EXHIBIT 99.1
DATE: October 27, 2005
FOR IMMEDIATE RELEASE
AMERICAN MEDICAL SYSTEMS DELIVERS 18 PERCENT
REVENUE GROWTH AND LEVERAGED NET INCOME GROWTH
IN THIRD QUARTER OF 2005
REVENUE GROWTH AND LEVERAGED NET INCOME GROWTH
IN THIRD QUARTER OF 2005
Women’s Health Grows Over 40 Percent in the Quarter
MINNEAPOLIS, October 27, 2005 — American Medical Systems Holdings, Inc. (NASDAQ: AMMD) reported sales of $61.7 million for the third quarter of 2005, an 18 percent increase over sales of $52.3 million in the comparable quarter of 2004 (with less than one percentage point of the increase coming from currency exchange rate changes).
The Company reported net income of $1.4 million, or $0.02 per share, including the effect of a $9.2 million, or $0.13 per share, in-process research and development (IPR&D) charge related to its July 2005 acquisition of Ovion Inc. The prior year’s third quarter earnings were reported as a net loss of $26.3 million, or $0.39 per share, including the effect of a $35.0 million IPR&D charge as the result of the TherMatrx acquisition completed in that year ago quarter.
Net income for the quarter, excluding the impact of the Ovion IPR&D charge, was $10.6 million, or $0.15 per share. Net income for third quarter 2004, excluding the impact of the TherMatrx IPR&D charge, was $8.7 million, or $0.12 per share. Net income growth, excluding the impact of the IPR&D charges for both 2004 and 2005, was over 22 percent. A reconciliation of GAAP earnings to these adjusted results is included in the attached financial tables.
Sales for the first nine months of 2005 were $189.5 million, up over 27 percent from sales of $148.7 million for the comparable period of 2004 (with 1.2 percentage points of the increase coming from currency exchange rate changes). Sales of TherMatrx, acquired in July 2004, contributed 8 percentage points to the first nine months’ sales growth.
Net income as reported for the nine month period totaled $24.7 million, or $0.34 per share, up from a 2004 net loss of $9.8 million, or $0.15 per share, reported for the comparable period. Net income in the nine month periods of 2004 and 2005 were reduced by the IPR&D charges for the TherMatrx and Ovion acquisitions respectively as previously quantified. Excluding these charges in both years, net income for the first nine months grew nearly 35 percent to $33.9 million, or $0.47 per share, in 2005 from $25.2 million, or $0.36 per share, in 2004.
Martin J. Emerson, President and Chief Executive Officer, commented, “While our sales growth did come in under our plan, we are satisfied with our overall financial performance in the third quarter. Our 18 percent top line growth was virtually all organic and was sufficient to drive solid leverage in our income statement. Excluding the effect of IPR&D charges, our operating and net income lines both grew faster than sales. Our top line growth was again led by our innovative line of women’s pelvic health products, sales of which increased over 40 percent in the quarter. The AMS commitment to bringing new office-based therapies to physicians was further reinforced by the closing of our acquisition of the Ovion permanent birth control technology.”
Emerson continued, “Our women’s health success has been, and will continue to be, driven by both our commitment to innovation and our investments in physician training and education. Our men’s health growth rates will increase as we move into 2006 and as we focus on the delivery of new products that will grow this large and underserved market.”
Outlook
For the full year 2005, the Company estimates revenue in the range of $258 to $261 million. The Company estimates earnings per share on these revenues of $0.66 to $0.67, prior to the third quarter inclusion of the in-process research and development charge resulting from the Ovion acquisition. For the fourth quarter of 2005, AMS expects revenue to be in the range of $69 to $72 million, with earnings per share of $0.18 to $0.19. The Company will provide specific guidance for 2006 during its 2005 year-end earnings conference call in February and remains committed to its previously stated goal of 18 to 22 percent long term organic growth.
Earnings Call Information
American Medical Systems will host a conference call today at 5:00 p.m. eastern time to discuss its third 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.
