American Medical Systems Holdings, Inc. (NASDAQ: AMMD) reported
revenue of $140.8 million for the first quarter of 2011, a 4.3
percent increase over sales of $134.9 million in the comparable
quarter of 2010. Adjusting revenue for the impact of currency
fluctuation and the impact of the Her Option® uterine health
product line, which was sold during the first quarter of 2010,
results in constant currency revenue growth of 5.4 percent.
Men’s Health sales of $67.4 million in the first quarter
represented an increase of 4.5 percent on a reported basis compared
to the same quarter last year, and grew 4.3 percent on a constant
currency basis, with growth primarily driven by the Male Continence
product line. The BPH Therapy business increased 8.3 percent on a
reported basis and 7.8 percent on a constant currency basis to
$28.1 million for the quarter. BPH Therapy sales were led by
continued enthusiasm surrounding the new GreenLight™ XPS console
and the MoXy™ Liquid Cooled Fiber. The Women’s Health business
increased 6.0 percent on a reported basis and 5.7 percent on a
constant currency basis to $45.3 million in the first quarter. The
Women’s Health growth is primarily driven by the pelvic floor
repair product line which continues to benefit from both the
Elevate® anterior and posterior systems.
The Company reported first quarter net income of $21.6 million,
or $0.27 per share. This compares to net income in the same quarter
last year of $20.7 million, also $0.27 per share. Non-GAAP adjusted
earnings per share of $0.33 compares to $0.29 per share in the same
quarter last year, an increase of 13.8 percent. Non-GAAP adjusted
earnings per share excludes the impact of the amortization of
intangible assets and amortization of financing costs, both
significant non-cash items affecting comparability to other
companies. First quarter 2011 non-GAAP adjusted earnings per share
also excludes the start-up costs related to the transition of
certain manufacturing operations to a new facility in Ireland and
first quarter 2010 non-GAAP adjusted earnings per share excludes
the gain on the sale of the Her Option® Uterine Health product
line. A reconciliation of reported net income to non-GAAP adjusted
net income for all periods is provided in the attached
schedules.
Proposed Transaction with Endo Pharmaceuticals
On April 10, 2011, Endo Pharmaceuticals (Endo) (NASDAQ: ENDP)
and American Medical Systems entered into a definitive agreement
under which Endo will acquire AMS for $30 per share, or $2.9
billion in cash, which includes the assumption and repayment of
$312 million of AMS debt. The transaction is expected to close in
the third quarter of 2011, subject to approval by AMS stockholders,
clearance by the relevant antitrust authorities and the
satisfaction of other customary conditions.
A special meeting of the stockholders of AMS will be announced
in due course to obtain stockholder approval of the proposed
transaction. AMS has filed with the Securities and Exchange
Commission (SEC) a preliminary proxy statement and intends to file
with the SEC and distribute to its stockholders a definitive proxy
statement and other relevant documents in connection with the
proposed transaction. Investors of AMS are urged to read the
definitive proxy statement and other relevant materials when they
become available because they will contain important information
about AMS, Endo and the proposed transaction. Investors may obtain
a free copy of these materials (when they are available) and other
documents filed by AMS with the SEC at the SEC’s website at
www.sec.gov, at AMS’s website at www.AmericanMedicalSystems.com or
by sending a written request to American Medical Systems Holdings,
Inc., 10700 Bren Road West, Minnetonka, Minnesota, 55343,
attention: Corporate Secretary.
AMS and its directors, executive officers and certain other
members of management and employees may be deemed to be
participants in soliciting proxies from its stockholders in favor
of the proposed merger. Information regarding the persons who may,
under the rules of the SEC, be considered to be participants in the
solicitation of AMS’s stockholders in connection with the proposed
transaction will be set forth in AMS’s definitive proxy statement
for its special meeting. Additional information regarding these
individuals and any interest they have in the proposed transaction
will be set forth in the definitive proxy statement to be filed
with the SEC.
Use of Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
U.S. generally accepted accounting principles (GAAP), management
provides non-GAAP adjusted net income, non-GAAP adjusted earnings
per share and constant currency revenue growth rates because
management believes that in order to properly understand the
Company’s short-term and long-term financial trends and for
purposes of comparability to other companies, investors may wish to
consider the impact of certain adjustments (such as gain or loss on
extinguishment of debt, gain or loss on sale of non-strategic
assets, in-process research and development charges (IPRD),
amortization of intangible assets, amortization of financing costs,
start-up costs of global manufacturing expansion and related income
tax adjustments and the impact of foreign currency translation on
reported revenue). These adjustments result from facts and
circumstances (such as acquisition, business development and
expansion activities and other non-recurring items) that vary in
frequency and impact on the Company’s results of operations,
represent significant items, which when excluded provide a useful
measure to determine the health of the business and earnings by the
business before significant non-cash charges and costs of a
start-up nature or in the case of foreign currency translation, are
highly variable and difficult to predict. Management uses non-GAAP
adjusted net income, non-GAAP adjusted earnings per share and
constant currency revenue growth rates to forecast and evaluate the
operational performance of the Company as well as to compare
results of current periods to prior periods on a consistent
basis.
