AGA MEDI 
By AGA Medical Holdings, Inc. (AGA Medical) (NASDAQ: AGAM), a leading developer of interventional medical devices for the minimally invasive treatment of structural heart defects and vascular abnormalities, today reported financial results for the second quarter ended June 30, 2010.
Highlights of the Second Quarter of 2010 include:
- Enrolled first patient in the feasibility phase of the prospective, multicenter, randomized AMPLATZER® Cardiac Plug U.S. clinical trial, designed to evaluate this device in closing the left atrial appendage for the prevention of stroke in atrial fibrillation patients;
- Issuance of new guidelines by the U.K.'s National Institute for Health and Clinical Excellence (NICE) concluding that the percutaneous closure of the left atrial appendage reduces stroke risk in atrial fibrillation;
- Awarded €2.1 million in damages by the Düsseldorf Regional Court as a result of a patent infringement case filed by AGA Medical against Occlutech GmbH, based in Jena, Germany; and
- Continued enrollment in its RESPECT clinical trial, designed to evaluate the link between a patent foramen ovale (PFO) and stroke, with 762 patients enrolled in the study and 1,514 patient follow-up years as of July 31, 2010.
Financial Results for Second Quarter 2010 vs. Second Quarter 2009
Net sales for the second quarter of 2010 were $53.8 million, a 7.6% increase over $50.0 million for the second quarter of 2009. On a constant currency basis, net sales grew 10.0% year over year.
John Barr, President and Chief Executive Officer of AGA Medical, commented, ?We achieved another quarter of solid top line growth, despite the significant impact of currency. We also significantly increased net income while continuing to invest in our future by investing in our pipeline programs, which include our clinical trials. Overall, our results clearly demonstrate the strength of our business with strong operating performance and significant cash generation.?
Gross margins for the second quarter of 2010 were 85.5% (85.8% on a constant currency basis) compared to 83.6% in the prior year period.
Total operating expenses for the second quarter of 2010 were $40.6 million as compared to $36.4 million in the second quarter of 2009. Total operating expenses for the second quarter of 2010 were essentially flat from the first quarter of 2010, excluding the impact of the litigation settlement expense, at $40.6 million versus $40.7 million, respectively.
Selling, general and administrative expenses totaled $24.5 million in the second quarter of 2010 versus $23.8 million in the prior year period, an increase of 2.8%, related primarily to expanding our direct sales force in Europe and North America and partially offset by lower legal expenses. Research and development spending totaled $11.5 million in the second quarter of 2010, an increase of $2.9 million from the second quarter of 2009, primarily due to increased spending on clinical trials as a result of strong patient enrollment in the company's U.S. clinical trials.
Barr commented, ?We continue to see strong and steady enrollment in RESPECT and continue to be pleased with our enrollment progress in PREMIUM, our U.S. clinical trial evaluating the link between PFO and migraine. With the commencement of our U.S. clinical trial evaluating our Amplatzer Cardiac Plug for left atrial appendage closure, we now have four major multicenter, randomized clinical trials underway, each representing a significant revenue opportunity and each with the potential to change the current standard of care.?
Operating income for the second quarter of 2010 was $5.4 million versus $5.4 million in the prior year period. However, operating income increased $2.0 million, or 58%, in the second quarter from the first quarter of 2010, excluding the impact of the litigation settlement with Medtronic.
Barr commented further, ?With a focus on sustaining our strong gross margins and managing operating expenses, we realized a 58% increase in operating income from the first quarter of 2010, excluding the Medtronic litigation settlement. This allows us to continue to make a significant investment in our R&D programs. As we head in to the second half of the year, we will remain focused on continuing these positive trends in operating performance.?
EBITDA (net income/(loss) before interest income, interest expense, provision/(benefit) for income tax, depreciation and amortization) was $11.9 million in the second quarter 2010 versus $12.1 million in the prior year period. EBITDA margin was 22.1% for the second quarter 2010, compared to 24.3% for the second quarter 2009.
Net income for the second quarter was $3.6 million versus $2.2 million in the prior year period, an increase of 68%. Including dividends for Series A and Series B preferred and Class A common stock accrued in the second quarter of 2009, the company reported net income/(loss) applicable to common stockholders of $3.6 million, or $0.07 per fully diluted and basic share, for the quarter ended June 30, 2010, compared to ($2.1) million, or ($0.10) per fully diluted and basic share, for the prior year period. The accrued dividends on these securities and the securities associated with these dividends were converted into common stock in connection with the company's initial public offering in the fourth quarter 2009.
Non-GAAP adjusted net income for the quarter ended June 30, 2010 was $6.9 million versus $7.4 million in the prior year period and non-GAAP adjusted net income per fully diluted share was $0.13 for the quarter ended June 30, 2010 versus $0.18 for the prior year period calculated using fully diluted shares outstanding of approximately 51.2 million and 41.0 million respectively. The significant increase in fully diluted weighted average shares outstanding was primarily due to the company's initial public offering in the fourth quarter of 2009.
