American Medical Systems (AMMD) 8-K American Medical Systems Revenue Grew 20 Percent In Second Quarter

DATE: July 27, 2006

FOR IMMEDIATE RELEASE

AMERICAN MEDICAL SYSTEMS REVENUE GREW 20 PERCENT IN SECOND QUARTER

Laserscope Acquisition Positions Company for Continued Growth in Sales and Earnings

MINNEAPOLIS, July 27, 2006 — American Medical Systems Holdings, Inc. (NASDAQ: AMMD) reported sales of $78.8 million for the second quarter of 2006, a 20.0 percent increase over sales of $65.6 million in the comparable quarter of 2005. Results for the second quarter do not include any operating results related to the Laserscope acquisition which closed on July 25, 2006.

The Company reported a net loss for second quarter 2006 of $8.1 million, or $0.12 per share. This loss includes the $28.1 million impact of in-process research and development (IPR&D) charges from the BioControl and Solarant Medical acquisitions completed during the quarter, $7.0 million of financing charges from bridge financing committed at the time of the Laserscope acquisition announcement, $2.5 million of SFAS 123(R) charges from the Company’s implementation of stock option expensing beginning with this fiscal year and the tax impacts of each of these. Net income for the second quarter, adjusted to exclude the effect of these charges and the related tax effects, was $16.5 million, or $0.23 per share. The prior year’s second quarter net income was reported at $12.0 million, or $0.17 per share. Net income growth for the second quarter, as adjusted, was 37.3 percent. A reconciliation of GAAP earnings to these adjusted results is included in the attached financial tables.

Sales for the first six months of 2006 totaled $152.4 million, a 19.3 percent increase over sales of $127.8 million for the comparable period of 2005.

Net income as reported for the six month period of 2006 was $3.4 million, or $0.05 per share. These reported earnings include the IPR&D and financing charges previously described as well as $5.1 million of SFAS 123(R) costs for the six month period and the tax impacts of each of these charges. Net income for the first six months of 2006, adjusted to exclude the effect of these charges, was $29.9 million, or $0.42 per share. Earnings reported for the comparable period of 2005 were $23.2 million or $0.33 per share. Net income growth for the first six months of 2006, as adjusted, was 28.6 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 20.0 percent second quarter revenue growth came from around the world and from both our men’s and women’s pelvic health businesses. This truly global sales strength will serve as a foundation for leverage within our recently completed Laserscope acquisition.”

Emerson continued, “Further strengthening of our gross margins, combined with higher than estimated revenues and continued improvements in inventory turns, resulted in strong operating cash flow for the quarter. We take great pride in presenting this result to our shareholders. The coming quarters will represent some of the most exciting periods in AMS’ history as we add BioControl and Solarant to our product development portfolio and we begin the integration of

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July 27, 2006
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The Laserscope. The sound financial performance of the second quarter of 2006 serves as evidence of AMS’ readiness to further its leadership position across the field of pelvic health. BioControl and Solarant each have the potential to redefine treatment options for incontinence. Laserscope will be our opportunity to become the global leader in providing the gold standard for treatment of obstructive BPH. It is these types of meaningful marketplace changes with which AMS has been, and will continue to be, identified.”

Outlook

For the year 2006, the Company has updated its expected revenue range to $309 to $314 million excluding revenues from the Laserscope acquisition. Revenue projected for the third quarter of 2006 ranges from $72 to $75 million, excluding revenues from Laserscope.

Based on AMS revenue alone and on a non-GAAP basis including the impact of stock-based compensation expense, the Company’s projection of earnings per share for 2006 has been increased to an anticipated range of $0.74 to $0.77 per share from the previously projected range of $0.66 to $0.70 per share. These projected non-GAAP earnings exclude any IPR&D, one-time interest expense on bridge financing, financial results of discontinued operations and other revenue and costs related to the acquisition of Laserscope which will be reported during the year. In the third quarter of 2006, the Company expects earnings of $0.16 to $0.17 per share on a similarly defined non-GAAP basis.

Revenues for the second half of 2006 for the recently acquired Laserscope urology business are estimated at $49 to $54 million. Costs associated with the Laserscope acquisition and operations, excluding the aesthetics discontinued operations, are expected to reduce second half 2006 earnings by $0.26 to $0.28 per share. Global integration costs are a one-time impact to these results. Ongoing intangible asset amortization and interest expense from the acquisition financing are also included in this estimated earnings impact.

