American Medical Reports Strong – Analyst Blog

American Medical Systems Holdings, Inc. (AMMD) reported strong fiscal third quarter results. For the quarter, earnings per share was 27 cents, beating the Zacks Consensus Estimate of 20 cents and the year-ago earnings of 18 cents. Earnings per share for the reported quarter were also ahead of the company’s previous guidance of 17 to 21 cents.

 

Sales

 

Total sales for the quarter increased 4.9% year over year to $123.2 million. Excluding an unfavorable foreign currency translation (FX), net sales increased 6.7% year over year. On a geographic basis, U.S. sales accounted for roughly 75% of total sales and increased 9.2% year over year. International sales declined 6.1% year over year.

 

In terms of business segments: Men’s health revenues increased 6.6% year over year to $54.7 million. Growth was primarily due to higher sales of the erectile restoration system.

 

Women’s health revenues increased 4% year over year to $40.9 million primarily due to higher demand for the company’s pelvic floor repair products. BPH therapy sales increased 3.1% year over year to $27.7 million. Growth in this segment can be attributed to higher demand for laser fibers, primarily in the domestic market.

 

Margins

 

American Medical Systems reported strong growth in margins on the basis of higher sales and tight cost-control initiatives. Gross margin increased 390 basis points (bps) year over year to 82.7%. Marketing and selling expenses as a percentage of sales declined 140 bps year over year to 34.5%.

 

Research and development expenses (including in-process development charges) as a percentage of sales declined 590 bps year over year to 10.1%. General and administrative expenses as a percentage of sales increased 20 bps year over year to 8.5%. Operating margin increased 1,200 bps year over year to 26.9%. 

 

Balance Sheet & Cash Flow

 

American Medical Systems ended the reported quarter with cash and short-term investments of $49.5 million, an increase of roughly 15% in the first nine months of the year. The company’s outstanding debt and other long term liabilities stood at $452.5 million at the end of the quarter. Cash flow from operations was approximately $37.3 million for the quarter.

 

Guidance

 

American Medical Systems provided revenues and earnings per share guidance for the next quarter and full year 2009. For the fourth quarter, revenues are estimated in the range of $136 to $142 million. Earnings per share are estimated between 29 and 33 cents.

 

For full fiscal 2009, revenues should be between $509 and $515 million, an increase from the prior guidance of $495 to $510 million. Earnings per share should be in the range of $1.10 to $1.14, compared to the previous guidance of $1 to $1.10. 

Headquartered in Minnetonka, Minnesota, American Medical Systems is a world leader in medical devices and procedures used to treat erectile dysfunction and other men's and women's health problems. Other men's health problems include incontinence, benign prostate hyperplasia, and stricture. Women's health problems include menorrhagia (excessive bleeding during menstruation), incontinence, and other pelvic floor defects. The company’s primary competitors include Johnson & Johnson (JNJ) and Boston Scientific Corp. (BSX).