-- Lithotripsy procedures grow 11.6% from prior year -- Prostate treatment revenues increase 63.6%
MARIETTA, Ga., Aug. 5, 2004 (PRIMEZONE) -- HealthTronics Surgical Services, Inc. (Nasdaq:HTRN), a leading device manufacturer and provider of minimally invasive urologic and orthopaedic services, today announced financial results for the second quarter ended June 30, 2004.
Revenues for the second quarter increased 17.7% to $25.3 million from $21.5 million for the same period a year ago. Net income for the second quarter totaled $226 thousand, or $0.02 per share, compared with $698 thousand for the comparable period last year. The expected decline in net income was a result of several factors, including an increase in minority interest expense related to the Company's re-syndication of several key lithotripsy partnerships during 2003 and the expected dilution from the HMT Holding acquisition completed in March 2004.
Revenues for the first six months of 2004 increased 16.1% to $49.1 million from $42.3 million for the comparable period last year. Net income for the first six months ended June 30, 2004 was $575 thousand, compared to $2.8 million for the first six months of 2003. Included in the 2003 net income was a $1.3 million after tax gain on sale of investment interest generated by the Company's planned re-syndication of several of its lithotripsy partnerships.
"HealthTronics' core businesses continued to perform well in the second quarter," said Martin McGahan, President and COO. "We experienced ongoing growth in our core lithotripsy business, we continued to show progress in treatment of benign and cancerous prostate conditions, and our orthopaedic business performed according to expectations."
Lithotripsy Operations
HealthTronics' lithotripsy procedures increased 11.6% during the second quarter of 2004 over the second quarter of 2003. Strong growth continued as a result of both same-store growth (growth within existing partnerships) and from new operations. HealthTronics' lithotripsy procedures for the second quarter of 2004 and the second quarter of 2003 were as follows:
For the three months ended June 30,
2004 2003
---- ----
Consolidated 6,616 5,972
Unconsolidated 3,229 2,848
----- -----
Total 9,845 8,820
Lithotripsy revenue for the quarter was $14.7 million compared to $13.7 million for the comparable period last year, an increase of 7.3%. The slower growth rate in revenues versus procedures is a result of the Company performing more wholesale procedures this year than last. Newer partnerships perform wholesale procedures and one of the Company's larger partnerships switched from retail to wholesale at the beginning of the year. Under the wholesale billing model, the Company charges a fee to the hospital or surgery center at which the treatment is performed. Under the retail billing model, HealthTronics charges the patient's insurer, HMO or other responsible party, and pays a fee to the health care facility for access to its premises. Overall, the Company has seen no significant change in either wholesale or retail pricing.
Lithotripsy revenue for the first six months of 2004 was $28.8 million compared to $27.0 million for the comparable period last year.
Orthopaedic Operations
HealthTronics performed 1,978 orthopaedic procedures during the second quarter, a 0.6% increase over the 1,967 procedures performed during the second quarter of 2003. Revenues for the orthopaedic extracorporeal shock wave surgery business during the second quarter increased 2.2% to $4.6 million from $4.5 million in the comparable quarter of 2003.
Manufacturing, Sales and Service Operations
Revenue from the equipment sales and service division was $4.3 million during the second quarter, a 95.5% increase over the $2.2 million during the second quarter of 2003. Revenues from the HMT subsidiary contributed $1.9 million of the total sales for the quarter -- the first full quarter of operations including HMT.
The expected dilution of the acquisition resulted in part from the elimination of sales recognized between HMT and HealthTronics.
Other Operations
The Company's prostate treatment business continued to show solid growth during the second quarter. The Company performed 1,030 procedures on either benign or cancerous prostate conditions during the quarter, an increase of 27.8% over the 806 procedures performed during the comparable quarter last year. Revenues for prostate treatments rose 63.6% to $1.8 million from the $1.1 million in the second quarter of last year.
HealthTronics also made progress in establishing several clinical testing sites for the commencement of clinical trials with High Intensity Focused Ultrasound ("HIFU") which should begin next year. HealthTronics continues to believe that, upon approval by the FDA, HIFU has the potential to play an important role in the treatment of prostate cancer and can be a clinically effective and cost efficient alternative. The Company anticipates that the HIFU FDA clinical review and application process could take from three to five years.
Other Developments
As reported, HealthTronics and Prime Medical Services Inc. reached a definitive agreement in June to merge, and on August 4, 2004 announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 had expired for the proposed transaction.
On July 2, 2004, HealthTronics filed a Registration Statement on Form S-4 with the Securities and Exchange Commission (SEC), which is available on the SEC's web site. This document is currently under review by the SEC. When the comment and response process has concluded, the finalized joint proxy statement/prospectus contained in the Form S-4 will be sent to both companies' stockholders in connection with the stockholder meetings that will be held to vote on the transaction. It is anticipated that the closing of the merger would occur promptly after these meetings, assuming both companies' stockholders approve the merger. The companies currently anticipate closing the merger in late September or early October of 2004.
