DATE: April 27, 2006
FOR IMMEDIATE RELEASE
AMERICAN MEDICAL SYSTEMS REPORTS 19 PERCENT FIRST QUARTER REVENUE GROWTH
Strong Margins on Global Growth Drive Earnings Performance
MINNEAPOLIS, April 27, 2006 — American Medical Systems Holdings, Inc. (NASDAQ: AMMD) reported record sales of $73.6 million for the first quarter of 2006, an 18.5 percent increase over sales of $62.1 million in the comparable quarter of 2005 (with this reported growth rate reduced by 1.6 percentage points due to currency exchange rate changes).
The Company reported first quarter 2006 net income of $11.5 million, or $0.16 per share, including the $0.03 earnings per share reduction from stock option expensing begun during the period. Net income for the first quarter 2006, adjusted for this expense, was $13.4 million, or $0.19 per share. Net income for the first quarter 2005 was $11.2 million, or $0.16 per share, during that period which preceded the introduction of stock option expensing in accordance with SFAS 123(R). Net income growth, when adjusted to exclude the stock option expense from the 2006 period, was 19.2 percent. A reconciliation of GAAP earnings to these adjusted results is included in the attached financial tables.
Martin J. Emerson, President and Chief Executive Officer, commented, “Our first quarter 2006 revenue growth was consistent with our anticipated annual growth rates across our businesses. With growth of over 34 percent for the quarter, women’s pelvic health contributed 65 percent of the quarter’s growth dollars. Our innovative prolapse systems, cryoablation systems for menorrhagia and our portfolio of incontinence technologies each played a role in these results. Men’s pelvic health growth of 10 percent in the quarter was also consistent with our annual growth expectation for this business comprised of our erectile restoration, male continence and prostate treatments product lines. Our international business continued its excellent growth, reporting over 20 percent for the quarter, a growth rate that would be increased by nearly 8 percentage points on a constant currency basis.”
Emerson continued, “Operating cash flows, strong for the quarter at nearly $21 million, were once again driven by the combination of strong margins and asset management. As a company, we continue to focus on, and deliver on, our balance sheet goals, providing us the cash flow to invest strategically in future technology platforms such as our acquisition of implantable electrical stimulation technology from BioControl Medical, Ltd. as reported yesterday.”
Outlook
For the year 2006, the Company reiterated that it expected revenue in the range of $304 to $314 million. Revenue projected for the second quarter of 2006 ranges from $75 to $78 million.
Earnings per share on these revenues for 2006, on a non-GAAP basis before the impact of the stock-based compensation expensing per SFAS 123(R), remain as anticipated in the range of $0.78 to $0.82 per share. In the second quarter of 2006, the Company expects non-GAAP earnings of $0.19 to $0.20 per share. These projected earnings exclude any in process research and development charge from the BioControl acquisition.
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Earnings per share for 2006 as reported in accordance with GAAP, and thereby including the effect of stock option expensing as required under SFAS 123(R), are expected to be in the range of $0.66 to $0.70. Second quarter GAAP earnings per share are anticipated in the range of $0.16 to $0.17.
A reconciliation of GAAP to non-GAAP earnings per share projections is as follows:
| Projected Second | Projected Year | |||||||
| Quarter 2006 | 2006 | |||||||
| Projected GAAP earnings per share | $ | 0.16 - $0.17 | $ | 0.66 - $0.70 | ||||
| Add: Projected stock-based compensation expense, net of tax | $ | 0.03 | $ | 0.12 | ||||
| Equals: Projected non-GAAP earnings per share | $ | 0.19 - $0.20 | $ | 0.78 - $0.82 | ||||
Earnings Call Information
American Medical Systems will host a conference call today at 5:00 p.m. eastern time to discuss its first quarter 2006 results. 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 at www.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 provide approximately 170,000 patient cures in 56 countries during 2005.
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 December 31, 2005 and its other SEC filings. Actual results may differ materially from anticipated results.
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More information about the Company and its products can be found at its website www.AmericanMedicalSystems.com and in the Company’s Annual Report on Form 10-K for 2005 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 |
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American Medical Systems Holdings, Inc.
