American Medical Systems (AMMD) 8-K American Medical Systems Reports Revenue Growth of 34% for Second Quarter of 2005

DATE: July 28, 2005

FOR IMMEDIATE RELEASE

AMERICAN MEDICAL SYSTEMS REPORTS REVENUE
GROWTH OF 34% FOR SECOND QUARTER OF 2005

Continuing Operating Leverage Drives
Earnings Growth in Excess of 42%

MINNEAPOLIS, July 28 2005 — American Medical Systems Holdings, Inc. (NASDAQ: AMMD) reported record sales of $65.6 million for the second quarter of 2005, a 34 percent increase over sales of $49.1 million in the comparable quarter of 2004 (with 1.3 percentage points of the increase coming from currency exchange rate changes). Sales of TherMatrx, acquired in July 2004, contributed 11.8 percentage points to second quarter sales growth. Net income in the quarter was a record $12.0 million, or $0.17 per share, up 42 percent from $8.4 million, or $0.12 per share, in the second quarter of 2004.

Sales for the first six months of 2005 were $127.8 million, up 33 percent from sales of $96.4 million for the comparable period of 2004 (with 1.4 percentage points of the increase coming from currency exchange rate changes). Net income in the six month period totaled $23.2 million, or $0.33 per share, up 41 percent from $16.5 million, or $0.24 per share, in the comparable period of 2004.

Martin J. Emerson, President and Chief Executive Officer, commented, “Revenue growth for the second quarter of 2005 was driven by both our organically developed and our recently acquired product lines. With nearly 42,000 patient solutions delivered by our physician customers in the quarter, AMS’ global impact has never been greater. Our men’s health business was driven by the continued market acceptance of our new erectile restoration pump technology as well as by sales of our TherMatrx™ product line, our recent acquisition for the treatment of benign prostatic hyperplasia. In our women’s health franchise, growth in our innovative prolapse offerings complemented our market-leading continence business. The ramp up of payers now reimbursing our Her Option™ endometrial cryoablation system progressed through the quarter, paving the way for gynecologists to offer this therapy to more patients in their offices.”

Mr. Emerson added, “Our record 28 percent operating margin in the first half of 2005 demonstrates our continued focus on leveraging our business as we grow. Our quarter ending balance in cash and short-term investments of $62.5 million strategically positions us for future investments. The cash generating strength of our operations going forward will also support us in meeting the future payment obligations of our two most recent acquisitions.”

Outlook

For the year 2005, the Company is increasing its annual revenue expectation to the range of $262 to $266 million. The Company estimates earnings per share on these revenues of $0.66 to $0.68, prior to the inclusion of any in-process research and development charge resulting from the recently completed Ovion acquisition. For the third quarter of 2005, AMS expects revenues to be in the range of $63 to $65 million, an increase of between 20 and 24 percent compared to the year ago quarter which included TherMatrx sales. The Company expects third quarter earnings per share of $0.15 to $0.16.

Earnings Call Information

American Medical Systems will host a conference call today at 5:00 p.m. eastern time to discuss its second quarter results for 2005. Those without internet access may join the call from within the U.S. by dialing 800-886-7217; outside the U.S., dial 706-679-3821.

A live webcast of the call will be available through the Company’s corporate website atwww.AmericanMedicalSystems.com and available for replay three hours after the completion of the call.

American Medical Systems, headquartered in Minnetonka, Minnesota is a diversified supplier of medical devices and procedures to cure erectile dysfunction, benign prostatic hyperplasia, incontinence, menorrhagia, prolapse and other pelvic disorders in men and women. 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 lives, higher quality-of-life expectations and greater awareness of new treatment alternatives. American Medical Systems’ products reduce or eliminate the incapacitating effects of these diseases, often through minimally invasive therapies. The Company’s products were used to treat over 132,000 patients in 54 countries during 2004.

Forward-Looking Statements

Statements about the Company’s market opportunities, future products, sales and financial results are forward-looking statements subject to risks and uncertainties such as the timing and success of new product introductions; physician acceptance, endorsement, and use of the Company’s products; regulatory matters; competitor activities; changes in and adoption of reimbursement rates; potential product recalls and other risks and uncertainties described in the Company’s Annual Report on Form 10-K for the year ended January 1, 2005 and its other SEC filings. Actual results may differ materially from anticipated results.

More information about the Company and its products can be found at its websitewww.AmericanMedicalSystems.com and in the Company’s Annual Report on Form 10-K for 2004 and its other SEC filings.

