American Medical Systems (AMMD) 8-K Women’s Health Revenues Grow 58 percent

DATE: July 23, 2003

American Medical Systems
Reports Record Sales
for Second Quarter

Women’s Health Revenues
Grow 58 percent

     MINNEAPOLIS, July 23 – American Medical Systems Holdings Inc. (Nasdaq: AMMD) reported record sales in the second quarter of 2003 of $42.2 million, a 16 percent increase over sales of $36.3 million in the comparable quarter of 2002 (13 percent without gain from currency exchange rate changes). Net income in the quarter was $6.3 million, or $0.19 per share, up 11 percent from $5.7 million, or $0.17 per share, in the comparable quarter of 2002.

     Sales in the six months through June 2003 were $81.6 million, up 15 percent from sales of $71.0 million in 2002 (12 percent without gain from currency exchange rate changes). Net income in the six months was $11.8 million, or $0.35 per share, up 6 percent from $11.1 million, or $0.33 per share in 2002. Net income in the first half of 2002 benefited from a one-time gain with the company’s pension fund termination, without which 2002 net income would have been $10.7 million, or $.31 per share. A summary of the adjustments is attached.

     Douglas W. Kohrs, president and CEO, commented, “We are proud of our performance and the progress we are making with our broad range of product offerings. Revenues continue to show strong growth, with second quarter revenue from women’s health products growing 58 percent over the comparable period last year. We again demonstrated improved operating lever-age as evidenced by significant operating margin improvement from the first quarter of 2003.”

Outlook

     For the year 2003, the Company expects sales to increase 17 to 20 percent over 2002, and full-year operating margin to show improvement over the prior year.

     In the third quarter of 2003, AMS expects total revenues to be in the range of $39 to $41 million dollars. Operating margin as a percent of sales for the third quarter of 2003 is expected to be better than the second quarter of 2003 and lower than the third quarter of 2002.

Earnings Call Information

     American Medical Systems will host a conference call today at 5:00 p.m. eastern time to discuss its second quarter 2003 results. A live web cast of the call is available from the Company’s corporate website at www.AmericanMedicalSystems.com and via replay two hours after the completion of the call.

American Medical Systems
July 23, 2003
Page 2 of 7

About American Medical Systems

     American Medical Systems, headquartered in Minnetonka, Minnesota, is a world leader in medical devices and procedures to treat erectile dysfunction (ED); other men’s health problems, (including incontinence, BPH, and stricture); and women’s health problems, including, menorrhagia, incontinence, and other pelvic floor defects. Although not often life-threatening, these disorders can significantly diminish one’s quality of life and profoundly affect social relationships. In recent years, the number of people seeking treatment has increased markedly as a result of longer life expectancy, higher quality-of-life expectations, and greater awareness of new treatment alternatives. Physicians use American Medical Systems’ products to reduce or eliminate the incapacitating effects of these diseases, often through minimally invasive surgery. The company believes its products were used to treat over 80,000 patients in 54 countries during the last 12 months. More information about the company and its products may be found at the company’s website: .

Forward-Looking Statements

     Statements about the company’s future product availability, sales, and financial results are forward-looking statements subject to risks and uncertainties including the timing and success of new product introductions, continued physician endorsement and use of the company’s products, competitor activities, changes in reimbursement rates, potential product recalls, and the integra- tion of acquired businesses and product lines. These risks and uncertainties are more fully described in the company’s Annual Report on Form 10-K for the year ended December 28, 2002, and its other SEC filings. Actual results may differ materially from anticipated results.

Contact:

Doug Kohrs
President and Chief Executive Officer
952-930-6118
Doug.Kohrs@AmericanMedicalSystems.com
 
Jim Call
Executive Vice President
  and Chief Financial Officer
952-930-6238
Jim.Call@AmericanMedicalSystems.com

American Medical Systems
July 23, 2003
Page 3 of 7

American Medical Systems Holdings Inc.
Statements of Operations
(In thousands, except per share data)

		Three months through June						Six months through June
		2002			2003			2002			2003
Sales		$	36,330		$	42,224		$	71,045		$	81,571
Operating expenses
	Cost of goods sold		7,120			7,381			14,252			14,324
	Marketing and selling		13,108			16,984			25,918			31,781
	Research and development		3,197			3,483			6,031			7,274
	General and administrative		3,357			3,845			6,636			7,915
	Amortization of intangibles		939			1,039			1,878			2,104
	Total operating expenses		27,721			32,732			54,715			63,398
Operating income			8,609			9,492			16,330			18,173
Other income (expense)
	Royalty income		747			687			1,530			1,464
	Interest expense, net		(393	)		(586	)		(723	)		(1,182	)
	Other income		445			286			1,166			321
	Total other income		799			387			1,973			603
Income before income taxes			9,408			9,879			18,303			18,776
Provision for income taxes			3,678			3,542			7,156			6,985
Net income		$	5,730		$	6,337		$	11,147		$	11,791
Net income per share
	Basic	$	0.18		$	0.19		$	0.35		$	0.36
	Diluted	$	0.17		$	0.19		$	0.33		$	0.35
Weighted average shares used in calculation
	Basic		32,171			32,800			32,072			32,673
	Diluted		34,245			34,077			34,244			34,057