About American Medical Systems
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)
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| October 1, 2005 | October 2, 2004 | October 1, 2005 | October 2, 2004 | |||||||||||||
Net sales | $ | 61,738 | $ | 52,326 | $ | 189,520 | $ | 148,732 | ||||||||
Cost of sales | 11,156 | 9,508 | 34,130 | 27,485 | ||||||||||||
Gross profit | 50,582 | 42,818 | 155,390 | 121,247 | ||||||||||||
Operating expenses | ||||||||||||||||
| Marketing and selling | 22,341 | 18,349 | 67,491 | 52,092 | ||||||||||||
| Research and development | 4,995 | 4,305 | 14,499 | 11,466 | ||||||||||||
| In-process research and development | 9,220 | 35,000 | 9,220 | 35,000 | ||||||||||||
| General and administrative | 5,217 | 5,120 | 16,213 | 15,206 | ||||||||||||
| Amortization of intangibles | 2,200 | 1,850 | 5,938 | 3,969 | ||||||||||||
| Total operating expenses | 43,973 | 64,624 | 113,361 | 117,733 | ||||||||||||
Operating income (loss) | 6,609 | (21,806 | ) | 42,029 | 3,514 | |||||||||||
Other income (expense) | ||||||||||||||||
| Royalty income | 505 | 627 | 1,491 | 1,548 | ||||||||||||
| Interest income | 298 | 231 | 933 | 541 | ||||||||||||
| Interest expense | (44 | ) | (357 | ) | (140 | ) | (806 | ) | ||||||||
| Other expense | (28 | ) | 3 | (1,104 | ) | (184 | ) | |||||||||
| Total other income | 731 | 504 | 1,180 | 1,099 | ||||||||||||
Income (loss) before income taxes | 7,340 | (21,302 | ) | 43,209 | 4,613 | |||||||||||
Provision for income taxes | 5,925 | 5,000 | 18,544 | 14,459 | ||||||||||||
Net income (loss) | $ | 1,415 | ($26,302 | ) | $ | 24,665 | ($9,846 | ) | ||||||||
Net income (loss) per share | ||||||||||||||||
| Basic | $ | 0.02 | ($0.39 | ) | $ | 0.36 | ($0.15 | ) | ||||||||
| Diluted | $ | 0.02 | ($0.39 | ) | $ | 0.34 | ($0.15 | ) | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
| Basic | 69,344 | 67,338 | (A) | 68,741 | 66,858 | (A) | ||||||||||
| Diluted | 72,096 | 67,338 | (A) | 71,658 | 66,858 | (A) | ||||||||||
Note
| (A) | October 4, 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)
Condensed Balance Sheets
(In thousands)
(Unaudited)
| October 1, 2005 | January 1, 2005 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and short-term investments | $ | 48,233 | $ | 51,168 | ||||
| Accounts receivable, net | 44,900 | 46,984 | ||||||
| Inventories | 19,426 | 21,719 | ||||||
| Deferred taxes and other current assets | 10,397 | 7,956 | ||||||
| Total current assets | 122,956 | 127,827 | ||||||
| Property, plant and equipment, net | 21,451 | 22,065 | ||||||
| Goodwill and intangibles, net | 189,813 | 147,157 | ||||||
| Deferred taxes and other assets | 3,821 | 3,501 | ||||||
| Total assets | $ | 338,041 | $ | 300,550 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 3,693 | $ | 4,237 | ||||
| Accrued liabilities and taxes | 43,594 | 44,015 | ||||||
| Total current liabilities | 47,287 | 48,252 | ||||||
| Other long term liabilities | 3,126 | 3,126 | ||||||
| Total liabilities | 50,413 | 51,378 | ||||||
| Stockholders’ equity | 287,628 | 249,172 | ||||||
| Total liabilities and stockholders’ equity | $ | 338,041 | $ | 300,550 | ||||
American Medical Systems Holdings, Inc.
Condensed Statements of Cash Flow
(In thousands)
(Unaudited)
Condensed Statements of Cash Flow
(In thousands)
(Unaudited)
| Nine Months Ended | |||||||||||
| October 1, 2005 | October 2, 2004 | ||||||||||
Cash flows from operating activities | |||||||||||
| Net income | $ | 24,665 | ($9,846 | ) | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation | 4,030 | 5,338 | |||||||||
| Loss on asset disposals | 232 | 16 | |||||||||
| Amortization of intangibles, including deferred financing costs | 5,938 | 4,419 | |||||||||
| Non-cash in-process research and development charge | 9,220 | 35,000 | |||||||||
| Non-cash deferred compensation | 61 | 53 | |||||||||
| Income tax benefit related to stock options | 4,079 | 1,477 | |||||||||
| Change in net deferred taxes | 912 | 2,496 | |||||||||
| Changes in operating assets and liabilities | |||||||||||
| Accounts receivable | 654 | (1,076 | ) | ||||||||
| Inventories | 1,991 | (50 | ) | ||||||||
| Accounts payable and accrued expenses | (1,654 | ) | (4,172 | ) | |||||||
| Other assets | (4,211 | ) | (257 | ) | |||||||
| Net cash provided by operating activities | 45,917 | 33,398 | |||||||||
Cash flows from investing activities | |||||||||||
| Purchase of property, plant and equipment | (3,703 | ) | (1,804 | ) | |||||||
| Purchase of business, net of cash acquired | (56,309 | ) | (40,075 | ) | |||||||
| Purchase of investments in technology | (1,620 | ) | (2,500 | ) | |||||||
| Purchase of investments | (30,340 | ) | (12,634 | ) | |||||||
| Sale of short term investments | 30,204 | — | |||||||||
| Net cash used in investing activities | (61,768 | ) | (57,013 | ) | |||||||
Cash flows from financing activities | |||||||||||
| Issuance of common stock | 11,926 | 5,326 | |||||||||
| Payments on long-term debt | — | (16,364 | ) | ||||||||
| Net cash provided by financing activities | 11,926 | (11,038 | ) | ||||||||
Effect of currency exchange rates on cash | 855 | (529 | ) | ||||||||
Net increase in cash and cash equivalents | (3,070 | ) | (35,182 | ) | |||||||
Cash and cash equivalents at beginning of period | 35,689 | 58,953 | |||||||||
Cash and cash equivalents at end of period | $ | 32,619 | $ | 23,771 | |||||||
Supplemental disclosure | |||||||||||
| Cash paid for interest | $ | 0 | $ | 314 | |||||||
| Cash paid for taxes | $ | 14,843 | $ | 13,111 | |||||||
American Medical Systems Holdings, Inc.
