Company Earns $.06 Per Share Compared with Second Quarter 2005 Loss
of $.04 Conference Call Today at 1:30 PM CDT/2:30 EDT MINNEAPOLIS,
July 20 /PRNewswire-FirstCall/ -- Enpath Medical, Inc.
(NASDAQ:NPTH), a leading developer and manufacturer of proprietary
products for blue-chip medical device companies operating
worldwide, today reported sharply improved second quarter results.
Second quarter financial highlights included: -- A 32% increase in
revenues to $9.5 million compared with $7.2 million for the same
quarter in 2005. -- Net income of $360,000 or $0.06 per diluted
share for the second quarter, compared with a net loss of $225,000,
or $0.04 per share, for the same quarter of 2005. -- A 55% increase
in introducer product line revenues compared with the same quarter
in 2005. -- Gross margins of 41.7% for the second quarter, up from
38.7% from the same quarter last year. For the six months ended
June 30, 2006, financial highlights included: -- A 37% increase in
revenues to $18.9 million compared with $13.8 million for the first
half of 2005. -- Net income of $1,013,000 or $.16 per diluted
share, compared with a net loss of $575,000, or $.10 per share in
the first six months of 2005. -- A 43% increase in introducer
revenues compared with the same period of last year. -- Gross
margins of 40.6% for the first half of 2006, up from 37.3% in the
same period of last year and only a 2.4% increase in operating
expenses from 2005 to 2006. "For the second consecutive quarter we
achieved strong, profitable revenue growth primarily due to a 55%
increase in introducer revenues and continued shipments of our
steerable catheter products, which were launched through our two
new OEM partners in the first quarter," said John C. Hertig, chief
executive officer. "The demand for introducers from a wide
cross-section of customers has been so significant that we
implemented a seven-day, three-shift work week production schedule
during the second quarter while we awaited delivery, installation
and validation of new introducer production equipment. We are just
now winding down the third shift as we bring the new production
capacity on-line," Hertig added. As previously announced, Enpath
began shipping advanced delivery catheters to two OEM partners in
the first quarter as those customers began to fill their
distribution pipelines. As anticipated, revenues from the advanced
delivery catheter product line, which reached $1.4 million in the
first quarter of 2006, declined to $565,000 in the second quarter
as the two partners established market acceptance for Enpath's new
single-use steerable catheters. The Company expects catheter
revenues for the remainder of the year to gradually increase as
market awareness grows and re-stocking orders are received.
Revenues from the stimulation leads product line for the quarter
were $1.8 million, down 26% from the same quarter of 2005. Revenues
from our leads and adaptors declined modestly from 2005 while our
contract manufacturing and engineering services revenue dropped by
39% compared with the second quarter of 2005. One of Enpath's
larger contract manufacturing customers reduced orders during the
first half of 2006 but orders now appear to have resumed at
historical levels. Engineering services revenue is related to
timing of projects and should rebound in the second half of 2006.
The Company announced it has decided not to continue to pursue its
efforts to obtain FDA marketing clearance of its steroid lead for
its remaining potential customer. "We were unable to accumulate
enough statistical data as requested by the Food and Drug
Administration in Europe within the Pre-Market Approval timeline
and Enpath would have continued to incur substantial additional
costs," said Mr. Hertig. "Also, in respect to the FDA and best
utilization of the Agency's time, we made the decision that our
R&D resources would be better utilized focusing on the
development of our next generation product that will improve and
simplify the placement of an epicardial lead." Gross margins for
the quarter were 41.7% compared with 38.7% in the second quarter of
2005, and were driven primarily by efficiencies created with higher
introducer production volume. Selling, general and administrative
expenses totaled $1.6 million during the second quarter of 2006, a
12% increase over the second quarter of 2005. Stock-based
compensation expenses as required by new accounting standards
impacted our overall results by $109,000 in the second quarter and
$165,000 in the first six months of 2006. Research and development
expenditures for the quarter increased 9% to $1.7 million, or 18.3%
of revenues, compared with $1.6 million in the second quarter of
2005, or 22.1% of revenues. As provided in the guidance for the
second quarter, the Company anticipated a sequential increase in R
& D expenditures compared with the $1.2 million expended in the
first quarter of 2006 as it completed a number of qualification and
validation activities for several new products. "Enpath's product
development pipeline is full and growing," continued Mr. Hertig.