Conference Call
A conference call for the investment community will be held today, August 5, at 10:30 a.m. EDT. The conference call will be webcast live and can be accessed via HealthTronics' website at http://www.healthtronics.com. Go to the Investor Relations page and follow the link for the broadcast. An online archive of the conference call will be available on the website for approximately thirty days. Individuals who wish to participate in the conference call may dial in at 1-877-323-2091 using the conference code "Q2 Earnings Release".
About HealthTronics Surgical Services
HealthTronics Surgical Services, Inc. is one of the nation's leading providers of non-invasive and minimally invasive medical devices and surgical services for certain urologic and orthopaedic conditions. The Company provides technical and administrative services to physicians, hospitals and ambulatory surgery centers using extracorporeal shock wave devices. The two primary services offered by HealthTronics are lithotripsy extracorporeal shock wave treatment, which is a procedure for treating kidney stones in a non-invasive manner, and Orthotripsy(r) extracorporeal shock wave surgery, which is a procedure for treating orthopaedic soft tissue disorders in a non-invasive manner. The two primary medical devices manufactured by the Company's HMT subsidiary are the LithoDiamond(r) and the OssaTron(r). The Company has operations throughout the United States and worldwide. More information about HealthTronics Surgical Services can be found at the Company's website, www.healthtronics.com.
Safe Harbor
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties or other factors which may cause actual results, performance or achievements of HealthTronics Surgical Services to be materially different from any future results, performance or achievements express or implied by such forward-looking statements. As always, these expectations and projections are based on currently available competitive, financial, and economic data, along with operating plans, and are subject to future events and uncertainties. Among the events and uncertainties which could adversely affect future periods are: inability to establish or maintain relationships with physicians and hospitals; health care regulatory developments that prevent certain transactions with health care professionals or facilities; inability of the Company or health care providers to obtain reimbursement for use of the Company's current or future products; competition or technological change that impacts the market for the Company's products; difficulty integrating HMT and realizing projected cost savings; unanticipated regulatory and clinical costs related to FDA approval of HIFU; and difficulty in managing the Company's growth. Additional factors that might cause such a difference, include, but are not limited to those discussed in the Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 2003, and in subsequent documents filed by HealthTronics Surgical Services with the Securities and Exchange Commission.
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
---- ---- ---- ----
(000's omitted, except per share amounts)
Revenues $25,334 $21,455 $49,074 $42,343
Net income $ 226 $ 698 $ 575 $ 2,827
Weighted average common
shares outstanding:
Basic 12,386 11,539 12,100 11,434
Diluted 12,470 11,842 12,143 11,715
Net income per common
share:
Basic $ 0.02 $ 0.06 $ 0.05 $ 0.25
Diluted $ 0.02 $ 0.06 $ 0.05 $ 0.24
CONSOLIDATED STATEMENTS OF INCOME
(000's omitted)
Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
-------- -------- -------- --------
Net revenue $ 25,334 $ 21,455 $ 49,074 $ 42,343
Cost of devices,
service parts and
consumables 4,933 4,553 9,906 8,813
Salaries, general and
administrative
expenses 13,066 9,792 24,417 19,372
Depreciation and
amortization 1,498 1,424 3,060 2,804
-------- -------- -------- --------
5,837 5,686 11,691 11,354
Equity in earnings of
unconsolidated
partnerships 160 221 489 479
Partnership
distributions from
cost based
investments 174 160 376 278
Gain on sale of
investment interest 10 142 255 2,216
Gain on sale of
property and
equipment 94 9 240 15
Interest expense (518) (511) (1,106) (1,044)
Interest income 94 40 109 75
-------- -------- -------- --------
Income before minority
interest
and income taxes 5,851 5,747 12,054 13,373
Minority interest (4,999) (4,600) (10,549) (8,729)
-------- -------- -------- --------
Income before income
taxes 852 1,147 1,505 4,644
Provision for income
taxes (626) (449) (930) (1,817)