Cash and cash equivalents were $14.7 million as of June 30, 2010, representing a $1.5 million increase from cash and cash equivalents of $13.2 million as of March 31, 2010. This increase is net of a $7.5 million payment to Medtronic as a result of the litigation settlement agreement.
Fiscal 2010 Outlook
AGA Medical has updated its fiscal 2010 sales guidance to reflect the recent strengthening of the U.S. dollar against certain foreign currencies, primarily the Euro. In the event the Euro remains at a rate of 1.32 or above, the company's 2010 financial guidance remains unchanged. In the event the Euro averages 1.25 on a sustained basis, the low end of the company's sales guidance will be $217 million. This compares with prior sales guidance of $221 million to $226 million.
There are no changes to the company's previous full year 2010 expectations for gross margin (85%), effective tax rate (35%) or fully-diluted shares outstanding (51 million).
In addition, if the Euro averages 1.25 on a sustained basis, the low end of the company's 2010 financial guidance for non-GAAP adjusted earnings per share, excluding the impact of amortization and certain one-time items, will be $0.46. This compares with prior non-GAAP adjusted earnings per share guidance of $0.49 and $0.54.
Conference Call Today at 8 a.m. Eastern
AGA Medical will host a live webcast of its second quarter conference call today at 8 a.m. ET (7 a.m. CT). To access the live webcast, go to the investor information section of the company's website, www.amplatzer.com, and click on the webcast icon. A webcast replay will be available beginning at approximately 10:00 a.m. ET today.
To participate in the conference call, dial (866) 356-4123 and enter 70381813. Please dial in at least 10 minutes prior to the call.
If you do not have access to the Internet and want to listen to an audio replay of the conference call, please dial (888) 286-8010 and enter access number 64783415. The audio replay will be available beginning at approximately 10:00 a.m. ET today through Tuesday, August 17, 2010.
Statement regarding Non-GAAP Financial Measures
The following provides information regarding non-GAAP financial measures used in this earnings release:
To supplement the company's consolidated statement of operations presented in accordance with accounting principles generally accepted in the United States, or GAAP, the company has disclosed EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, non-GAAP adjusted net income and non-GAAP adjusted earnings per share, which are non-GAAP measures. EBITDA represents net income (loss) before interest income, interest expense, provision (benefit) for income tax, and depreciation and amortization. EBITDA margin represents EBITDA divided by total net sales. Adjusted EBITDA and adjusted EBITDA margin represent EBITDA and EBITDA margin excluding the impact of the one-time litigation settlement expense. The company presents EBITDA and EBITDA margin because it believes these measures are useful indicators of its operating performance and adjusted EBITDA and adjusted EBITDA margin to present this operating performance measure without the impact of the one-time litigation settlement expense. Non-GAAP adjusted net income and adjusted earnings per share reflects certain non-cash and non-recurring items that are itemized in the ?Reconciliation of Reported Results to Non-GAAP Financial Measures?. While the company believes that these financial measures are useful in evaluating the company's business, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, this non-GAAP financial measure may not be the same as similarly entitled measures reported by other companies. See ?Consolidated Statements of Operations? for the quarters ended June 30, 2010 and 2009 included with this release for a reconciliation of EBITDA to net income and for a presentation of net income to non-GAAP adjusted net income and non-GAAP adjusted net income per diluted share.
Use of Constant Currency
As exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of results on a constant currency basis in addition to reported results helps improve investors' ability to understand the company's operating results and evaluate its performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. The company uses results on a constant currency basis as one measure to evaluate its performance. In this release, the company calculates constant currency by calculating current-year results using prior year foreign currency exchange rates. The company generally refers to such amounts calculated on a constant currency basis as excluding or adjusting for the impact of foreign currency. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as presented by the company, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.
About AGA Medical
AGA Medical, based in Plymouth, Minnesota, is a leading innovator and manufacturer of medical devices for the treatment of structural heart defects and vascular abnormalities. AGA Medical's AMPLATZER® occlusion devices offer minimally invasive, transcatheter treatments that have been clinically shown to be safe and highly effective in defect closure. AGA Medical is the only manufacturer with occlusion devices approved to close seven different structural heart defects, with leading market positions for each of its devices. More than 1,650 articles supporting the benefits of AMPLATZER products have been published in medical literature. AGA Medical markets its AMPLATZER products in 112 countries worldwide to interventional cardiologists, electrophysiologists, interventional radiologists and vascular surgeons. More information about the company and its products can be found at http://www.amplatzer.com.