"We are finalizing a second generation valved introducer
specifically designed for the pacing market that we expect to
launch in the second half of 2006. In addition, we have a number of
steerable catheter projects in development and we are enthusiastic
about the interest in our next generation epicardial lead design
which, coupled with our proprietary steerable delivery
capabilities, creates an integrated system." Enpath also announced
that it has been named as defendant in a patent infringement action
filed by Pressure Products Medical Supplies, Inc on June 12, 2006
and venued in the United States District Court in the Eastern
District of Texas. At this time, Enpath has not been officially
served. The product identified as allegedly infringing the
competitor's patents is the Company's FlowGuard(TM) valved
introducer, which has been on the market for more than three years.
Revenues from products sold that include the FlowGuard valved
introducer were approximately 5% of total revenue for the six month
periods ended June 30, 2006 and 2005. "We believe that this
particular claim is without merit and intend to defend ourselves
vigorously in this matter," said Mr. Hertig. "Regardless, patent
litigation can be expensive and the cost of defending the Company
could have a material impact on future financial results." 2006
Outlook and Guidance -- Enpath expects second half 2006 revenues to
be approximately 12-15% higher than the second half of 2005,
resulting in overall revenues growth of 23-25% for full-year 2006
compared with 2005. In the second half of 2006, the Company expects
introducer orders to be reduced from the substantial levels
experienced in the second quarter, and accordingly, expects second
half 2006 revenues to be approximately 5- 7% less than in the first
half of 2006. Revenues of lead products and advanced delivery
catheters are expected to increase from second quarter levels
during the second half of 2006. -- During the first six months of
2006, the substantial increase in introducer production volume had
a positive effect on overhead utilization which helped to improve
gross margins. With the introducer volume outlook slightly lower
for the remainder of 2006, gross margins may be lower than the
40.6% achieved in the first half of the year. The Company expects
operating expenses to be comparable to the first half of 2006, and
therefore, expects to be profitable during the second half of 2006.
-- The Company is also unable to predict the impact on second half
results of the legal costs, if any, of the above referenced patent
infringement matter. Conference Call Today The Company will host a
conference call today at 1:30 PM, CDT/2:30, EDT to discuss its
financial results, outlook for the remainder of 2006 and current
corporate developments. To participate in the call dial (800)
257-2101 for domestic callers and (303) 205-0066 for international
callers, then provide the Company name and John Hertig as the
leader's name. A live webcast can be accessed on the Enpath Medical
website, http://www.enpathmed.com/ , by clicking on the Second
Quarter 2006 Conference Call window. A taped replay of the call
will be available approximately one hour after the conclusion of
the call until July 27, 2006, by calling (800) 405-2236 for
domestic callers and (303) 590-3000 for international and
referencing ID#11066187#. An audio replay of the webcast will be
archived on the Enpath website http://www.enpathmed.com/ until July
20, 2007. About Enpath Medical Enpath Medical, Inc., headquartered
in Plymouth, Minnesota, is a leader in the design, development,
manufacture and marketing of percutaneous delivery systems and
stimulation leads technologies. Its proprietary products include
venous vessel introducers, articulating and fixed curve delivery
catheters, epicardial and endocardial stimulation leads, and other
products for use in pacemaker, defibrillator, catheter and infusion
port procedures as well as neuromodulation markets. Its products,
which are primarily finished goods, are sold worldwide through
partnering relationships with other medical device companies. Safe
Harbor This news release contains forward-looking statements as
defined by the Private Securities Litigation Reform Act of 1995.