Contact: Carmen Diersen
Executive Vice President and Chief Financial Officer
952-930-6495
Carmen.Diersen@AmericanMedicalSystems.com

Marty Emerson
President and Chief Executive Officer
952-930-6334
Marty.Emerson@AmericanMedicalSystems.com

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

	Three Months Ended						Six Months Ended
	July 2, 2005			July 3, 2004			July 2, 2005			July 3, 2004
Net sales	$	65,637		$	49,093		$	127,782		$	96,406
Cost of sales		11,954			9,047			22,974			17,977
Gross profit		53,683			40,046			104,808			78,429
Operating expenses
Marketing and selling		23,494			17,250			45,150			33,743
Research and development		4,866			3,577			9,504			7,161
General and administrative		5,207			5,210			10,996			10,086
Amortization of intangibles		1,948			1,058			3,738			2,119
Total operating expenses		35,515			27,095			69,388			53,109
Operating income		18,168			12,951			35,420			25,320
Other income (expense)
Royalty income		508			430			986			921
Interest income		361			172			635			310
Interest expense		(41	)		(248	)		(96	)		(449	)
Other expense		(613	)		(31	)		(1,077	)		(187	)
Total other income		215			323			448			595
Income before income taxes		18,383			13,274			35,868			25,915
Provision for income taxes		6,376			4,845			12,619			9,459
Net income	$	12,007		$	8,429		$	23,249		$	16,456
Net income per share
Basic	$	0.17		$	0.13		$	0.34		$	0.25
Diluted	$	0.17		$	0.12		$	0.33		$	0.24
Weighted average common shares outstanding
Basic		68,972			66,768	(A)		68,437			66,626	(A)
Diluted		71,327			70,074	(A)		71,449			70,008	(A)

Note

(A) July 3, 2004 average common shares have been adjusted for the stock split effective March 21, 2005.

American Medical Systems Holdings, Inc.
Condensed Balance Sheets
(In thousands)
(Unaudited)

	July 2, 2005		January 1, 2005
Assets
Current assets
Cash and short-term investments	$	62,496	$	51,168
Accounts receivable, net		45,695		46,984
Inventories		19,785		21,719
Deferred taxes and other current assets		10,866		7,956
Total current assets		138,842		127,827
Property, plant and equipment, net		22,277		22,065
Goodwill and intangibles, net		167,147		147,157
Deferred taxes and other assets		3,365		3,501
Total assets	$	331,631	$	300,550
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	4,769	$	4,237
Accrued liabilities and taxes		40,095		44,015
Total current liabilities		44,864		48,252
Other long term liabilities		3,126		3,126
Total liabilities		47,990		51,378
Stockholders’ equity		283,641		249,172
Total liabilities and stockholders’ equity	$	331,631	$	300,550

American Medical Systems Holdings, Inc.
Condensed Statements of Cash Flow
(In thousands)
(Unaudited)

	Six Months Ended
	July 2, 2005			July 3, 2004
Cash flows from operating activities
Net income	$	23,249		$	16,456
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		2,899			3,466
Loss on asset disposals		45			(5	)
Amortization of intangibles, including deferred financing costs		3,738			2,231
Non-cash deferred compensation		10			3
Income tax benefit related to stock options		3,220			1,294
Change in net deferred taxes		159			(618	)
Changes in operating assets and liabilities
Accounts receivable		(166	)		(3,693	)
Inventories		1,601			704
Accounts payable and accrued expenses		(3,163	)		(1,866	)
Other assets		(3,372	)		727
Net cash provided by operating activities		28,220			18,699
Cash flows from investing activities
Purchase of property, plant and equipment		(3,211	)		(1,443	)
Purchase of business		(24,053	)		—
Purchase of license agreement		(770	)		—
Purchase of investments		(30,338	)		(11,349	)
Sale of short term investments		29,757			—
Net cash used in investing activities		(28,615	)		(12,792	)
Cash flows from financing activities
Issuance of common stock		10,249			4,590
Payments on long-term debt		—			(3,478	)
Net cash provided by financing activities		10,249			1,112
Effect of currency exchange rates on cash		890			(81	)
Net increase in cash and cash equivalents		10,744			6,938
Cash and cash equivalents at beginning of period		35,689			58,953
Cash and cash equivalents at end of period	$	46,433		$	65,891
Supplemental disclosure
Cash paid for interest	$	0		$	299
Cash paid for taxes	$	11,520		$	9,820

American Medical Systems Holdings, Inc.
Selected Sales Information
(In thousands)
(Unaudited)

	Three Months Ended				Six Months Ended
	July 2, 2005		July 3, 2004		July 2, 2005		July 3, 2004
Sales
Product Line
Men’s pelvic health
Erectile restoration	$	20,680	$	17,919	$	41,374	$	35,384
Continence		13,402		12,266		26,650		24,432
Prostate treatment		6,735		1,089		13,382		2,255
Total men’s pelvic health		40,817		31,274		81,406		62,071
Women’s pelvic health		24,820		17,819		46,376		34,335
Total	$	65,637	$	49,093	$	127,782	$	96,406
Geography
United States	$	50,737	$	37,643	$	99,070	$	74,241
Outside United States		14,900		11,450		28,712		22,165
Total	$	65,637	$	49,093	$	127,782	$	96,406

	Three Months Ended						Six Months Ended
	July 2, 2005			July 3, 2004			July 2, 2005			July 3, 2004
Percent of total sales
Product Line
Men’s pelvic health
Erectile restoration		32	%		37	%		32	%		37	%
Continence		20	%		25	%		21	%		25	%
Prostate treatment		10	%		2	%		10	%		2	%
Total men’s pelvic health		62	%		64	%		64	%		64	%
Women’s pelvic health		38	%		36	%		36	%		36	%
Total		100	%		100	%		100	%		100	%
Geography
United States		77	%		77	%		78	%		77	%
Outside United States		23	%		23	%		22	%		23	%
Total		100	%		100	%		100	%		100	%