DATE: April 23, 2003
AMERICAN MEDICAL SYSTEMS REPORTS
ANOTHER RECORD SALES QUARTER
Women's Health Revenues
Grow 48%
MINNEAPOLIS, April 23 -- American Medical Systems Holdings Inc. (Nasdaq:
AMMD) reported record sales in the first quarter of 2003 of $39.3 million, a 13
percent increase over sales of $34.7 million in the comparable quarter of 2002
(11 percent before gain from foreign currency changes). Net income in the
quarter was $5.5 million, or $0.16 per share, up slightly from $5.4 million, or
$0.16 per share, in the comparable quarter of 2002. Net income in 2002 benefited
from the company's pension fund termination, without which 2002 net income would
have been $5.0 million, or $.15 per share; net income in 2003 was net of
after-tax losses from the newly acquired CryoGen operations, without which net
income would have increased 34 percent to $6.7 million, or $.20 per share. A
summary of the adjustments is attached.
Douglas W. Kohrs, president and CEO, commented, "We are proud of our
first-quarter performance and the early progress we have made with the CryoGen
acquisition. Revenues from our major product groups continue to show strong
growth, with revenue from women's health products leading the way at 48 percent
growth over the first quarter of 2002. Included in this record growth in women's
health were net revenues from the sale of CryoGen's Her Option disposables of
$0.7 million, in line with our expectations for the quarter. Male continence
revenues grew 14 percent for the quarter and erectile restoration revenues grew
3 percent. We again demonstrated strong expense controls, resulting in operating
margins for the non-CryoGen business expanding to 27 percent of sales from 22
percent of sales in 2002."
Commenting further on the sales growth, Mr. Kohrs noted, "We are very
pleased with the growth from women's health products, including both the SPARC
and the Monarc sling systems for stress urinary incontinence. As we said in our
April 14 Monarc announcement, this new subfascial hammock system was released in
several European countries during the first quarter, and we are looking forward
to having U.S. availability in the second half of 2003. The company also reached
a significant milestone in the first quarter as total company continence
revenues exceeded erectile restoration revenues for the first time in our 30
year history."
OUTLOOK
Looking forward, Mr. Kohrs said AMS still expects full year sales to
increase 17 to 22 percent over 2002 sales, including the increase from the sales
of Her Option products and full-year operating margin for 2003 to show
improvement over the full year 2002 operation margin. Operating margins in the
first half of 2003 are expected to be adversely affected by significant start-up
expenses of the CryoGen acquisition.
In the second quarter of 2003, AMS expects total revenues to be in the
range of $41 to $43 million dollars. Operating margin as a percent of sales for
the second quarter of 2003 is expected to be slightly better than the first
quarter of 2003 and slightly lower than the second quarter of 2002.
AMERICAN MEDICAL SYSTEMS
APRIL 23, 2003
Page 2 of 7
EARNINGS CALL INFORMATION
American Medical Systems will host a conference call today at 5:00 p.m.
eastern time to discuss its first 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.
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 70,000 patients in 54 countries
during the last 12 months. More information about the company and its products
may be found at:
www.AmericanMedicalSystems.com.
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 filings. Actual results
may differ materially from anticipated results. AMS 700, Her Option, InhibiZone,
Monarc, and SPARC are AMS trademarks.
