Aspect Medical Systems, Inc. Announces Third Quarter Operating Results.Business Editors NEWTON, Mass.--(BUSINESS WIRE)--Oct. 18, 2001 Highlights of the Quarter -- Worldwide revenue increased 18 percent in Q3 2001 vs. Q3 2000 and decreased 5 percent vs. Q2 2001 -- Worldwide shipments of monitors and modules totaled 951 in Q3 2001 vs. 615 in Q3 2000 and 1,247 in Q2 2001 -- Worldwide installed base now exceeds 12,900 -- Worldwide sensor revenue increased 16 percent in Q3 2001 vs. Q3 2000 and decreased 7 percent vs. Q2 2001 -- Sensor revenue in U.S. increased 15 percent in Q3 2001 vs. Q3 2000 and decreased 8 percent vs. Q2 2001 -- Initial order of BIS modules shipped to two additional original equipment manufacturers 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 ), today reported results of operations for the three and nine months ended September September: see month. 29, 2001. Third Quarter Financial Results For the third quarter ended September 29, 2001, revenue was $8.5 million, an increase of 18 percent from $7.2 million in the third quarter of 2000. The year-over-year increase resulted from a 22 percent increase in revenue from monitors, modules and related accessories (Equipment) and a 16 percent increase in revenue from sensors
non-urgent; at an elected time, e.g. of surgery. elective adjective Referring to that which is planned or undertaken by choice and without urgency, as in elective surgery, see there noun Graduate education noun surgical procedures Surgical procedures have long and possibly daunting names. The meaning of many surgical procedure names can often be understood if the name is broken into parts. For example in splenectomy, "ectomy" is a suffix meaning the removal of a part of the body. "Splene-" means spleen. , which typically occurs in the summer months. Domestic revenue for the third quarter of 2001 increased 20 percent to $6.9 million versus the comparable period last year and increased 3 percent as compared to the second quarter of 2001. Domestic revenue from the sale of Equipment increased 48 percent to $1.5 million as compared to the third quarter of 2000 and increased 86 percent as compared to the second quarter of 2001. The increase in domestic revenue, for both sequential quarters and year over year, from the sale of Equipment, resulted primarily from an increase in the number of monitors and modules sold. Other factors which had a positive impact on revenue during the third quarter of 2001 were a higher average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. of the Company's level of consciousness monitors and a reduction in the Company's focus on the free placement of monitors in the medical community. Domestic revenue from the sale of sensors increased 15 percent to $5.5 million as compared to the third quarter of 2000 and decreased 8 percent as compared to the second quarter of 2001. Internationally, the Company generated $1.6 million in revenue in the third quarter of 2001, an increase of 8 percent from $1.5 million in the third quarter of 2000. In the last three months, the Company shipped 135 A-2000 BIS monitors to Japan, which represented a 23 percent increase in revenue from Japan compared with the third quarter of 2000. However, revenue from Japan fell 28 percent versus the second quarter of 2001 when Nihon Kohden made a substantial initial purchase of A-2000 BIS monitors following 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 regulatory approval in May. Sensor sales to Japan improved 43 percent versus the third quarter of 2000 and 70 percent versus the second quarter of 2001. Total international revenue outside of Japan decreased 29 percent from the second quarter of 2001, but increased slightly compared with the third quarter of 2000. International sensor revenue outside of Japan increased 43 percent versus the third quarter of 2000 and 2 percent versus the second quarter of 2001. In the third quarter of 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. was 64.2 percent versus 71.0 percent in the comparable 2000 period. In the third quarter of 2001, there were three primary factors that had a negative impact on gross profit margin: the additional cost of sales related to the depreciation on the monitors placed under the Equipment Placement program and for evaluation at customer sites, the lower margins on the BIS modules, and the under absorption of manufacturing overhead due to reduced monitor production. 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. rose 27 percent as compared to the third quarter of 2000 and declined 2 percent versus the second quarter of 2001. The increase in expenses in the third quarter of 2001 versus the third quarter of 2000 was the result of a 51 percent increase in research and development expenses related to the new BIS XP monitoring system and BIS modules and a 25 percent increase in sales and marketing expenses primarily resulting from increases in marketing expenses and international sales expenses. The higher operating expenses as a percentage of sales resulted in a net loss of $4.8 million, or $0.27 per share, on 17.7 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, versus a net loss of $2.4 million, or $0.14 per share, on 17.2 million basic and diluted shares outstanding, in last year's third quarter. Nine-Month Results For the nine months ended September 29, 2001, revenue was $26.4 million, a decrease of 6 percent as compared to the first nine months of 2000. The year-over-year decline was attributable to a 31 percent decline in revenue from the sale of Equipment partially offset by a 13 percent increase in sensor revenue. For