A reconciliation of net income and revenue growth rate
percentages, the GAAP measure most directly comparable to non-GAAP
adjusted earnings per share and constant currency revenue growth
rates, respectively, are provided on the attached schedules.
Non-GAAP financial measures used by the Company may be
calculated differently from, and therefore may not be directly
comparable to, similarly titled measures used by other companies.
Investors should consider non-GAAP measures in addition to, and not
as a substitute for, or superior to, financial performance measures
prepared in accordance with GAAP.
About American Medical Systems
American Medical Systems, headquartered in Minnetonka,
Minnesota, is a diversified supplier of medical devices and
procedures to treat incontinence, erectile dysfunction, benign
prostatic hyperplasia (BPH), pelvic floor 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 approximately 340,000 patients in 2010.
Forward-Looking Statements
This press release contains forward-looking statements relating
to, among other things, the market opportunities, future products,
sales, financial results of American Medical Systems and the
proposed merger between AMS and Endo. 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 successfully competing against
competitors, physician acceptance, endorsement, and use of AMS
products; timing and success of new product introductions; clinical
and regulatory matters; product liability claims; potential product
recalls or technological obsolescence; changes in and adoption of
reimbursement rates; global healthcare reform; patient acceptance
of the Company's products and therapies; current worldwide economic
conditions; reliance on single or sole-sourced suppliers; loss or
impairment of a principal manufacturing facility; factors impacting
the stock market and share price and its impact on the dilution of
convertible securities; adequate protection of the Company's
intellectual property rights; successfully managing debt leverage
and related credit facility financial covenants; currency and other
economic risks inherent in selling our products internationally;
whether the merger with Endo will be consummated; and other risks
and uncertainties described in the Company's Annual Report on Form
10-K for the year ended January 1, 2011, and its 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 2010 and its other SEC filings.
American Medical Systems Holdings, Inc.
Statements of Operations (In thousands, except per share
data) Three Months Ended April 2, 2011
April 3, 2010 (Unaudited) (Unaudited) Net sales $ 140,786 $
134,926 Cost of sales 22,133 21,027
Gross profit 118,653 113,899 Operating expenses Sellling,
general and administrative 60,286 60,887 Research and development
14,418 13,509 Global manufacturing start-up costs 197 -
Amortization of intangibles 2,948 3,047
Total operating expenses 77,849 77,443
Operating income 40,804 36,456 Other (expense) income
Royalty income 82 308 Interest expense (3,101 ) (3,954 )
Amortization of financing costs (3,163 ) (3,693 ) Gain on sale of
non-strategic assets - 7,719 Other expense (827 )
(516 ) Total other (expense) income (7,009 ) (136 )
Income before income taxes 33,795 36,320 Provision
for income taxes 12,234 15,662
Net income $ 21,561 $ 20,658 Net income per
share Basic net income $ 0.28 $ 0.28 Diluted net income $ 0.27 $
0.27 Weighted average common shares used in calculation
Basic 76,866 75,117 Diluted 78,691 76,270
American
Medical Systems Holdings, Inc. Condensed Balance Sheets
(In thousands) April 2, 2011 January 1,
2011 (Unaudited) Assets Current assets Cash and short-term
investments $ 110,015 $ 77,815 Accounts receivable, net 96,442
98,518 Inventories, net 35,492 33,789 Other current assets
24,220 22,305 Total current assets 266,169 232,427
Property, plant and equipment, net 40,820 41,405 Goodwill and
intangibles, net 772,642 774,501 Other long-term assets
8,768 5,101 Total assets $ 1,088,399 $ 1,053,434
Liabilities and stockholders' equity Current liabilities Accounts
payable $ 9,500 $ 8,833 Accrued liabilities and taxes 58,802
60,719 Total current liabilities 68,302 69,552 Debt
and other long-term liabilities 320,618 315,321 Total
liabilities 388,920 384,873 Stockholders' equity 699,479
668,561 Total liabilities and stockholders' equity $
1,088,399 $ 1,053,434
American Medical Systems
Holdings, Inc. Condensed Statements of Cash Flows
(Unaudited) (In thousands) Three Months
Ended April 2, 2011 April 3, 2010 Cash flows from
operating activities Net income $ 21,561 $ 20,658
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization, including
financing costs 8,552 9,264 Gain on sale of non-strategic assets -
(7,719) Stock-based compensation 2,190 1,829 Other adjustments,
including changes in operating assets and liabilities 874
2,576 Net cash provided by operating activities 33,177
26,608 Cash flows from investing activities Purchase of
property, plant and equipment (1,802) (1,314) Purchase of
intangibles (508) (693) Purchase of investments (34,468) (25,041)
Sale of investments 8,571 7,337 Sale of non-strategic asset -
20,186 Other cash flows from investing activities (425)
783 Net cash provided by investing activities (28,632) 1,258
Cash flows from financing activities Payments on senior
secured credit facility - (45,719) Other cash flows from financing
activities 6,298 9,560 Net cash used in financing
activities 6,298 (36,159) Effect of currency exchange rates
on cash (329) (165) Net (decrease) increase in
cash and cash equivalents 10,514 (8,458) Cash and cash
equivalents at beginning of period 16,481 30,670
Cash and cash equivalents at end of period $ 26,995 $ 22,212
American Medical Systems Holdings, Inc.