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
APRIL 23, 2003
Page 3 of 7
AMERICAN MEDICAL SYSTEMS HOLDINGS INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three months through March
----------------------------------
2002 2003
---------------- --------------
NET SALES $34,715 $39,347
OPERATING EXPENSES
Cost of goods sold 7,132 6,943
Marketing and selling 12,810 14,797
General and administrative 3,279 4,070
Research and development 2,834 3,791
Amortization of intangibles 939 1,065
------- -------
Total operating expenses 26,994 30,666
------- -------
OPERATING INCOME 7,721 8,681
OTHER INCOME (EXPENSE)
Royalty income 783 777
Other income 721 35
Interest expense, net (330) (596)
------- -------
Total other income (expense) 1,174 216
------- -------
INCOME BEFORE INCOME TAXES 8,895 8,897
PROVISION FOR INCOME TAXES
Income tax expense 3,478 3,443
------- -------
NET INCOME $ 5,417 $ 5,454
======= =======
NET INCOME PER SHARE
Basic $0.17 $0.17
Diluted $0.16 $0.16
WEIGHTED AVERAGE SHARES USED IN CALCULATION
Basic 32,005 32,547
Diluted 34,221 34,042
AMERICAN MEDICAL SYSTEMS
APRIL 23, 2003
Page 4 of 7
AMERICAN MEDICAL SYSTEMS HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
December 28, 2002 March 29, 2003
------------------ ----------------
ASSETS
Current assets
Cash and short-term investments $ 79,429 $ 42,767
Accounts receivable, net 27,208 27,905
Inventories 13,475 15,451
Deferred taxes and other current assets 5,697 5,775
-------- --------
Total current assets 125,809 91,898
Property, plant and equipment, net 21,328 23,294
Goodwill and intangibles, net 96,298 135,056
Deferred taxes and other assets 8,210 7,748
-------- --------
Total assets $251,645 $257,996
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,000 $ 3,483
Accrued liabilities and taxes 19,523 20,195
Current portion of notes payable 6,000 6,000
-------- --------
Total current liabilities 28,523 29,678
Long-term notes payable 18,000 16,636
Other long-term liability 860 444
Stockholders' equity 204,262 211,238
-------- --------
Total liabilities and stockholders' equity $251,645 $257,996
======== ========
Note: The CryoGen purchase price has been allocated to goodwill
pending completion of the acquisition valuation study.
AMERICAN MEDICAL SYSTEMS
APRIL 23, 2003
Page 5 of 7
AMERICAN MEDICAL SYSTEMS HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Three months through March
------------------------------
2002 2003
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $5,417 $5,454
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 950 1,383
Amortization of intangibles, including deferred financing 1,010 1,136
costs
Non-cash deferred compensation 59 46
Income tax benefit related to stock option plans 279 170
Change in net deferred taxes 108 (83)
Changes in operating assets and liabilities (4,145) (7,345)
-------- --------
Net cash provided by operating activities 3,678 761
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (440) (707)
Purchase of businesses, net of cash acquired 0 (36,940)
Purchase of investments, net of sales (6,123) 0
-------- --------
Net cash used in investing activities (6,563) (37,647)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 430 570
Payments on long-term debt (2,182) (1,956)
-------- --------
Net cash provided by financing activities (1,752) (1,386)
EFFECT OF EXCHANGE RATES (56) 1,610
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ($4,693) ($36,662)
======== ========
Note: Changes in operating assets and liabilities include approximately $3.8
million in CryoGen accrued acquisition liabilities
AMERICAN MEDICAL SYSTEMS
APRIL 23, 2003
Page 6 of 7
AMERICAN MEDICAL SYSTEMS HOLDINGS INC.
SELECTED SALES INFORMATION
(In Thousands)
Three months through March
-------------------------------
2002 2003
----------- -----------
SALES
Product line
Erectile restoration $17,295 $17,854
Other men's health
Male continence 9,028 10,283
Prostate treatments 1,645 1,199
------- -------
Total 10,673 11,482
Women's health 6,747 10,011
------- -------
Total $34,715 $39,347
======= =======
Geography
United States $29,159 $32,347
Outside United States 5,556 7,000
------- -------
Total $34,715 $39,347
======= =======
SHARE OF TOTAL SALES
Product line
Erectile restoration 50% 45%
Other men's health
Male continence 26% 26%
Prostate treatments 5% 3%
------- -------
Total 31% 29%
Women's health 19% 25%
------- -------
Total 100% 100%
Geography
United States 84% 82%
Outside United States 16% 18%
------- -------
Total 100% 100%
AMERICAN MEDICAL SYSTEMS
APRIL 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 March
----------------------------
2002 2003
---------- ----------
ADJUSTMENTS TO OPERATING INCOME
Reported operating income $7,721 $8,681
Add back operating loss for CryoGen 0 1,971
------- -------
Adjusted operating income $ 7,721 $10,652
======= =======
ADJUSTMENTS TO NET INCOME
Reported net income $5,417 $5,454
Adjust for 2002 pension fund termination
Pension accrual reversal (716) 0
Tax impact 272 0
------- -------
Decrease in net income (444) 0
------- -------
Add back after tax loss for CryoGen
Operating loss for CryoGen 0 1,971
Tax impact 0 (749)
------- -------
Increase in net income 0 1,222
Adjusted net income $ 4,973 $ 6,676
======= =======
NET INCOME PER SHARE
Reported
Basic $0.17 $0.17
Diluted $0.16 $0.16
Adjusted
Basic $0.16 $0.21
Diluted $0.15 $0.20