AMS 2006 Guidance Excluding Laserscope

	Actual		Projected		Projected
	First Half 2006		Second Half 2006		2006
	Results		Results		Results
Projected earnings per share including stock-based compensation charges and excluding charges for IPR&D and interest on bridge financing	$	0.37	$	0.37 - $0.40	$	0.74 - $0.77
Plus: stock-based compensation charges	$	0.05	$	0.07	$	0.12
Equals: non-GAAP earnings as presented for prior year comparability on attached schedule	$	0.42	$	0.44 - $0.47	$	0.86 - $0.89

As the Company looks forward to 2007, total Company revenues are anticipated in the range of $505 to $530 million. Excluding the impact of the discontinued Laserscope aesthetics operation, earnings per share are preliminarily estimated for the combined Company at $0.73 to $0.78.

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July 27, 2006
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Laserscope acquisition is incorporated in this earnings estimate and reflects a reduction of approximately $0.10 per share. Cash earnings for 2007 are estimated in the range of $1.10 to $1.16. Cash earnings are defined as the non-GAAP earnings estimated plus tax-effected depreciation, amortization and stock-based compensation expenses. Included in this 2007 cash earnings estimate is an expected contribution from the Laserscope acquisition of approximately $0.04 per share.

Over the next five years, the Company estimates revenue growth in the range of 20 to 24 percent with operating margins targeted to grow to 30 percent of sales. To achieve this, the combined Company’s gross margins, inclusive of the lower margin capital equipment sales of Laserscope, are targeted to increase to levels above 80 percent.

Earnings Call Information

American Medical Systems will host a conference call today at 5:00 p.m. eastern time to discuss its second quarter 2006 results, projected 2006 financial results, the status of the Laserscope integration and preliminary guidance for 2007. 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 and including its recently concluded acquisition of Laserscope, 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

This press release contains forward-looking statements relating to the market opportunities, future products, sales and financial results of American Medical Systems and Laserscope and the combined business. These statements and other statements contained in this press release that are not purely historical fact are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that are based on management’s beliefs, certain assumptions and current expectations. These forward-looking statements are subject to risks and uncertainties such as the timing and success of new product introduction including, but not limited to, theGreenLight HPS ^TM system; successful integration of Laserscope into AMS’ business; physician acceptance, endorsement, and use of AMS and Laserscope products; assumptions made regarding the investments required to integrate and grow the Laserscope

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July 27, 2006
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business; valuations to be performed of the tangible and intangible assets of Laserscope; estimates regarding the financial performance of Laserscope’s aesthetics business; the negotiated proceeds from our intended sale of the Laserscope aesthetics business; factors impacting the stock market and our share price and, thereby, the share dilution of our convertible securities; regulatory matters; competitor activities; changes in and adoption of reimbursement rates; potential product recalls and other risks and uncertainties described in AMS’ and Laserscope’s Annual Reports on Form 10-K for the year ended December 31, 2005 and our other SEC filings. Actual results may differ materially from anticipated results. The forward-looking statements contained in this press release are made as of the date hereof, and AMS undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

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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July 27, 2006
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American Medical Systems Holdings, Inc.
Statements of Operations
(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	July 1, 2006			July 2, 2005			July 1, 2006			July 2, 2005
Net sales	$	78,782		$	65,637		$	152,406		$	127,782
Cost of sales		11,707			11,954			23,437			22,974
Gross profit		67,075			53,683			128,969			104,808
Operating expenses
Marketing and selling		29,370			23,494			57,184			45,150
Research and development		5,772			4,866			13,554			9,504
In-process research and development		28,075			—			28,075			—
General and administrative		7,635			5,207			14,129			10,996
Amortization of intangibles		1,785			1,948			3,626			3,738
Total operating expenses		72,637			35,515			116,568			69,388
Operating (loss) income		(5,562	)		18,168			12,401			35,420
Other (expense) income
Royalty income		408			508			861			986
Interest income		434			361			756			635
Interest expense		(257	)		(41	)		(353	)		(96	)
Financing charges		(6,955	)		—			(6,955	)		—
Other income (expense)		436			(613	)		290			(1,077	)
Total other (expense) income		(5,934	)		215			(5,401	)		448
(Loss) income before income taxes		(11,496	)		18,383			7,000			35,868
Provision for income taxes		(3,401	)		6,376			3,623			12,619
Net (loss) income		($8,095	)	$	12,007		$	3,377		$	23,249
Net (loss) income per share
Basic		($0.12	)	$	0.17		$	0.05		$	0.34
Diluted		($0.12	)	$	0.17		$	0.05		$	0.33
Weighted average common shares used in calculation
Basic		69,838			68,972			69,755			68,437
Diluted		69,838			71,327			72,001			71,449

