Solid Year-Over-Year Revenue Growth Driven by Domestic and
International PVP Procedure Volume Growth SAN JOSE, Calif., Nov. 3
/PRNewswire-FirstCall/ -- Laserscope (NASDAQ:LSCP), a pioneer in
the development and commercialization of minimally-invasive medical
devices, including medical lasers and advanced fiber-optic delivery
devices, today reported revenues of $30.4 million for its third
quarter ended September 30, 2005, a 26% increase from $24.2 million
in the third quarter of 2004. The increase in revenues was
primarily attributable to continued strong year-over-year growth in
sales of the Company's line of GreenLight(TM) products used for the
Photoselective Vaporization of the Prostate ("PVP") procedure,
offset by a slight decline in the Company's aesthetics business.
Third quarter 2005 operating income grew 19% to $5.4 million, from
$4.5 million in the third quarter of 2004. Third quarter 2005 net
income was $6.3 million, or $0.28 per fully-diluted share, an
increase from net income of $4.4 million, or $0.19 per
fully-diluted share, in the same quarter last year. Gross margins
in the third quarter of 2005 were down slightly to 59% compared to
approximately 60% in the third quarter of 2004 and 61% in the
second quarter of 2005. Year-over-year gross margin fluctuations
were the result of the higher mix of lower margin international
sales of both our GreenLight and aesthetic products as a percentage
of overall revenues offset by a higher percentage of overall sales
being from higher margin GreenLight products worldwide. Selling,
general and administrative ("SG&A") expenses declined as a
percentage of revenues compared to the third quarter of 2004.
SG&A expenses were $10.5 million, or 35% of revenues, in the
third quarter of 2005, compared to $8.8 million, or 36% of
revenues, in the third quarter of 2004. The absolute increase in
SG&A expenses resulted primarily from increases in marketing
and sales costs to support higher sales. As a result of analysis of
business prospects for 2006, the Company determined that it is more
likely than not that future profitability will be sufficient to
realize deferred income tax assets. In accordance with FAS 109 and
related literature the Company released valuation allowances
against its deferred income tax assets. The effective income tax
rate was approximately negative 16% in the third quarter of 2005
and is expected to be positive 12% in the fourth quarter of 2005.
The effective income tax rate for 2006 is currently anticipated to
be in the range of 39% to 40%. The Company strengthened its balance
sheet during the third quarter of 2005. At September 30, 2005,
Laserscope had no bank borrowings and a cash position of $29.1
million, up significantly from $16.0 million at December 31, 2004.
Inventories increased predominantly to support our GreenLight
product line. Day Sales Outstanding ("DSOs") were relatively
constant in the U.S. and increased somewhat for international
sales. Nine-Month Results For the nine months ended September 30,
2005, the Company reported revenues of $92.1 million compared to
$64.3 million for the nine months ended September 30, 2004, a 43%
year-over-year increase. Operating income in the first nine months
of 2005 was $18.4 million, compared to $9.8 million in the
prior-year period, an 87% year-over-year increase. For the nine
months ended September 30, 2005, Laserscope reported net income
rose 74% to $16.6 million, or $0.73 per fully-diluted share,
compared to $9.6 million, or $0.42 per fully-diluted share, in the
same period last year. Urology Business Update "In the last
quarter, we continued our trend of strong year-over-year growth,
increased our penetration of international markets and advanced our
goal of making the PVP procedure using our GreenLight products as
the worldwide standard for treating BPH, while absorbing the impact
of a confluence of adverse factors in the U.S. urology market.
International demand for the PVP procedure using the GreenLight
laser system continued to grow in the third quarter of 2005, as we
posted another quarterly increase in shipments of GreenLight
delivery devices overseas on a sequential quarter-over-quarter and
year-over-year basis," said Eric Reuter, Laserscope President and
CEO. "U.S. revenues from GreenLight delivery devices grew strongly
year-over-year, although we did experience an unexpected slowdown
in U.S. PVP utilization during the third quarter, resulting in a
sequential decrease in U.S. sales of GreenLight delivery devices on
a quarter-over-quarter basis. We believe several factors
contributed to this decline including a seasonal slowdown in
elective procedures during the summer months, a temporary
disruption in large areas of the southern United States due to the
hurricanes and subsequent relief efforts, the potential that
reimbursement for the PVP procedure may be reduced substantially
from the current temporary rate which caused some customers to
delay or cancel purchases and competitive product offerings."