Forward-Looking Statements
This news release and any attachments may include ?forward-looking statements,? within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including, in particular, earnings guidance, statements regarding enrollment rates in our clinical trials, statements regarding operating performance, and any statements about the company's plans, strategies and prospects. These statements are based on the beliefs of our management as well as assumptions made by, and information currently available to, the company. These statements reflect the company's current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These factors include, among other things: failure to implement the company's business strategy; failure to capitalize on the company's expected market opportunities; lack of regulatory approval and market acceptance of the Company's new products, product enhancements or new applications for existing products; regulatory developments in key markets for the company's AMPLATZER occlusion devices; failure to complete the company's clinical trials or failure to achieve the desired results in our clinical trials; inability to successfully commercialize the company's existing and future research and development programs; failure to protect the company's intellectual property, in particular a failure to prevail on appeal in our Occlutech litigation; decreased demand for the company's products; product liability claims exposure; failure to otherwise comply with laws and regulations; changes in general economic and business conditions; changes in currency exchange rates and interest rates; and other risks and uncertainties, including those detailed in the company's most recent Annual Report on Form 10-K, as may be updated from time to time in the company's periodic reports filed with the Securities and Exchange Commission. You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein, could cause the company's results to differ materially from those expressed or suggested in any forward-looking statement. Except as required by law, the company does not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review the company's filings with the Securities and Exchange Commission (which are available from the SEC's EDGAR database at www.sec.gov, at various SEC reference facilities in the United States and via the company's website at www.amplatzer.com).
For more information, visit www.amplatzer.com.
| AGA Medical Holdings, Inc. | ||||||||||||||||||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||||||
| Net sales | $53,750 | $49,961 | $105,026 | $94,381 | ||||||||||||||||||||||||||||||||
| Cost of goods sold | 7,782 | 8,196 | 14,987 | 17,004 | ||||||||||||||||||||||||||||||||
| Gross profit | 45,968 | 41,765 | 90,039 | 77,377 | ||||||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||
| Selling, general, and administrative | 24,456 | 23,792 | 49,843 | 46,456 | ||||||||||||||||||||||||||||||||
| Research and development | 11,470 | 8,618 | 21,620 | 16,477 | ||||||||||||||||||||||||||||||||
| Litigation settlement | – | – | 31,859 | – | ||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 4,936 | 4,676 | 9,971 | 9,894 | ||||||||||||||||||||||||||||||||
| Change in purchase consideration | (240 | ) | (698 | ) | (153 | ) | (698 | ) | ||||||||||||||||||||||||||||
| Gain on disposal of assets | (12 | ) | (26 | ) | (1 | ) | (26 | ) | ||||||||||||||||||||||||||||
| Total operating expenses | 40,610 | 36,362 | 113,139 | 72,103 | ||||||||||||||||||||||||||||||||
| Operating income (loss) | 5,358 | 5,403 | (23,100 | ) | 5,274 | |||||||||||||||||||||||||||||||
| Investment loss | – | – | – | (2,352 | ) | |||||||||||||||||||||||||||||||
| Interest income | 21 | 29 | 60 | 61 | ||||||||||||||||||||||||||||||||
| Interest expense | (2,390 | ) | (3,638 | ) | (4,451 | ) | (8,149 | ) | ||||||||||||||||||||||||||||
| Other income (expense), net | 135 | 771 | (263 | ) | 1,275 | |||||||||||||||||||||||||||||||
| Income (loss) before income taxes | 3,124 | 2,565 | (27,754 | ) | (3,891 | ) | ||||||||||||||||||||||||||||||
| Income tax provision (benefit) | (518 | ) | 399 | (10,168 | ) | 306 | ||||||||||||||||||||||||||||||
| Net income (loss) | 3,642 | 2,166 | (17,586 | ) | (4,197 | ) | ||||||||||||||||||||||||||||||
| Less Series A and B preferred stock and Class A common stock dividends | - | (4,237 | ) | - | (8,471 | ) | ||||||||||||||||||||||||||||||
| Net Income (loss) applicable to common stockholders | $3,642 | ($2,071 | ) | ($17,586 | ) | ($12,668 | ) | |||||||||||||||||||||||||||||
| Net income (loss) per common share-basic | $0.07 | ($0.10 | ) | ($0.35 | ) | ($0.59 | ) | |||||||||||||||||||||||||||||
| Net income (loss) per common share-diluted | $0.07 | ($0.10 | ) | ($0.35 | ) | ($0.59 | ) | |||||||||||||||||||||||||||||
| Weighted average common shares-basic | 50,156 | 21,482 | 50,130 | 21,482 | ||||||||||||||||||||||||||||||||
| Weighted average common shares- diluted | 51,207 | 21,482 | 50,130 | 21,482 | ||||||||||||||||||||||||||||||||
| Operating Statistics: | ||||||||||||||||||||||||||||||||||||
| EBITDA | $11,899 | $12,133 | ($10,527 | ) | $16,419 | |||||||||||||||||||||||||||||||
| EBITDA Margin | 22.1 | % | 24.3 | % | (10.0 | %) | 17.4 | % | ||||||||||||||||||||||||||||
| Adjusted EBITDA | $11,899 | $12,133 | $21,332 | $16,419 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA Margin | 22.1 | % | 24.3 | Share
© Business Wire - 2010
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