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July 27, 2006
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American Medical Systems Holdings, Inc.
Condensed Balance Sheets
(In thousands)

	July 1, 2006		December 31, 2005
	(unaudited)
Assets
Current assets
Cash and short term investments	$	378,874	$	46,390
Accounts receivable, net		57,822		51,058
Inventories, net		17,197		18,191
Deferred income taxes and other current assets		11,432		7,269
Total current assets		465,325		122,908
Property, plant and equipment, net		26,275		21,371
Goodwill and intangibles, net		208,714		210,278
Deferred income taxes and other assets		14,067		4,769
Total assets	$	714,381	$	359,326
Liabilities and Stockholders’ Equity
Current liabilities Accounts payable	$	6,703	$	3,688
Accrued liabilities and taxes		25,217		49,687
Total current liabilities		31,920		53,375
Other long term liabilities		365,613		3,072
Total liabilities		397,533		56,447
Stockholders’ equity		316,848		302,879
Total liabilities and stockholders’ equity	$	714,381	$	359,326

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July 27, 2006
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American Medical Systems Holdings, Inc.
Condensed Statements of Cash Flows
(In thousands)

	Six Months Ended
	July 1, 2006			July 2, 2005
Cash flows from operating activities
Net income	$	3,377		$	23,249
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,763			2,899
Loss on asset disposals		331			45
Amortization of intangibles, including deferred financing costs		3,630			3,738
Non-operating in-process research and development		28,075			—
Financing charges		6,955			—
Stock-based compensation		5,235			—
Excess tax benefit from exercise of stock options		(389	)		3,379
Changes in operating assets and liabilities		(15,978	)		(5,090	)
Net cash provided by operating activities		32,999			28,220
Cash flows from investing activities
Purchase of property, plant and equipment		(6,970	)		(3,211	)
Purchase of business, net of cash acquired		(23,986	)		(24,053	)
Purchase of investments in technology		(29,075	)		(770	)
Purchase of short term investments		(110	)		(30,338	)
Sale of short term investments		15,190			29,757
Net cash used in investing activities		(44,951	)		(28,615	)
Cash flows from financing activities
Proceeds from issuance of long term debt		362,538			—
Proceeds from issuance of common stock and exercised stock options		3,437			10,249
Excess tax benefit from exercise of stock options		389			—
Financing charges paid		(6,955	)		—
Net cash provided by financing activities		359,409			10,249
Effect of exchange rates		96			890
Net increase in cash and cash equivalents		347,553			10,744
Cash and cash equivalents at beginning of period		30,885			35,689
Cash and cash equivalents at end of period	$	378,438		$	46,433
Supplemental disclosure
Cash paid for interest	$	166		$	0
Cash paid for taxes	$	16,534		$	11,520

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July 27, 2006
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American Medical Systems Holdings, Inc.
Selected Sales Information
(In thousands)

	Three Months Ended						Six Months Ended
	July 1, 2006			July 2, 2005			July 1, 2006			July 2, 2005
Sales
Product line
Men’s health		45,912			40,817			90,570			81,406
Women’s health		32,870			24,820			61,836			46,376
Total	$	78,782		$	65,637		$	152,406		$	127,782
Geography
United States	$	60,024		$	50,737		$	117,023		$	99,070
International		18,758			14,900			35,383			28,712
Total	$	78,782		$	65,637		$	152,406		$	127,782
Percent of total sales
Product line
Men’s health		58	%		62	%		59	%		64	%
Women’s health		42	%		38	%		41	%		36	%
Total		100	%		100	%		100	%		100	%
Geography
United States		76	%		77	%		77	%		78	%
International		24	%		23	%		23	%		22	%
Total		100	%		100	%		100	%		100	%

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July 27, 2006
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American Medical Systems Holdings, Inc.
Adjustments to the Statement of Operations for Consistent Presentation
(In thousands, except per share data)

