EDAP TMS S.A. Reports 2003 Fourth Quarter & Year End Financial Results
Action Taken to Stop Sizeable Operating Losses - Cash Balances Remain Strong
VAULX-EN-VELIN, France, March 10 /PRNewswire-FirstCall/ -- EDAP TMS S.A. , a
global leader in the development, marketing and distribution of a portfolio of
minimally-invasive medical devices for the treatment of urological diseases,
today reported financial results for the fourth quarter and year ended December
31, 2003.
Revenues for the fourth quarter2003 were EUR 4.6 million compared to EUR 6.0
million in the same quarter of 2002. Total year 2003 revenues were EUR 18.5
million versus EUR 20.0 million in year 2002.
Gross margin, as a percent of sales, decreased to 16.6% in the fourth quarter of
2003, versus 46.1% in the same quarter of 2002. Full year 2003 gross margin, as
a percent of sales, decreased to 29.8% in fiscal year 2003 versus 42.9% in
fiscal year 2002.
Operating loss for the fourth quarter of 2003 was EUR 4.2 million versus EUR 1.4
million in the fourth quarter of 2002. Operating loss for the full year 2003
was EUR 8.1 million compared to full year 2002 operating loss of EUR 4.8
million.
Net loss for the fourth quarter of 2003 was EUR 4.3 million versus EUR 2.5
million in the same period of 2002. Net loss for the full year ended December
31, 2003 was EUR 9.0 versus EUR 4.0 million in the same period of 2002.
CONSOLIDATED COMPANY The fourth quarter 2003 results were affected by several reserves against
earnings that are exceptional and non-recurring. The first of these reserves
was related to the previously announced restructuring charge of EUR 2.1 million. Additionally, the Company took an inventory write down in the fourth quarter of
EUR 0.6 million related to the revaluation of inventories under U.S. GAAP.
Furthermore, there were two fewer Ablatherm sales versus budget, which, if sold,
would have contributed an additional EUR 0.4 in gross margin. Altogether, this
contributed to the 2003 operating loss of EUR 8.1 million. The two budgeted
Ablatherm units have subsequently been sold in the first quarter of 2004.
However, one of the most significant impacts to the results of the Company was
the strength of the Euro in 2003. The following table compares 2003 and 2002
exchange rates and illustrates the impact the exchange rates had on the results
of 2003, which on its own, reduced gross profit by EUR 2.0 million in 2003.
In millions of Euro 2003 2003 2002
at 2003 Rate at 2002 Rate at 2002 Rate
(Year End rate) (USD 1.26/YEN 135) (USD 1.05/YEN 124) (USD 1.05/YEN 124) Net Revenues 18.5 20.8 20.0
Cost of Sales / COGS (13.1) (13.4) (11.5)
Gross Profit 5.4 7.4 8.5
Operating Exp. (11.4) (11.7) (12.1)
Non-recurring Exp. (2.1) (2.1) (1.2)
Operating Loss (8.1) (6.4) (4.8) Note: Today's rate : USD 1.22 / YEN 136 mid-day March 10, 2004 Cash management continues to remain a high priority and cash balances remain
strong. The Company ended 2003 with EUR 10.4 million cash on hand and had EUR
10.7 million as of the end of February 2004. As planned, there are still
payments to be made against the EUR 2.1 restructuring total reserve with the
following schedule: EUR 0.2 million for the balance of Q1, EUR 0.7 million in Q2
and EUR 0.3 million for the balance of the year. At year-end 2003, the Company
had EUR 1.33 per diluted share in cash on hand and a net book value of EUR 19.0
million or EUR 2.43 per diluted share.