-------- -------- -------- --------
Net income $ 226 $ 698 $ 575 $ 2,827
======== ======== ======== ========
Income per common share:
Basic $ 0.02 $ 0.06 $ 0.05 $ 0.25
======== ======== ======== ========
Diluted $ 0.02 $ 0.06 $ 0.05 $ 0.24
======== ======== ======== ========
Weighted average common
shares outstanding:
Basic 12,386 11,539 12,100 11,434
======== ======== ======== ========
Diluted 12,470 11,842 12,143 11,715
======== ======== ======== ========
For the Three Months Ended June 30, 2004
(000's omitted)
Manufacturing
Sales &
Lithotripsy Orthotripsy Service Other Total
---------------------------------------------------
Net revenue from
segment $ 15,054 $ 4,559 $ 7,754 $ 1,836 $ 29,203
Less intersegment
revenue 386 -- 3,483 -- 3,869
-------- -------- -------- -------- --------
Total consolidated
net revenues by
Segment $ 14,668 $ 4,559 $ 4,271 $ 1,836 $ 25,334
======== ======== ======== ======== ========
Segment depreciation
and Amortization $ 816 $ 460 $ 32 $ 164 $ 1,472
Plus unallocated
depreciation and
Amortization 26
--------
Total consolidated
depreciation and
Amortization $ 1,498
========
Equity in earnings
of unconsolidated
Entities $ 160 $ -- $ -- $ -- $ 160
========
Segment income
(loss) before
income Taxes $ 2,672 $ (99) $ (350) $ 3 $ 2,226
======== ======== ======== ========
Less unallocated
corporate
expenses (1,374)
--------
Total consolidated
income before
income taxes $ 852
========
For the Three Months Ended June 30, 2003
(000's omitted)
Manufacturing
Sales &
Lithotripsy Orthotripsy Service Other Total
----------------------------------------------------
Net revenue from
segment $ 14,002 $ 4,463 $ 3,018 $ 1,099 $ 22,582
Less intersegment
revenue 301 -- 826 -- 1,127
-------- -------- -------- -------- --------
Total consolidated
net revenues by
Segment $ 13,701 $ 4,463 $ 2,192 $ 1,099 $ 21,455
======== ======== ======== ======== ========
Segment
depreciation and
Amortization $ 854 $ 437 $ 4 $ 37 $ 1,332
Plus unallocated
depreciation
and Amortization 92
--------
Total consolidated
depreciation and
Amortization $ 1,424
========
Equity in earnings
of unconsolidated
Entities $ 221 $ -- $ -- $ -- $ 221
========
Segment income
(loss) before
income Taxes $ 2,654 $ (130) $ 47 $ 31 $ 2,602
======== ======== ======== ========
Less unallocated
corporate expenses (1,455)
--------
Total consolidated
income before
income taxes $ 1,147
========
For the Six Months Ended June 30, 2004
(000's omitted)
Manufacturing
Sales &
Lithotripsy Orthotripsy Service Other Total
---------------------------------------------------
Net revenue from
segment $ 29,492 $ 8,743 $ 12,813 $ 3,733 $ 54,781
Less intersegment
revenue 739 -- 4,968 -- 5,707
-------- -------- -------- -------- --------
Total consolidated
net revenues by
Segment $ 28,753 $ 8,743 $ 7,845 $ 3,733 $ 49,074
======== ======== ======== ======== ========
Segment depreciation
and Amortization $ 1,672 $ 908 $ 120 $ 306 $ 3,006
Plus unallocated
depreciation and
Amortization 54
--------
Total consolidated
depreciation and
Amortization $ 3,060
========
Equity in earnings
of unconsolidated
Entities $ 489 $ -- $ -- $ -- $ 489
========
Segment income (loss)
before income Taxes $ 4,659 $ (633) $ (288) $ 288 $ 4,026
======== ======== ======== ========
Less unallocated
corporate expenses (2,521)
--------
Total consolidated
income before
income taxes $ 1,505
========
For the Six Months Ended June 30, 2003
(000's omitted)
Manufacturing
Sales &
Lithotripsy Orthotripsy Service Other Total
----------------------------------------------------
Net revenue from
segment $ 27,541 $ 8,599 $ 6,042 $ 2,285 $ 44,467
Less intersegment
revenue 550 -- 1,574 -- 2,124
-------- -------- -------- -------- --------
Total consolidated
net revenues by
Segment $ 26,991 $ 8,599 $ 4,468 $ 2,285 $ 42,343
======== ======== ======== ======== ========
Segment depreciation
and Amortization $ 1,689 $ 843 $ 8 $ 87 $ 2,627
Plus unallocated
depreciation and
Amortization 177
--------
Total consolidated
depreciation and
Amortization $ 2,804
========
Equity in earnings of
unconsolidated
Entities $ 479 $ -- $ -- $ -- $ 479
========
Segment income (loss)
before income
Taxes $ 7,382 $ (243) $ 140 $ 95 $ 7,374
======== ======== ======== ========
Less unallocated
corporate expenses (2,730)
--------
Total consolidated
income before
income taxes $ 4,644
========
PROCEDURES PERFORMED
Q2, 2004 Q2, 2003
-------- --------
Lithotripsy 9,845 8,820
Orthopaedic ESWS 1,978 1,967
Prostate Treatment 1,030 806
-------------------------------
Martin J. McGahan, President & COO