Revenues Increase 9% over Second Quarter 1999; Previously Announced
Manufacturing Issues and Restructuring Activities Result in Operating Loss
TUCSON, Ariz., July 21 /PRNewswire/ -- Ventana Medical Systems, Inc.
(Nasdaq: VMSI), the leading company in supplying automated instrument-reagent
systems to histology labs, today reported $17.7 million in sales for the
second quarter ending June 30, 2000, a 9 percent increase over the
$16.3 million reported in the same quarter of 1999. Ventana also reported an
operating loss of $24.0 million compared with an operating profit of
$1.5 million in the same prior-year quarter. The reported net loss for the
June 30, 2000 quarter was $23.5 million and the diluted loss per share was
$(1.55). During the comparable quarter of 1999, Ventana reported a net profit
of $1.6 million and diluted earnings per share of $0.11.
Sales for the six months ending June 30, 2000 were $35.6 million
representing an 11 percent increase over the $31.9 million in sales realized
during the same prior-year period. The six-month net loss was $22.5 million,
or $(1.57) per diluted share, compared with net earnings of $2.8 million and
$0.20 per diluted share in 1999.
"Our second-quarter results were negatively impacted by $22.5 million in
one-time write-offs and accruals," commented Christopher Gleeson, Ventana's
President and Chief Executive Officer. "One-time charges of $19.5 million
resulted from our previously announced manufacturing challenges with our
dispensers, our decision to exit our non-strategic electron microscopy
business, and our decision to restructure our manufacturing operations," noted
Gleeson. "In addition to these activities, we elected to write off
$3.0 million in goodwill associated with our 1996 acquisition of Biotek
Solutions, Inc. Without these one-time charges, we would have reported a
$1.5 million operating loss for the quarter. The loss directly resulted from
lower-than-planned sales caused by quality issues with our dispensers.
"Our second-quarter results were disappointing," noted Gleeson. "Revenue
growth was at a slower rate than we have historically reported as our sales
forces focused on our existing customer base to deal with the dispenser
problems, rather than on new business. However, our core franchise in
histology is still very much intact and will support a return to more robust
growth rates. We will leverage this franchise with our third-quarter launch
of our new BenchMark clinical IHC and ISH staining system and, pending FDA
approval, our test for detecting breast cancer patients who are likely to
respond to Genentech's Herceptin(R) drug. BenchMark is the most advanced
staining system offered to histology labs and clearly sets Ventana apart from
our competition. The system automates a series of time-consuming manual steps
that must be done prior to a staining run and offers customers the convenience
of performing both protein-targeted IHC stains and molecular-targeted ISH
stains on the same instrument. Our Her-2/neu breast cancer diagnostic places
us on equal competitive footing with DAKO, who has enjoyed an 18-month lead in
marketing an FDA-approved product."
Gleeson further noted, "Our future revenue growth and profitability will
be positively impacted by applications we are introducing on our Discovery
platform to meet the genomic and proteomic analytic needs of drug discovery
companies."
Ventana also reported that its days-sales-outstanding of accounts
receivable fell to 94 days in the second quarter, down from 108 days in the
first quarter.
In discussing the financial outlook for the balance of 2000, Gleeson
noted, "Although we believe we now have a permanent fix for our dispensers, we
will still feel the impact of the problem during the third quarter.
Accordingly, we expect third-quarter sales to come in between the second-
quarter level of $17.7 million and $18.5 million. This represents 8 to
12 percent growth over 1999 sales levels. Due to lower-than-planned sales, we
expect to report between a three cents-per-share loss and breakeven in the
third quarter." Regarding the fourth quarter, Gleeson commented, "We will
return to higher growth rates and report sales in the range of $23 to
$26 million compared with $21.1 million reported during the fourth quarter of
1999. We will return to profitability during the fourth quarter and expect to
report diluted earnings per share in the eight- to 12-cent range."
Gleeson also provided some early insight into 2001 numbers. "We expect
revenue growth in 2001 to be in the 25 to 30 percent range over the $77 to
$80 million in sales we expect to achieve in 2000. Preliminary internal
projections suggest revenues in the $98 to $103 million range for 2001.
Further, our current financial models suggest fully taxed earnings per share
will be in the 60- to 65-cent range," he said.
Statements in this press release which are not strictly historical are
"forward-looking" statements that are made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995. Forward-
looking statements involve known and unknown risks, which may cause the
company's actual results in the future to differ materially from the expected
results. The risks and uncertainties that may affect the results of the
company's business may include general economic conditions, market acceptance
of new automated histology products, continued success in asset management and
other factors that are described in the company's specific filings with the
Securities and Exchange Commission.
Ventana develops, manufactures and markets instrument/reagent systems that
automate tissue preparation and slide staining in histology laboratories
worldwide. Ventana's systems are important tools used in the diagnosis and
treatment of cancer and infectious diseases.
For more information on Ventana Medical Systems, Inc. via facsimile at no
additional cost, simply dial 1-800-PRO-INFO and enter the stock symbol "VMSI".
Ventana Medical Systems, Inc.