the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. , domestic revenue decreased 13 percent as compared to the first nine months of 2000. The decrease was primarily attributable to a 59 percent decrease in Equipment revenue partially offset by a 12 percent increase in sensor revenue. For the nine months ended September 29, 2001, international revenue increased 29 percent as compared to the first nine months of 2000. Equipment revenue increased 29 percent as the Company initiated shipments of BIS modules to the Company's original equipment manufacturer (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 ) partners. In addition, sensor revenue increased by 28 percent. In the first nine months revenue from international sales outside of Japan increased 85 percent while sales to Japan decreased 34 percent as compared to the comparable period in 2000. The decrease in sales to Japan was primarily attributable to the Company's Japanese distributor deferring purchases until the second quarter of 2001 while they awaited a·wait v. a·wait·ed, a·wait·ing, a·waits v.tr. 1. a. To wait for. See Synonyms at expect. b. regulatory approval for the A-2000 BIS monitor. Gross profit margin for the first nine months was 67.0 percent as compared to 69.4 percent in the first nine months of 2000. For the nine months ended September 29, 2001, operating expenses increased 35 percent versus the comparable period in 2000, primarily as a result of a 37 percent increase in sales and marketing expenses and a 36 percent increase in research and development expenses. The lower revenue, lower gross profit margin percentage and higher operating expenses resulted in a net loss of $12.9 million, or $0.73 per share on 17.6 million basic and diluted shares outstanding, versus a net loss of $2.0 million, or $0.13 per share on 15.2 million basic and diluted shares outstanding, in the first nine months of 2000. Liquidity and Capital Resources In January January: see month. 2000, Aspect raised $54.6 million in 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). from its initial public offering of common stock. At the end of the third quarter of 2001, 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 $45.8 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 $52.7 million and total debt of $6.0 million, producing a debt-to-equity ratio debt-to-equity ratio The relationship between long-term funds provided by creditors and funds provided by owners. A firm's debt-to-equity ratio is calculated by dividing long-term debt by owners' equity. Both items are shown on the balance sheet. of 11.4 percent. In the second quarter of 2001, the Company repaid its term loan and equipment loan and replaced the two loans with a $5.0 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. A total of $4.0 million was outstanding under the revolving credit facility at September 29, 2001. Outlook for the Fourth Quarter of 2001 and Fiscal Year 2002 "We are still in the early stages of three very promising programs to generate stronger revenue growth - the adjustment to our sales model to more localized Translated into the spoken language of the country. See localization. territories, the market introduction of BIS XP, and the progressive rollout of BIS modules. Due to their early stages of implementation, these programs are not expected to have a material impact in the fourth quarter. Further, our growth strategies continue to be undercut undercut, n 1. the portion of a tooth that lies between its height of contour and the gingivae, only if that portion is of less circumference than the height of contour. 2. by the weak economy," said Nassib Chamoun, president and chief executive officer. "However, once these programs are fully implemented, we anticipate seeing broader market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" and rising sensor utilization driving top-line growth." The Company expects 2001 total revenue to fall within a range of $35 to $36 million, and believes that the loss per share for the year will be within a range of $1.02 to $1.07. For the fourth quarter, the Company expects that revenue will be within a range of $8.5 to $9.5 million, which is substantially in line with the results for the third quarter and believes that the loss per share for the quarter will be within a range of $0.28 to $0.33. "At the American Society of Anesthesiologists The American Society of Anesthesiologists (ASA) is an association of physicians (primarily anesthesiologists) whose stated goal is to raise and maintain the standards of the medical practice of anesthesiology and improve the care of the patient. (ASA Asa (ā`sə), in the Bible, king of Judah, son and successor of Abijah. He was a good king, zealous in his extirpation of idols. When Baasha of Israel took Ramah (a few miles N of Jerusalem), Asa bought the help of Benhadad of Damascus and ) annual meeting this week 72 additional BIS abstracts were presented. BIS data has now been independently reviewed in roughly 550 abstracts and 250 comprehensive articles," said Chamoun. "The ASA was also the forum for the launch of Aspect's next-generation BIS XP system, which is an enhanced technology suitable for utilization in a broader range of medical procedures, including intensive care units - a new market opportunity for Aspect. Over the last two weeks of the third quarter BIS XP was offered to selected customers by our sales organization and we received orders for upgrades to approximately 150 existing systems," said Chamoun. At the ASA meeting, GE Medical Systems and Datex-Ohmeda rolled out their BIS modules after receiving initial shipments of