Reimbursement Update "Yesterday, the Centers for Medicare and
Medicaid Services ("CMS") announced the final rule for the
Outpatient Prospective Payment System ("OPPS") for 2006," Mr.
Reuter commented. "Although we disagree with the decision by CMS,
we had anticipated the possibility of this ruling and, accordingly,
our current 2006 guidance contemplates the new OPPS reimbursement
rate applicable to PVP in 2006 of approximately $2,500 per
procedure, on a national average basis. CMS is expected to announce
the final rule for the Fee Schedule (physician payment) for 2006 in
the near future, and we will reserve public comment on that final
rule until after its release." Aesthetics Business Update "This was
a disappointing quarter for our aesthetics business," said Mr.
Reuter. "Aesthetics revenues fell slightly on a sequential and
year-over-year basis due in large part to a precipitous decline in
revenues generated through our distribution relationship with
McKesson during the transition to our new U.S. distribution
partner, Henry Schein. Given the large opportunity in the market
for aesthetic products and procedures, we plan to utilize our new
distribution relationship with Henry Schein and augment our
internal resources in order to re-dedicate and re-focus the
organization on growth. We believe our aesthetic product portfolio
remains attractive and that our recently released Solis(TM) product
will help our aesthetic business rebound in the fourth quarter and
in 2006." Full Year 2005 Guidance Based on the nine-month results
in 2005, the management of Laserscope has revised its full-year
2005 guidance as follows: - 2005 revenues are expected to be in the
range of $125 million to $130 million, up 33% to 38% over 2004. -
Reported pre-tax earnings are expected to be in the range of $25.5
to $26.5 million, up 63% to 69% over 2004. - Net income is expected
to be in the range of $0.97 to $1.02 per fully-diluted share, at
our effective tax rate of approximately 12% for 2005. For 2006,
Laserscope expects our effective tax rate will be 39-40%. Full Year
2006 Guidance The management of Laserscope has additionally
outlined preliminary 2006 guidance as follows: - 2006 Revenues and
Earnings are expected to grow between 20% and 25% assuming a full
income tax rate of 39-40% is applied to pre-tax income for both
2006 and 2005. This earnings outlook specifically does not include
the impact on the Company of stock-based compensation expenses
required under FAS 123R. Management Conference Call Management of
Laserscope will hold a conference call on Thursday, November 3,
2005 at 8:00 am PT / 11:00 am ET to discuss results for the third
quarter of 2005. To participate in the call, please dial
800-257-6566 (303-205-0055 for international callers) at least five
minutes prior to the start time. Investors will also have the
opportunity to listen to the conference call live on the Internet
through Laserscope's website at http://www.laserscope.com/.
Investors should go to the website a few minutes early, as it may
be necessary to download audio software to access the conference
call. A replay of the conference call will be available through
November 10, 2005 by dialing 800-405-2236 (303-590-3000 for
international callers), and entering passcode 11041041 About
Laserscope Laserscope designs, manufactures, sells and services on
a worldwide basis an advanced line of minimally-invasive medical
products including medical laser systems and related energy
delivery devices for the office, outpatient surgical center, and
hospital markets. More information about Laserscope can be found on
its web site at http://www.laserscope.com/. Safe Harbor Statement
This press release contains forward-looking information within the
meaning of Section 21E of the Securities Exchange Act of 1934, and
is subject to the safe harbor created by this section. These
forward-looking statements include: statements about Laserscope's
future profitability and operating results, competition, proposed
changes to the rates of reimbursement applicable to the PVP
procedure recently proposed by the Centers for Medicare and
Medicaid Services and the possible effects, expected continued
momentum of Laserscope's business and growth including new product
offerings, worldwide adoption rates of the PVP procedure using the
Company's GreenLight(TM) laser system, our ability to compete with
similar product offerings, market penetration opportunities in
international markets such as in Europe and the Asia Pacific
region, including Japan. These statements are subject to a number
of risks and uncertainties, including: uncertainties regarding