	As Reported						In-Process						As Adjusted
	Three Months Ended			SFAS 123(R)		(A)	Research and		(B)	Financing		(C)	Three Months Ended			Three Months Ended
	July 1, 2006			Stock Option			Development			Charges			July 1, 2006			July 2, 2005
Net sales	$	78,782			—			—			—		$	78,782		$	65,637
Cost of sales		11,707			110			—			—			11,597			11,954
Gross profit		67,075			(110	)		—			—			67,185			53,683
Operating expenses
Marketing and selling		29,370			878			—			—			28,492			23,494
Research and development		5,772			534			—			—			5,238			4,866
In-process research and		28,075			—			28,075			—			—			—
development General and administrative		7,635			959			—			—			6,676			5,207
Amortization of intangibles		1,785			—			—			—			1,785			1,948
Total operating expenses		72,637			2,371			28,075			—			42,191			35,515
Operating (loss) income		(5,562	)		(2,481	)		(28,075	)		—			24,994			18,168
Other (expense) income
Royalty income		408			—			—			—			408			508
Interest income		434			—			—			—			434			361
Interest expense		(257	)		—			—			—			(257	)		(41	)
Financing charges		(6,955	)		—			—			(6,955	)		—			—
Other (expense) income		436			—			—			—			436			(613	)
Total other (expense) income		(5,934	)		—			—			(6,955	)		1,021			215
(Loss) income before income taxes		(11,496	)		(2,481	)		(28,075	)		(6,955	)		26,015			18,383
Provision for income taxes		(3,401	)		(574	)		(9,896	)		(2,452	)		9,521			6,376
Net (loss) income		($8,095	)		($1,907	)		($18,179	)		($4,503	)	$	16,494		$	12,007
Net (loss) income per share
Basic		($0.12	)										$	0.24		$	0.17
Diluted		($0.12	)										$	0.23		$	0.17
Weighted average common shares used in calculation
Basic		69,838												69,838			68,972
Diluted		69,838												71,975	(D)		71,327

Note

(A)	This expense represents SFAS 123(R) stock option expense. SFAS 123(R) was implemented in Q1 2006.
(B)	These charges are for $25.6 million and $2.5 million of IPR&D recorded as part of the BioControl and Solarant acquisitions, respectively.
(C)	This charge was for financing costs related to the bridge loan committed as initial financing for the Laserscope acquisition.
(D)	Our GAAP reported diluted shares exclude the impact of outstanding options since their inclusion would be anti-dilutive given our GAAP net loss position. The 2.1 million increase to diluted shares is to recognize our non-GAAP net income position.

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July 27, 2006
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American Medical Systems Holdings, Inc.
Adjustments to the Statement of Operations for Consistent Presentation
(In thousands, except per share data)

	As Reported						In-Process						As Adjusted
	Six Months Ended			SFAS 123(R)		(A)	Research and		(B)	Financing		(C)	Six Months Ended			Six Months Ended
	July 1, 2006			Stock Option			Development			Charges			July 1, 2006			July 2, 2005
Net sales	$	152,406			—			—			—		$	152,406		$	127,782
Cost of sales		23,437			155			—			—			23,282			22,974
Gross profit		128,969			(155	)		—			—			129,124			104,808
Operating expenses
Marketing and selling		57,184			1,751			—			—			55,433			45,150
Research and development		13,554			1,034			—			—			12,520			9,504
In-process research and		28,075			—			28,075			—			—			—
development General and administrative		14,129			2,137			—			—			11,992			10,996
Amortization of intangibles		3,626			—			—			—			3,626			3,738
Total operating expenses		116,568			4,922			28,075			—			83,571			69,388
Operating income		12,401			(5,077	)		(28,075	)		—			45,553			35,420
Other (expense) income
Royalty income		861			—			—			—			861			986
Interest income		756			—			—			—			756			635
Interest expense		(353	)		—			—			—			(353	)		(96	)
Financing charges		(6,955	)		—			—			(6,955	)		—			—
Other income (expense)		290			—			—			—			290			(1,077	)
Total other (expense) income		(5,401	)		—			—			(6,955	)		1,554			448
Income before income taxes		7,000			(5,077	)		(28,075	)		(6,955	)		47,107			35,868
Provision for income taxes		3,623			(1,236	)		(9,896	)		(2,452	)		17,207			12,619
Net income	$	3,377			($3,841	)		($18,179	)		($4,503	)	$	29,900		$	23,249
Net income per share
Basic	$	0.05											$	0.43		$	0.34
Diluted	$	0.05											$	0.42		$	0.33
Weighted average common shares used in calculation
Basic		69,755												69,755			68,437
Diluted		72,001												72,001			71,449

Note

(A)	This expense represents SFAS 123(R) stock option expense. SFAS 123(R) was implemented in Q1 2006.
(B)	These charges are for $25.6 million and $2.5 million of IPR&D recorded as part of the BioControl and Solarant acquisitions, respectively.
(C)	This charge was for financing costs related to the bridge loan committed as initial financing for the Laserscope acquisition.