American Medical Systems
July 23, 2003
Page 4 of 7

American Medical Systems Holdings Inc.
Consolidated Balance Sheets
(In thousands)

			December 28, 2002		June 28, 2003
Assets
	Current assets
		Cash and short-term investments	$	79,429	$	44,399
		Accounts receivable, net		27,208		29,938
		Inventories		13,475		17,160
		Deferred taxes and other current assets		5,697		5,644
		Total current assets		125,809		97,141
	Property, plant and equipment, net			21,328		24,484
	Goodwill and intangibles, net			96,298		138,431
	Deferred taxes and other assets			8,210		5,064
	Total assets		$	251,645	$	265,120
Liabilities and Stockholders’ Equity
	Current liabilities
		Accounts payable	$	3,000	$	3,122
		Accrued liabilities		19,523		19,320
		Deferred taxes		—		1,571
		Current portion of notes payable		6,000		6,546
		Total current liabilities		28,523		30,559
	Long-term notes payable			18,000		14,727
	Other long-term liability			860		—
	Stockholders’ equity			204,262		219,834
	Total liabilities and stockholders’ equity		$	251,645	$	265,120

American Medical Systems
July 23, 2003
Page 5 of 7

American Medical Systems Holdings Inc.
Consolidated Statements of Cash Flow
(In thousands)

			Six months through June
			2002			2003
Cash flows from operating activities
	Net income		$	11,147		$	11,791
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation		2,028			2,865
		Amortization of intangibles, including deferred financing costs		2,009			2,239
		Income tax benefit related to stock option plans		102			88
		Non-cash deferred compensation		542			892
		Change in net deferred taxes		2,231			(992	)
		Changes in operating assets and liabilities		(9,197	)		(5,181	)
	Net cash provided by operating activities			8,862			11,702
Cash flows from investing activities
	Purchase of property, plant and equipment			($920	)		($1,599	)
	Purchases of businesses, net of cash acquired			0			(43,043	)
	Purchase of investments, net of sales			(3,071	)		0
	Net cash used in investing activates			(3,991	)		(44,642	)
Cash flows from financing activities
	Issuance of common stock		$	991		$	1,269
	Payments on long-term debt			(3,546	)		(3,319	)
	Net cash used in financing activities			(2,555	)		(2,050	)
Effect of exchange rates				411			(40	)
Net increase (decrease) in cash and cash equivalents			$	2,727			($35,030	)

American Medical Systems
July 23, 2003
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American Medical Systems Holdings Inc.
Selected Sales Information
(In thousands)

	Three months through June				Six months through June
	2002		2003		2002		2003
Sales
Product line
Erectile restoration	$	17,793	$	17,964	$	35,089	$	35,818
Other men’s health
Male incontinence		9,117		10,727		18,134		21,010
Other		1,670		1,309		3,313		2,508
Total		10,787		12,036		21,447		23,518
Women’s health		7,750		12,224		14,509		22,235
Total	$	36,330	$	42,224	$	71,045	$	81,571
Geography
United States	$	29,668	$	33,919	$	58,827	$	66,266
Outside United States		6,662		8,305		12,218		15,305
Total	$	36,330	$	42,224	$	71,045	$	81,571

American Medical Systems
July 23, 2003
Page 7 of 7

American Medical Systems Holdings Inc.
Adjustments to Operating Income, Net Income,
and Earnings Per Share for Consistent
Presentation from 2002 to 2003
(In thousands, except per share data)

			Three months through June						Six months through June
			2002			2003			2002			2003
Adjustments in Operating Income
	Reported operating income		$	8,609		$	9,492		$	16,330		$	18,173
	Add back operating loss for Cryogen			0			2,393			0			4,364
	Adjusted operating income			8,609			11,885			16,330			22,537
Adjustments in net income
	Reported net income			5,730			6,337			11,147			11,791
	Add back after tax loss for Cryogen
		Operating loss for Cryogen		0			2,393			0			4,364
		Tax impact		0			(874	)		0			(1,623	)
		Increase in net income		0			1,519			0			2,741
	Adjust for 2002 pension fund termination
		Pension accrual reversal		0			0			(716	)		0
		Tax impact		0			0			272			0
		Decrease in net income		0			0			(444	)		0
	Total increase (decrease) in net income			0			1,519			(444	)		2,741
	Adjusted net income		$	5,730	��	$	7,856		$	10,703		$	14,532
Net income per share
	Reported
		Basic	$	0.18		$	0.19		$	0.35		$	0.36
		Diluted	$	0.17		$	0.19		$	0.33		$	0.35
	Adjusted
		Basic	$	0.18		$	0.24		$	0.33		$	0.44
		Diluted	$	0.17		$	0.23		$	0.31		$	0.43