Hugues de Bantel,President of the Company's two operating divisions, commented:
"These operating losses for both divisions are totally unacceptable. Only three
months into my new role as head of both divisions, I am forcibly driven to a
five-point action plan, which I began executing on in December 2003. The plan
is as follows: * Putting a stop to the multi-million operating losses with a total
Company restructuring, which has now been completed, but this is only
the first step;
* Maintaining strongcash management. This is an on going and tough
discipline that I am committed to ensure at all times. Currently the
Company's cash balances are tracking reasonably;
* Increasing Revenues, with double-digit growth, is a personal commitment
that I am devoted to in every market segment of the business. This is a
challenge, but one that I feel is attainable;
* A major cost of sales reduction program is being implemented with all
of our suppliers and partners; and
* Disciplined control of all already reduced operating expenses is every
Manager's commitment and is reviewed by me weekly.
"As President of the operating divisions, my personal objective is operating
income and positive cash flow for the Company and I look forward to reviewing
this plan with everyone at tomorrow's conference call and reporting quarterly on
the Company's results against these objectives going forward," concluded Mr. de
Bantel.
UROLOGICAL DEVICES AND SERVICES ("UDS") DIVISION The UDS division experienced another record year in terms of the number of
lithotripsy units sold. The total number of units sold in 2003 was 34 versus 30
in 2002, which increased the division's installed base by a net 23 units
bringing the total installed base, at December 31, 2003, to 404 units worldwide. The UDS division saw a decrease in its average sales price ("ASP") in 2003
primarily due to the strength of the Euro versus the local currencies in the
division's strongest markets in Asia.
The division, even with the challenges impacting its ASP, was cash flow neutral
during 2003 and produced an operating profit, exclusive of restructuring charges
and inventory write-down. The division anticipates continued growth in its
revenue in 2004. The division is confident in its expectations, in part because,
the backlog of machines at the end of 2003 was four units and the outlook for
2004 looks promising as the demand in the Asian market remains strong and sales
will begin in the U.S. through the Company's relationship with HealthTronics
Surgical Services (NASDAQ:HTRN) ("HealthTronics").
HIGH INTENSITY FOCUSED ULTRASOUND ("HIFU") DIVISION The HIFU division clearly did not meet the Company's expectations in 2003. Hence
the restructuring at the end of 2003 whereby the Company took extraordinary
steps to ensure the strength of the division and to position it for success in
2004 by focusing the efforts of the organization on its key European markets.
Additionally, to further focus the division's efforts on the European market,
the Company finalized, in early 2004, an agreement with HealthTronics granting
the Ablatherm's distribution rights to the U.S. market when and if HealthTronics
is able to receive marketing clearance from the U.S. Food and Drug
Administration ("FDA"). We believe that HIFU technology has a potential to play
an important role in the United States, in the treatment of localized prostate
cancer and can be a clinically effective and a very cost efficient alternative. Several prominent urologists in the United Sates have already expressed a strong
interest in participating in the planned FDA clinical trials.
The acceptance of Ablatherm continues its progress in Europe, albeit at a slower
pace than expected, due to a longer than expected process of securing
reimbursement rates. Even with these challenges, as of today, over 4,500
patients have been treated and 42 sites have access to the Ablatherm and utilize
it as part of their daily practice. In 2003, there were 1,477 Ablatherm
treatments performed versus 1,104 in 2002, which is an increase of 34% year over
year.
The division is optimistic that 2004 will be a breakout year for HIFU
technology, with a cost structure now more in line with revenue expectations in
2004. Additionally, there have been a series of exciting subsequent events that
have yet to positively impact the financials of the division. These events
include: * The Company's finalization of an agreement with HealthTronics allowing
HealthTronics tobe the champion of HIFU in the U.S.A.;
* The recent Scientific meeting of the American Association for the
Advancement of Science ("AAAS"), held in Seattle last February,
generated extensive interest and news releases on HIFU technology asa
whole and for the treatment of prostate cancer specifically; and
* Three Ablatherm orders have been received in the first quarter with two
units already delivered.