Certain important factors could cause results to differ materially
from those anticipated by some statements made herein. All
forward-looking statements involve risks and uncertainties. A
number of factors that could cause results to differ materially are
discussed in our Annual Report on Form 10-K for the year ended
December 31, 2005, as well as in our quarterly reports on Form 10-Q
and Current Reports on Form 8-K. Among the factors that could cause
results to differ materially are the following: Enpath's dependence
upon a limited number of key customers for its revenue; Enpath's
ability to successfully protect its intellectual property against
misappropriation or claims of infringement by third parties; the
ability of Enpath's customers to successfully develop and market
therapies that utilize the Company's advanced delivery systems;
Enpath's ability to effectively manufacture its products,
specifically steerable catheters, in anticipated required
quantities; Enpath's ability to develop or acquire new products to
increase its revenues; Enpath's ability to attract and retain key
personnel; introduction of competitive products; government
regulatory matters; economic conditions; and Enpath's ability to
raise capital. All forward-looking statements of Enpath, whether
written or oral, and whether made by or on behalf of Enpath, are
expressly qualified by these cautionary statements. In addition,
Enpath disclaims any obligation to update forward-looking
statements to reflect events or circumstances after the date
hereof. Condensed Balance Sheets Unaudited Assets 06/30/06 12/31/05
Cash and cash equivalents $1,700,867 $- Inventory, receivables and
prepaids 10,395,810 8,566,254 Other current assets 245,831 394,202
Property, plant and equipment, net 4,731,391 4,686,121 Goodwill
9,487,975 9,487,975 Intangible assets with finite lives and other
6,448,576 6,916,406 Total Assets $33,010,450 $30,050,958
Liabilities & Shareholders' Equity Bank line of credit $- $-
Other current liabilities 4,677,462 2,966,933 Long-term liabilities
1,430,187 2,058,316 Shareholders' equity 26,902,801 25,025,709
Total Liabilities & Shareholders' Equity $33,010,450
$30,050,958 Income Statements (Unaudited) Three Months Ended Six
Months Ended June 30, June 30, June 30, June 30, 2006 2005 2006
2005 Net sales $9,530,112 $7,193,659 $18,952,801 $13,810,411 Cost
of sales 5,555,814 4,413,522 11,265,484 8,663,749 Gross profit
3,974,298 2,780,137 7,687,317 5,146,662 Operating expenses:
Research and development 1,739,243 1,592,166 2,942,331 2,970,139
Selling, general and administrative 1,634,933 1,466,142 3,094,342
2,922,711 Total operating expenses 3,374,176 3,058,308 6,036,673
5,892,850 Operating income (loss) 600,122 (278,171) 1,650,644
(746,188) Other income (expense): Interest expense (48,139)
(61,151) (98,738) (124,153) Interest income 3,620 - 3,851 - Other
(1,374) (6,392) 2,424 (13,953) Total other income (expense)
(45,893) (67,543) (92,463) (138,106) Income (loss) before income
taxes 554,229 (345,714) 1,558,181 (884,294) Income tax (expense)
benefit (193,980) 121,000 (545,363) 309,503 Net income (loss)
$360,249 $(224,714) $1,012,818 $(574,791) Net income (loss) per
common share: Basic $0.06 $(0.04) $0.16 $(0.10) Diluted $0.06
$(0.04) $0.16 $(0.10) Weighted average common and common equivalent
shares outstanding Basic 6,178,509 5,948,430 6,147,895 5,924,135
Diluted 6,324,141 5,948,430 6,282,691 5,924,135 DATASOURCE: Enpath
Medical, Inc. CONTACT: Scott Youngstrom, CFO, Enpath Medical, Inc.,
+1-763-744-2314; or Investors, Doug Sherk, or Jennifer Beugelmans,
+1-415-896-6820, or Media, Steve DiMattia, +1-646-277-8706, all of
EVC Group Web site: http://www.enpathmed.com/
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