introduction of new technologies competitive to Laserscope's
products and the degree to which the Company's current and new
products are accepted by customers, which could affect the level of
demand for our products; our dependence on sole source providers
for key components and products; risk of reductions in government
and private insurance reimbursement of hospitals and physicians for
health care costs, which may negatively impact hospitals and
physicians decisions to purchase our products reducing adoption
rates and sales growth; risks that we may be unable to protect
adequately the integrity, safety and proper use of our disposable
fiber optic delivery device with the GreenLight laser system, which
could result in negative patient outcomes and reduce our disposable
fiber recurring revenue stream; risks that patents and licenses
that we hold may be challenged, invalidated or circumvented or that
we may become the subject of intellectual property litigation;
uncertainties regarding our ability to compete with companies that
have significantly greater financial, technical, research and
development, manufacturing and marketing resources than we have;
and uncertainties that new products will receive regulatory
approval in applicable jurisdictions. Actual results may differ
materially due to these and other factors. The matters discussed in
this press release also involve risks and uncertainties described
from time to time in Laserscope's filings with the Securities and
Exchange Commission. In particular, see the Risk Factors described
in Laserscope's most recent Quarterly Report on Form 10-Q and
Annual Report on Form 10-K. Copies of Laserscope's public
disclosure filings with the SEC, including the most recent Annual
Report on Form 10-K and the most recent forms 10-Q are available
upon request from its Investor Relations Department at its website
at http://www.laserscope.com/ and at the SEC's website:
http://www.sec.gov/. Laserscope assumes no obligation to update the
forward-looking information contained in this press release. At
Laserscope: At Financial Relations Board: Eric Reuter, President
& CEO Tricia Ross Analyst/Investor Contact Derek Bertocci, CFO
(617) 520-7064 (408) 943-0636 Laurie Berman, General Information
(310) 854-8315 GreenLight(TM) Fiber Sales* (Units) 2005 Q1 Q2 Q3
United States 11,792 14,379 12,654 International 4,463 4,712 4,985
Total 16,255 19,091 17,639 2004 Q1 Q2 Q3 Q4 Year United States
5,018 6,908 7,024 10,211 29,161 International 1,385 1,582 2,967
2,269 8,203 Total 6,403 8,490 9,991 12,480 37,364 * The Company now
plans to report consolidated worldwide fiber unit sales beginning
with its 2006 first quarter earnings press release. LASERSCOPE
FINANCIAL SUMMARY (Unaudited) Condensed Consolidated Statements of
Income Three months ended Nine months ended September 30, September
30, (thousands except 2005 2004 2005 2004 per share amounts) Net
revenues $30,428 $24,156 $92,123 $64,340 Cost of sales 12,403 9,749
36,131 26,935 Gross margin 18,025 14,407 55,992 37,405 Operating
expenses: Research and development 2,123 1,143 5,446 3,727 Selling,
general and administrative 10,533 8,763 32,100 23,834 12,656 9,906
37,546 27,561 Operating income 5,369 4,501 18,446 9,844 Interest
income (expense) and other, net 92 (52) 419 321 Net income before
income taxes 5,461 4,449 18,865 10,165 Provision (benefit) for
income taxes (862) 96 2,221 610 Net income $6,323 $4,353 $16,644
$9,555 Basic net income per share $0.28 $0.20 $0.75 $0.46 Diluted
net income per share $0.28 $0.19 $0.73 $0.42 Shares used in basic
per share calculations 22,196 21,364 22,101 20,875 Shares used in
diluted per share calculations 22,955 22,778 22,937 22,780
Condensed Consolidated Balance Sheets September 30, December 31, ($
in thousands) 2005 2004 Assets Current assets: Cash & cash
equivalents $29,083 $15,954 Accounts receivable, net 22,403 20,342
Inventories 26,731 19,446 Deferred tax assets, prepayments and
other current assets 16,908 1,471 Total current assets 95,125
57,213 Property and equipment, net 6,321 3,457 Other assets 1,317
919 Total assets $102,763 $61,589 Liabilities and Shareholders'
Equity Current liabilities $24,824 $18,647 Capital leases 14 31
Shareholders' equity 77,925 42,911 Total liabilities and
shareholders' equity $102,763 $61,589 DATASOURCE: Laserscope
CONTACT: Eric Reuter, President & CEO, or Derek Bertocci, CFO,
both of Laserscope, +1-408-943-0636; or Analyst/Investor, Tricia
Ross, +1-617-520-7064, or Laurie Berman, General Information,
+1-310-854-8315, both of Financial Relations Board, for Laserscope
Web site: http://www.laserscope.com/
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