Philippe Chauveau, Chairman and Chief Executive Officer of EDAP TMS S.A.,
commented, "2003 was a very bad year. The Company made significant changes to
the cost structure of its operating divisions with the goal of stopping the
sizeable operating losses that the Company has been sustaining over the years. The Board and the Management of the Company are committed to the statement that
each of the operating divisions will be profitable and cash flow positive." EDAP TMS S.A. is the global leader in the development, production, marketing and
distribution of a portfolio of minimally invasive medical devices primarily for
the treatment of urological diseases. The Company currently develops and markets
devices for the minimally invasive treatment of localized prostate cancer, using
High Intensity Focused Ultrasound (HIFU), through its EDAP SA subsidiary; it is
also developing this technology for the treatment of certain other types of
tumors. EDAP TMS S.A. also produces and commercializes medical equipment for
treatment of urinary tract stones using Extra-corporeal Shockwave Lithotripsy
(ESWL), via its TMS SA subsidiary. In addition, the Company markets in Japan and
Italy devices for the non-surgical treatment of benign Prostate Hyperplasia
(BPH) using Microwave Thermotherapy (TUMT). For more information, in the U.S.,
contact EDAP Technomed Inc., the Company's U.S. subsidiary located in Atlanta,
GA, by phone at (770) 446-9950. For additional information on the Company,
please see the Company's web site at: http://www.edap-tms.com/.
This press release contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. These include
statements regarding the Company's growth and expansion plans. Such statements
are based on management's current expectations and are subjectto a number of
uncertainties and risks that could cause actual results to differ materially
from those described in the forward-looking statements. Factors that may cause
such a difference include, but are not limited to, those described in the
Company's filings with the Securities and Exchange Commission.
EDAP TMS S.A. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands of Euro's and U.S. Dollars, except per share data) Three Months Ended: Three Months Ended:
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
Euros Euros $US $US Net sales of medical
equipment 1,995 3,940 2,408 3,979
Net sales of spare
parts, supplies and
Services 2,514 1,975 3,034 1,994 NET SALES 4,509 5,915 5,442 5,973 Other revenues 106 87 127 88 TOTAL REVENUES 4,615 6,002 5,569 6,061 Cost of sales (3,849) (3,272) (4,645) (3,305) GROSS PROFIT 766 2,730 924 2,756 Research & development
expenses (725) (1,010) (875) (1,020) S, G & A expenses (2,127) (2,643) (2,567) (2,668) Non-recurring
operating expenses (2,097) (496) (2,531) (501) Total operating
expenses (4,949) (4,149) (5,973) (4,189) OPERATING PROFIT
(LOSS) (4,183) (1,419) (5,049) (1,433) Interest (expense)
income, net 136 (94) 164 (95) Currency exchange
gains (loss), net (272) (426) (328) (430) Other income (loss),
net (54) (535) (65) (540) INCOME (LOSS) BEFORE
TAXES AND MINORITY
INTEREST (4,373) (2,474) (5,278) (2,498) Income tax (expense)
credit 36 3 43 3 NET INCOME (LOSS) (4,337) (2,471) (5,235) (2,495) Earning per share --
Basic (0.56) (0.32) (0.67) (0.32) Average number of
shares used in
computation of EPS 7,782 7,782 7,782 7,782 Earning per share --
Diluted (0.56) (0.32) (0.67) (0.32) Average number of
shares used in
computation of EPS 7,805 7,782 7,805 7,782 NOTE: Translated for convenience of the reader to U.S. dollars at the