BIS module kits from Aspect in the third quarter. With these two leading OEMs joining Philips (company) Philips - A Dutch multinational electronics company. It produces washing machines, consumer electronics, integrated circuits and light bulbs. Together with Sony they set the Compact Disc standard, especially Green Book CD-ROM. , formerly Agilent (Agilent Technologies, Santa Clara, CA, www.agilent.com) The test and measurement subsidiary of HP. In 1999, HP split off the division that started the company into an independent subsidiary named Agilent Technologies. At the time, the $2. , and Spacelabs Medical, the Company now has the four largest patient monitoring companies marketing its BIS technology. Aspect also has exclusive agreements with Draeger and Nihon Kohden, and expects them to begin offering BIS modules as part of their monitoring systems in the next 12 to 24 months. Based on the successful implementation of programs initiated this year, at this point in time, the Company expects 2002 total revenue to increase 20 to 40 percent, and expects the loss per share for the fiscal year 2002 to be within a range of $0.55 to $0.85. 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 2001 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, October 18, 2001. The call can be accessed live by dialing 888-806-9467 or 703-871-3627, or over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at http://www.aspectms.com/ on the news releases page under investor relations Investor relations The process by which the corporation communicates with its investors. , or http://www.streetevents.com. It also will be available for replay from October 18, 2001, until October 25, 2001, by calling 888-266-2086 or 703-925-2435, access code 5566851. The webcast replay will also be available on Aspect's website at www.aspectms.com on the news releases page under investor information. About the Company Aspect Medical Systems (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 four million patients and has been the subject of more than 800 published articles and abstracts. BIS is currently in use in the ORs and ICUs of approximately 62 percent of the best-ranked hospitals 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 of best hospitals) and is available in more than 160 countries. Aspect Medical Systems has recently secured 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 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 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 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. 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 30, 2001, as filed with the Securities and Exchange Commission. In addition, the statements in this press release represent Aspect's expectations and beliefs as of the date of this press release. Aspect anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Aspect 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.aspectms.com ...FINANCIAL TABLES FOLLOW...
ASPECT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
---------------------------------------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2001 2000 2001 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue $8,528,080 $7,231,033 $26,363,921 $27,956,577
Costs and expenses:
Costs of revenue 3,051,077 2,097,716 8,702,214 8,563,151
Research and
development 1,968,659 1,304,227 5,587,219 4,106,976
Sales and
marketing 6,851,143 5,484,308 21,038,124 15,410,937
General and
administrative 2,003,111 1,738,341 6,092,629 4,732,854
--------- ---------- ---------- -----------
Total costs
and expenses 13,873,990 10,624,592 41,420,186 32,813,918
Loss from
operations (5,345,910) (3,393,559) (15,056,265) (4,857,341)
Interest income 586,571 1,173,066 2,456,062 3,427,797
Interest expense (77,769) (198,065) (300,617) (570,208)
------------ ----------- ------------- ----------
Net loss $(4,837,108) $(2,418,558) $(12,900,820)$(1,999,752)
============= =========== ============ ============
Net loss per share:
Basic $(0.27) $(0.14) $(0.73) $(0.13)
Diluted $(0.27) $(0.14) $(0.73) $(0.13)
Shares used in computing
net loss per share:
Basic 17,683,237 17,199,671 17,561,058 15,229,417
Diluted 17,683,237 17,199,671 17,561,058 15,229,417
ASPECT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 29, December 31,
2001 2000
(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and
marketable securities $45,805,704 $58,488,942
Accounts receivable, net 4,733,947 3,665,572
Current portion of investment
in sales-type leases 1,474,537 1,677,312
Inventory 6,167,680 4,764,479
Other current assets 1,153,961 1,542,597
----------------- --------------------
Total current assets 59,335,829 70,138,902
Property and equipment, net 6,177,739 6,807,192
Long-term investment in
sales-type leases 1,824,784 2,465,139
Other long-term assets 1,233,068 --
-------------------- -------------------
-------------------- -------------------
Total assets $68,571,420 $79,411,233
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Working capital line
of credit $4,000,000 $ --
Current portion of
long-term debt 866,105 2,530,707
Accounts payable and accrued
liabilities 8,319,055 8,351,182
Deferred revenue 503,629 802,489
----------------------- ------------------
Total current
liabilities 13,688,789 11,684,378
----------------------- ------------------
Deferred revenue 1,055,000 1,136,676
Long-term debt 1,130,007 2,616,657
Stockholders' equity 52,697,624 63,973,522
----------------------- ------------------
----------------------- ------------------
Total liabilities and
stockholders' equity $68,571,420 $79,411,233
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