Statements of Operations
(In thousands, except per share data)
Statements of Operations
(In thousands, except per share data)
| Three Months Ended | ||||||||
| April 1, 2006 | April 2, 2005 | |||||||
| Net sales | $ | 73,624 | $ | 62,145 | ||||
| Cost of sales | 11,730 | 11,020 | ||||||
| Gross profit | 61,894 | 51,125 | ||||||
| Operating expenses | ||||||||
| Marketing and selling | 27,814 | 21,656 | ||||||
| Research and development | 7,782 | 4,638 | ||||||
| General and administrative | 6,494 | 5,789 | ||||||
| Amortization of intangibles | 1,841 | 1,790 | ||||||
| Total operating expenses | 43,931 | 33,873 | ||||||
| Operating income | 17,963 | 17,252 | ||||||
| Other income (expense) | ||||||||
| Royalty income | 453 | 478 | ||||||
| Interest income | 322 | 274 | ||||||
| Interest expense | (96 | ) | (55 | ) | ||||
| Other income (expense) | (146 | ) | (463 | ) | ||||
| Total other income (expense) | 533 | 234 | ||||||
| Income before income taxes | 18,496 | 17,486 | ||||||
| Provision for income taxes | 7,024 | 6,243 | ||||||
| Net income | $ | 11,472 | $ | 11,243 | ||||
| Net income per share | ||||||||
| Basic | $ | 0.16 | $ | 0.17 | ||||
| Diluted | $ | 0.16 | $ | 0.16 | ||||
| Weighted average common shares used in calculation | ||||||||
| Basic | 69,679 | 67,898 | ||||||
| Diluted | 72,040 | 71,250 | ||||||
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American Medical Systems Holdings, Inc.
Condensed Balance Sheets
(In thousands)
Condensed Balance Sheets
(In thousands)
| April 1, 2006 | December 31, 2005 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and short-term investments | $ | 42,394 | $ | 46,390 | ||||
| Accounts receivable, net | 52,108 | 51,058 | ||||||
| Inventories | 17,065 | 18,191 | ||||||
| Deferred taxes and other current assets | 6,902 | 7,269 | ||||||
| Total current assets | 118,469 | 122,908 | ||||||
| Property, plant and equipment, net | 23,655 | 21,371 | ||||||
| Goodwill and intangibles, net | 208,598 | 210,278 | ||||||
| Deferred taxes and other assets | 4,767 | 4,769 | ||||||
| Total assets | $ | 355,489 | $ | 359,326 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 6,921 | $ | 3,688 | ||||
| Accrued liabilities and taxes | 25,200 | 49,687 | ||||||
| Total current liabilities | 32,121 | 53,375 | ||||||
| Other long term liabilities | 3,072 | 3,072 | ||||||
| Total liabilities | 35,193 | 56,447 | ||||||
| Stockholders’ equity | 320,296 | 302,879 | ||||||
| Total liabilities and stockholders’ equity | $ | 355,489 | $ | 359,326 | ||||
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American Medical Systems Holdings, Inc.
Condensed Statements of Cash Flows
(In thousands)
Condensed Statements of Cash Flows
(In thousands)
| Three Months Ended | ||||||||
| April 1, 2006 | April 2, 2005 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 11,472 | $ | 11,243 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 823 | 1,515 | ||||||
| Loss on asset disposals | 322 | 25 | ||||||
| Amortization of intangibles, including deferred financing costs | 1,841 | 1,790 | ||||||
| Stock based compensation | 2,699 | — | ||||||
| Changes in operating assets and liabilities | 3,733 | 3,984 | ||||||
| Net cash provided by operating activities | 20,890 | 18,557 | ||||||
| Cash flows from investing activities | ||||||||
| Purchase of property, plant and equipment | (3,419 | ) | (1,421 | ) | ||||
| Purchase of business, net of cash acquired | (23,986 | ) | (1,450 | ) | ||||
| Purchase of investments in technology | — | (750 | ) | |||||
| Purchase of short-term investments | (100 | ) | (2,600 | ) | ||||
| Sale of short-term investments | 14 | 5,728 | ||||||
| Net cash used in investing activities | (27,491 | ) | (493 | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of common stock and exercised stock options | 2,285 | 3,822 | ||||||
| Excess tax benefit from exercise of stock options | 279 | — | ||||||
| Net cash used in financing activities | 2,564 | 3,822 | ||||||
| Effect of exchange rates | (47 | ) | 558 | |||||
| Net increase (decrease) in cash and cash equivalents | $ | (4,084 | ) | $ | 22,444 | |||
| Cash and cash equivalents at beginning of period | $ | 30,885 | $ | 35,689 | ||||
| Cash and cash equivalents at end of period | $ | 26,801 | $ | 58,133 | ||||
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American Medical Systems Holdings, Inc.