2003 average three months noon buying rate of 1 Euro = 1.2067 USD,
and 2002 average three months noon buying rate of 1 Euro = 1.0099
USD. EDAP TMS S.A. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands of Euro's and U.S. Dollars, except per share data) Twelve Months Ended: Twelve Months Ended:
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
Euros Euros $US $US Net sales of medical
equipment 8,512 10,527 9,713 9,995
Net sales of spare
parts, supplies and
services 9,518 9,198 10,861 8,734 NET SALES 18,030 19,725 20,574 18,729 Other revenues 443 236 505 224 TOTAL REVENUES 18,473 19,961 21,079 18,953 Cost of sales (13,094) (11,503) (14,942)(10,022) GROSS PROFIT 5,379 8,458 6,137 8,031 Research &
development
expenses (3,069) (3,186) (3,502) (3,025) S, G & A expenses (8,334) (8,807) (9,509) (8,363) Non recurring
operating expenses (2,097) (1,241) (2,393) (1,178) Total operating
expenses (13,500) (13,234) (15,404) (12,566) OPERATING PROFIT
(LOSS) (8,121) (4,776) (9,267) (4,535) Interest (expense)
income, net 177 455 202 432 Currency exchange
gains (loss), net (928) (1,025) (1,059) (973) Other income (loss),
net (218) 1,473 (249) 1,399 INCOME (LOSS) BEFORE
TAXES AND MINORITY
INTEREST (9,090) (3,873) (10,373) (3,678) Income tax (expense)
credit 114 (167) 130 (159) NET INCOME (LOSS) (8,976) (4,040) (10,243) (3,836) Earning per share --
Basic (1.15) (0.52) (1.32) (0.49) Average number of
shares used in
computation of EPS 7,782 7,771 7,782 7,771 Earning per share --
Diluted (1.15) (0.52) (1.31) (0.49) Average number of
shares used in
computation of EPS 7,817 7,834 7,817 7,834 NOTE: Translated for convenience of the reader to U.S. dollars at the
2003 average twelve months noon buying rate of 1 Euro = 1.1411
USD, and 2002 average twelve months noon buying rate of 1 Euro =
0.9495 USD. EDAP TMS S.A. CONSOLIDATED BALANCE SHEETS HIGHLIGHTS (UNAUDITED)
(Amounts in thousands of Euro's and U.S. Dollars) Dec. 30, Sept. 30, Dec. 30, Sept. 30,
2003 2003 2003 2003
Euros Euros $US $US Cash, cash equivalents and short
term investments 10,429 11,963 13,137 13,937 Total current assets 25,870 28,551 32,588 33,262 Total current liabilities 10,819 9,363 13,629 10,908 Shareholders' Equity 18,961 23,663 23,885 27,567 NOTE: Translated for convenience of the reader to U.S. dollars at the
noon buying rate of 1 Euro = 1.2597 USD, on December 31, 2003 and
at the noon buying rate of 1 Euro = 1.165 USD, on September 30,
2003. EDAP TMS S.A. CONDENSED STATEMENTS OF OPERATIONS BY DIVISION
TWELVE MONTHS ENDED DECEMBER 31, 2003
(Amounts in thousands of Euro's) EDAP S.A. TMS S.A. EDAP TMS Consolida- Total After
HIFU Division UDS Division HQ tion Consolidation
Impact
Net sales of
medical
devices 1,148 8,684 (1,320) 8,512 Net sales of
spare parts,
supplies &
services 1,712 8,456 (650) 9,518 Other revenues 99 342 2 443 TOTAL REVENUES 2,959 17,482 2 (1,970) 18,473 GROSS PROFIT 903 32% 4,711 27% 2 (237) 5,379 Research &
Development (2,345) (725) (3,069) Total SG&A plus
depreciation (2,770) (4,210) (1,353) (8,334) Non recurring
operating
expenses (1,590) (463) (44) (2,097) OPERATING
PROFIT (LOSS) (5,802) (687) (1,395) (237) (8,121)
CONTACT: Philippe Chauveau / Blandine Confort
33.4.72.15.31.50
Ian Vawter - EDAP Technomed Inc. 1.770.446.9950
DATASOURCE: EDAP TMS S.A.
CONTACT: Philippe Chauveau, or Blandine Confort, +33-4-72-15-31-50, or Ian Vawter of EDAP Technomed Inc., +1-770-446-9950 Web site: http://www.edap-tms.com/
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