Leading pelvic-health devices provider American Medical Systems (AMMD) posted fourth-quarter fiscal 2010 adjusted (excluding one-time items such as amortization charges) earnings per share of 40 cents, ahead of the Zacks Consensus Estimate of 36 cents while exceeding the year-ago adjusted earnings of 35 cents.
The results also beat the Minnesota-based company’s guidance range of 35 to 38 cents. Profit for the quarter climbed 16.7% year over year to $27.2 million (or 35 cents a share).
For fiscal 2010, adjusted earnings of $1.30 a share also beat the Zacks Consensus Estimate of $1.25 and surpassed the year-ago earnings of $1.16. Besides, amortization charges, the full year adjusted earnings also exclude gains from the divestiture of the company’s “Her Option” uterine health product line.
Revenues for the quarter edged up 0.7% year over year to $147 million, beating the Zacks Consensus Estimate of $146 million and the company’s guidance of $141-$146 million. For fiscal 2010, revenues grew 4.4% to $542.3 million, also exceeding the Zacks Consensus Estimate of $540 million.
Revenue growth in the fourth quarter was impacted by an unfavorable foreign exchange translation and a challenging international market, which partly offset growth in the company’s domestic business. Excluding the currency exchange translation effect and the impact of the divested Her Option product line, sales grew 4%.
Gross margin improved modestly to 82.8% from 82.2% a year-ago. Operating margin increased to 31.7% from 30.9%.
Segment Analysis
By business segments, Men’s Health business rose 2.7% year over year in the quarter to $65.2 million. However, BPH Therapy segment revenues dipped 2.1% to $32.6 million, impacted by lower fiber sales due to the limited availability of the new BPH therapy system, MoXy Liquid Cooled Fiber, which offset the favorable response for the GreenLight XPS laser therapy.
Revenues from Women’s Health business spiked 6.7% year over year to $48.8 million. Growth was led by the sustained healthy performance of pelvic floor repair products buoyed by the success of Elevate anterior and Elevate posterior systems. The female continence business benefited from the launch of MiniArc Precise single-incision sling system for the treatment of female stress urinary incontinence.
Geographically, the U.S. sales (up 7.4%) contributed roughly 72% to total sales while international revenues (down 7.6%) accounted for the balance.
Financial Condition
American Medical exited fiscal 2010 with a reasonably healthy balance sheet with cash and short-term investments increasing 54% year over year to $77.8 million. The company de-leveraged its balance sheet as total debt and other long-term liabilities declined roughly 27% year over year and 8% sequentially to $315 million. American Medical generated $115.9 million in cash from operations during fiscal 2010, down by roughly 5.6% year over year.
Outlook
Moving forward, American Medical expects revenues for first-quarter 2011 in the range of $135 to $139 million with adjusted earnings per share of between 29 cents and 32 cents. The current Zacks Consensus Estimates for revenue and earnings of $138 million and 31 cents, respectively, are within these guidance ranges.
For fiscal 2011, the company forecast revenues between $555 million and $575 million along with adjusted earnings in the range of $1.32 to $1.39. The corresponding Zacks Consensus Estimates are $564 million and $1.33, respectively.
American Medical is a world leader in manufacturing medical devices and procedures for treating health problems of both men and women. In addition to the U.S., the company sells its products in Canada, Asia, Australia, Europe and South America.
American Medical has a strong pipeline and remains focused on rolling out new products to drive growth. Other positive factors are represented by the company’s dominant position in both male and female incontinence markets and a sound balance sheet.
However, American Medical faces stiff competition from larger players like Boston Scientific (BSX) and Johnson & Johnson (JNJ). Besides, the company is exposed to a significant reimbursement risk and its European markets are yet to recover from the macroeconomic headwinds. Currently, we have a Neutral rating on American Medical.
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