Consolidated Statements of Operations
(in thousands except per share data)
(Unaudited)
Three Months Ended:
June 30 '00/'99
2000 1999 B/(W) % Change
Sales:
Instruments $5,436 $4,726 $710 15%
Reagents and other 12,304 11,589 715 6%
Total net sales 17,740 16,315 1,425 9%
Cost of goods sold 18,464 4,765 13,699 287%
Gross (loss) profit (724) 11,550 (12,274) -106%
Operating expenses:
Research and
development 3,461 1,908 (1,553) 81%
Selling, general and
administrative 14,930 7,875 (7,055) 90%
Non-recurring expenses 4,519 - (4,519) -
Amortization of
intangibles 391 258 (133) 52%
(Loss) income from
operations (24,025) 1,509 (25,534) -1692%
Other income (expense) 452 (22) 474 -2155%
Pretax (loss) income $(23,573) $1,487 $(25,060) -1685%
Provision for income tax (106) (138) (32) -23%
Net (loss) income $(23,467) $1,625 $(25,092) -1544%
Per Share Data:
Basic (loss) earnings
per share $(1.55) $0.12 $(1.67) -1395%
Diluted (loss) earnings
per share $(1.55) $0.11 $(1.66) -1513%
Outstanding Shares:
Basic 15,097 13,462
Diluted 15,097 14,766
Ventana Medical Systems, Inc.
Consolidated Statements of Operations
(in thousands except per share data)
(Unaudited)
Six Months Ended:
June 30 '00/'99
2000 1999 B/(W) % Change
Sales:
Instruments $11,264 $9,846 $1,418 14%
Reagents and other 24,305 22,101 2,204 10%
Total net sales 35,569 31,947 3,622 11%
Cost of goods sold 24,598 9,753 14,845 152%
Gross profit 10,971 22,194 (11,223) -51%
Operating expenses:
Research and
development 5,445 3,537 (1,908) 54%
Selling, general
and administrative 22,890 15,274 (7,616) 50%
Non-recurring expenses 4,519 - (4,519) -
Amortization of
intangibles 669 511 (158) 31%
(Loss) income from
operations (22,552) 2,872 (25,424) -885%
Other income 404 2 402 20100%
Pretax (loss) income $(22,148) $2,874 $(25,022) -871%
Provision for
income tax 350 - (350) 0%
Net (loss) income $(22,498) $2,874 $(25,372) -883%
Per Share Data:
Basic (loss) earnings
per share $(1.57) $0.21 $(1.78) -848%
Diluted (loss) earnings
per share $(1.57) $0.20 $(1.77) -885%
Outstanding Shares:
Basic 14,366 13,440
Diluted 14,366 14,658
Ventana Medical Systems, Inc.
Consolidated Balance Sheet
(in thousands except share data)
(Unaudited)
ASSETS June 30, Dec. 31, Inc/(Dec)
2000 1999 $ Amt %
Current assets:
Cash and cash
equivalents $43,417 $1,787 41,630 2330%
Accounts receivable 18,404 20,776 (2,372) -11%
Inventories 6,093 13,474 (7,381) -55%
Prepaid expenses 660 574 86 15%
Deferred tax benefit,
current portion 1,692 1,692 - 0%
Other current assets 722 722 - 0%
Total current assets 70,988 39,025 31,963 82%
Property and equipment,
net 15,383 14,441 942 7%
Intangibles, net 11,395 14,178 (2,783) -20%
Other Assets 2,216 1,084 1,132 104%
Deferred tax benefit,
long term portion 5,674 4,433 1,241 28%
Total assets $105,656 $73,161 $32,495 44%
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $3,961 $4,017 (56) -1%
Other current
liabilities 9,225 6,600 2,625 40%
Total current
liabilities 13,186 10,617 2,569 24%
Long term debt 1,975 2,044 (69) -3%
Stockholders' equity:
Common stock -- $.001
par value; 50,000,000
shares authorized;
15,157,887 and
13,593,640 shares
issued and outstanding
at June 30, 2000 and
December 31, 1999,
respectively 15 14 1 7%
Additional Paid-In
Capital 132,998 80,542 52,456 65%
Accumulated deficit (41,839) (19,341) (22,498) 116%
Cumulative foreign
currency translation
adjustment (79) (115) 36 -31%
Treasury stock --
40,000 shares, at cost (600) (600) - -
Total stockholders'
equity 90,495 60,500 29,995 50%
Total liabilities and
stockholders' equity $105,656 $73,161 $32,495 44%
Ventana Medical Systems, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended
June 30
2000 1999
Operating activities:
Net income $(22,498) $2,874
Adjustments to reconcile net income
to cash provided by operating activities:
Change in deferred tax benefit, net (1,241) -
Depreciation and amortization 2,617 1,431
Non-cash intangibles and property and
equipment charges 7,914 -
Changes in operating assets and
liabilities, net 11,085 (1,544)
Net cash (used) provided by operating activities (2,123) 2,761
Investing activities:
Purchase of property and equipment, net (6,279) (4,922)
Purchase of intangible assets, net (2,390) (502)
Net cash used in investing activities (8,669) (5,424)
Financing activities:
(Repayment) issuance of debt -- net (71) 1,700
Issuance of stock -- net 52,457 1,002
Net cash provided by financing activities 52,386 2,702
Effect of exchange rate change on cash 36 -
Net increase in cash and cash equivalents 41,630 39
Cash and cash equivalents, beginning of period 1,787 2,424
Cash and cash equivalents, end of period $43,417 $2,463
SOURCE Ventana Medical Systems, Inc.
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CONTACT:
Christopher Gleeson, President and Chief
Executive Officer of Ventana Medical Systems, Inc., 520-887-2155;
or Analyst Contact, Kathy Brunson, 312-640-6696, General
Inquiries, 312-640-6692, Media Inquiries, Cindy Martin,
312-266-7800, all of The Financial Relations Board, for Ventana
Medical Systems, Inc.
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