Selected Sales Information and Constant Currency Growth
Reconciliation (Unaudited) (In thousands)
Three Months Ended Constant Currency
Growth Reconciliation (a) Percent Growth Percent Currency at
Constant April 2, 2011 April 3, 2010 Growth Impact Currency
Sales Men's health $ 67,407 $ 64,480 4.5 % $ 175 4.3 % BPH therapy
28,054 25,911 8.3 % 132 7.8 % Women's health 45,325
42,748 6.0 % 137 5.7 % Sub-total
140,786 133,139 5.7 % 444 5.4 % Uterine health (b) -
1,787 -100.0 % - -100.0 % Total
$ 140,786 $ 134,926 4.3 % $ 444 4.0 %
Geography United States $ 99,675 $ 96,523 3.3 % $ - 3.3 %
International 41,111 36,616 12.3 %
444 11.1 % Sub-total 140,786 133,139 5.7 % 444 5.4 %
United States-Uterine health (b) -
1,787 -100.0 % - -100.0 % Total $ 140,786
$ 134,926 4.3 % $ 444 4.0 % Percent of total
sales Men's health 48 % 48 % BPH therapy 20 % 19 % Women's health
32 % 32 % Sub-total 100 % 99 % Uterine
health (b) 0 % 1 % Total 100 % 100 %
Geography United States 71 % 73 % International 29 %
27 % Total 100 % 100 % (a)
To calculate the currency impact on
revenue growth rates, the Company compares each period's sales,
assuming no fluctuation in foreign currency exchange rates between
periods. The generally accepted accounting principle (GAAP) measure
most comparable to this non-GAAP measure is growth rate percentages
based on GAAP revenue.
(b)
The uterine health product line, Her
Option® was sold in February, 2010. Revenues for 2010 consist of
end-customer revenue earned prior to the date of sale, in addition
to revenue earned as part of the product supply agreement with
CooperSurgical, Inc., which continued through the fourth quarter of
2010.
American Medical Systems Holdings, Inc.
Reconciliation of Reported Net Income to Non-GAAP Adjusted Net
Income (Adjustments are presented on a pre-tax basis)
(Unaudited) (In thousands, except per share data)
Three Months Ended April 2, 2011 April 3, 2010
Net income, as reported $ 21,561 $ 20,658 Adjustments to net
income: Amortization of intangibles (a) 2,948 3,047 Amortization of
financing costs (b) 3,163 3,693 Global manufacturing start-up costs
(c) 197 - Gain on sale of non-strategic assets (d) - (7,719 ) Tax
effect of adjustments to net income (e) (2,147 )
2,533 Non-GAAP adjusted net income $ 25,722 $
22,212 Net income per share Basic $ 0.28 $ 0.28
Diluted $ 0.27 $ 0.27 Non-GAAP adjusted earnings per share
Basic $ 0.33 $ 0.30 Diluted $ 0.33 $ 0.29 Weighted average
common shares used in calculation: Basic 76,866 75,117 Diluted
78,691 76,270 (a) Consists of amortization of
intangible assets, primarily developed and core technology.
(b)
Consists of amortization of financing
costs on our convertible senior subordinated notes and senior
secured credit facility.
(c)
Consists of start-up costs in connection
with the expansion of manufacturing capacity internationally, which
are incremental to on-going operations.
(d) Relates to the gain on the sale of the Her Option®
Global Endometrial Ablation product line. (e) Includes the
tax effect of each of the above items in each of the periods.
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