Selected Sales Information
(In thousands)
Selected Sales Information
(In thousands)
| Three Months | ||||||||
| Ended | ||||||||
| April 1, 2006 | April 2, 2005 | |||||||
| Sales | ||||||||
| Product line | ||||||||
| Men’s health | 44,658 | 40,589 | ||||||
| Women’s health | 28,966 | 21,556 | ||||||
| Total | $ | 73,624 | $ | 62,145 | ||||
| Geography | ||||||||
| United States | $ | 56,999 | $ | 48,333 | ||||
| International | 16,625 | 13,812 | ||||||
| Total | $ | 73,624 | $ | 62,145 | ||||
| Percent of total sales | ||||||||
| Product line | ||||||||
| Men’s health | 61 | % | 65 | % | ||||
| Women’s health | 39 | % | 35 | % | ||||
| Total | 100 | % | 100 | % | ||||
| Geography | ||||||||
| United States | 77 | % | 78 | % | ||||
| International | 23 | % | 22 | % | ||||
| Total | 100 | % | 100 | % | ||||
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American Medical Systems Holdings, Inc.
SFAS 123(R) Stock Option Expense Impact to the Statement of Operations
for Consistent Presentation
(In thousands, except per share data)
SFAS 123(R) Stock Option Expense Impact to the Statement of Operations
for Consistent Presentation
(In thousands, except per share data)
| As Reported | SFAS 123 (R) | As Adjusted | ||||||||||||||
| Quarter Ended | Stock Option | Quarter Ended | Quarter Ended | |||||||||||||
| April 1, 2006 | Expense Impact | April 1, 2006 | April 2, 2005 | |||||||||||||
| Net sales | $ | 73,624 | — | $ | 73,624 | $ | 62,145 | |||||||||
| Cost of sales | 11,730 | 45 | 11,685 | 11,020 | ||||||||||||
| Gross profit | 61,894 | (45 | ) | 61,939 | 51,125 | |||||||||||
| Operating expenses | ||||||||||||||||
| Marketing and selling | 27,814 | 874 | 26,940 | 21,656 | ||||||||||||
| Research and development | 7,782 | 500 | 7,282 | 4,638 | ||||||||||||
| General and administrative | 6,494 | 1,178 | 5,316 | 5,789 | ||||||||||||
| Amortization of intangibles | 1,841 | — | 1,841 | 1,790 | ||||||||||||
| Total operating expenses | 43,931 | 2,552 | 41,379 | 33,873 | ||||||||||||
| Operating income | 17,963 | (2,597 | ) | 20,560 | 17,252 | |||||||||||
| Other income (expense) | ||||||||||||||||
| Royalty income | 453 | — | 453 | 478 | ||||||||||||
| Interest income | 322 | — | 322 | 274 | ||||||||||||
| Interest expense | (96 | ) | — | (96 | ) | (55 | ) | |||||||||
| Other income (expense) | (146 | ) | — | (146 | ) | (463 | ) | |||||||||
| Total other income (expense) | 533 | — | 533 | 234 | ||||||||||||
| Income before income taxes | 18,496 | (2,597 | ) | 21,093 | 17,486 | |||||||||||
| Provision for income taxes | 7,024 | (662 | ) | 7,686 | 6,243 | |||||||||||
| Net income | $ | 11,472 | $ | (1,935 | ) | $ | 13,407 | $ | 11,243 | |||||||
| Net income per share | ||||||||||||||||
| Basic | $ | 0.16 | $ | 0.19 | $ | 0.17 | ||||||||||
| Diluted | $ | 0.16 | $ | 0.19 | $ | 0.16 | ||||||||||
| Weighted average common shares used in calculation | ||||||||||||||||
| Basic | 69,679 | 69,679 | 67,898 | |||||||||||||
| Diluted | 72,040 | 72,040 | 71,250 | |||||||||||||