Selected Sales Information
(In thousands)
(Unaudited)
Selected Sales Information
(In thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| October 1, 2005 | October 2, 2004 | October 1, 2005 | October 2, 2004 | |||||||||||||
Sales | ||||||||||||||||
| Product Line | ||||||||||||||||
| Men’s pelvic health | ||||||||||||||||
| Erectile restoration | $ | 18,766 | $ | 18,620 | $ | 60,140 | $ | 54,004 | ||||||||
| Continence | 12,239 | 11,143 | 38,889 | 35,575 | ||||||||||||
| Prostate treatment | 6,719 | 5,514 | 20,101 | 7,769 | ||||||||||||
| Total men’s pelvic health | 37,724 | 35,277 | 119,130 | 97,348 | ||||||||||||
| Women’s pelvic health | 24,014 | 17,049 | 70,390 | 51,384 | ||||||||||||
| Total | $ | 61,738 | $ | 52,326 | $ | 189,520 | $ | 148,732 | ||||||||
| Geography | ||||||||||||||||
| United States | $ | 49,640 | $ | 43,271 | $ | 148,710 | $ | 117,512 | ||||||||
| Outside United States | 12,098 | 9,055 | 40,810 | 31,220 | ||||||||||||
| Total | $ | 61,738 | $ | 52,326 | $ | 189,520 | $ | 148,732 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| October 1, 2005 | October 2, 2004 | October 1, 2005 | October 2, 2004 | |||||||||||||
Percent of total sales | ||||||||||||||||
| Product Line | ||||||||||||||||
| Men’s pelvic health | ||||||||||||||||
| Erectile restoration | 30 | % | 36 | % | 32 | % | 36 | % | ||||||||
| Continence | 20 | % | 21 | % | 21 | % | 24 | % | ||||||||
| Prostate treatment | 11 | % | 11 | % | 11 | % | 5 | % | ||||||||
| Total men’s pelvic health | 61 | % | 67 | % | 63 | % | 65 | % | ||||||||
| Women’s pelvic health | 39 | % | 33 | % | 37 | % | 35 | % | ||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
| Geography | ||||||||||||||||
| United States | 80 | % | 83 | % | 78 | % | 79 | % | ||||||||
| Outside United States | 20 | % | 17 | % | 22 | % | 21 | % | ||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
American Medical Systems Holdings, Inc.
djustments to Operating Income, Net Income and Earnings per Share for Consistent Presentation
(In thousands, except per share data)
djustments to Operating Income, Net Income and Earnings per Share for Consistent Presentation
(In thousands, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| October 1, 2005 | October 2, 2004 | October 1, 2005 | October 2, 2004 | |||||||||||||
| Reported (GAAP) operating income (loss) | $ | 6,609 | ($21,806 | ) | $ | 42,029 | $ | 3,514 | ||||||||
| Adjust for in-process research and development charge | 9,220 | 35,000 | 9,220 | 35,000 | ||||||||||||
| Adjusted operating income | $ | 15,829 | $ | 13,194 | $ | 51,249 | $ | 38,514 | ||||||||
| Reported (GAAP) income (loss) before income taxes | $ | 7,340 | ($21,302 | ) | $ | 43,209 | $ | 4,613 | ||||||||
| Adjust for in-process research and development charge | 9,220 | 35,000 | 9,220 | 35,000 | ||||||||||||
| Adjusted income (loss) before income taxes | $ | 16,560 | $ | 13,698 | $ | 52,429 | $ | 39,613 | ||||||||
| Provision for income taxes | 5,925 | 5,000 | 18,544 | 14,459 | ||||||||||||
| Adjusted effective tax rate | 35.8 | % | 36.5 | % | 35.4 | % | 36.5 | % | ||||||||
| Reported (GAAP) net income (loss) | $ | 1,415 | ($26,302 | ) | $ | 24,665 | ($9,846 | ) | ||||||||
| Adjust for in-process research and development charge | 9,220 | 35,000 | 9,220 | 35,000 | ||||||||||||
| Adjusted net income | $ | 10,635 | 8,698 | 33,885 | 25,154 | |||||||||||
| Adjusted net income per share | ||||||||||||||||
| Basic | $ | 0.15 | $ | 0.13 | $ | 0.49 | $ | 0.38 | ||||||||
| Diluted | $ | 0.15 | $ | 0.12 | $ | 0.47 | $ | 0.36 | ||||||||
| Weighted average common shares used in calculation | ||||||||||||||||
| Basic | 69,344 | 67,338 | (A) | 68,741 | 66,858 | (A) | ||||||||||
| Diluted | 72,096 | 70,570 | (A) | 71,658 | 70,176 | (A) | ||||||||||
Note
| (A) | October 4, 2004 average common shares have been adjusted for the stock split effective March 21, 2005. |