1,968,659
Sales and marketing 6,981,264 6,851,143
General and
administrative 1,960,242 2,003,111
----------- -----------
Total costs and
expenses 13,630,651 13,873,990
----------- -----------
Loss from operations (3,635,438) (5,345,910)
Interest income 289,708 586,571
Interest expense (60,387) (77,769)
----------- -----------
Net loss $(3,406,117) $(4,837,108)
=========== ===========
Net loss per share:
Basic and diluted $ (0.18) $ (0.27)
Shares used in computing
net loss per share:
Basic and diluted 18,733,293 17,683,237
Nine Months Ended
--------------------------
Sept. 28, Sept. 29,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
Revenue $29,733,002 $26,363,921
Costs and expenses:
Costs of revenue 9,344,866 8,702,214
Research and
development 5,848,541 5,587,219
Sales and marketing 21,294,935 21,038,124
General and
administrative 5,744,221 6,092,629
----------- -----------
Total costs and
expenses 42,232,563 41,420,186
----------- -----------
Loss from operations (12,499,561) (15,056,265)
Interest income 917,805 2,456,062
Interest expense (185,717) (300,617)
----------- -----------
Net loss $(11,767,473) $(12,900,820)
=========== ===========
Net loss per share:
Basic and diluted $ (0.65) $ (0.73)
Shares used in computing
net loss per share:
Basic and diluted 18,072,978 17,561,058
ASPECT MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept. 28, Dec. 31,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and
marketable securities $38,881,709 $41,457,976
Accounts receivable, net 5,065,952 5,395,096
Current portion of investment
in sales-type leases 1,597,087 1,473,260
Inventory 2,786,699 5,108,166
Other current assets 1,416,015 1,182,385
----------- -----------
Total current assets 49,747,462 54,616,883
Property and equipment, net 4,518,798 5,695,436
Long-term investment in
sales-type leases 2,417,495 1,934,699
Other long-term assets 1,042,572 1,122,026
----------- -----------
Total assets $57,726,327 $63,369,044
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Working capital line of credit $ -- $ 3,000,000
Current portion of long-term debt 834,251 829,947
Accounts payable and accrued
liabilities 7,999,243 9,000,226
Deferred revenue 575,599 521,119
----------- -----------
Total current liabilities 9,409,093 13,351,292
Long-term portion of deferred revenue 7,183,753 997,813
Long-term debt 946,303 963,813
Stockholders' equity 40,187,178 48,056,126
----------- -----------
Total liabilities and
stockholders' equity $57,726,327 $63,369,044
=========== ===========
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