EX-99.1 2 a4681553ex991.txt PRESS RELEASE EXHIBIT 99.1 VMSI Reports Second Quarter Results; 27% Revenue Growth / 82% Net Income Increase / Outlook Raised TUCSON, Ariz.--(BUSINESS WIRE)--July 16, 2004--Ventana Medical Systems Inc. (Nasdaq: VMSI) today reported sales of $42.3 million for the quarter ending June 30, 2004, representing a 27% increase over second-quarter 2003. Net income for the second quarter was $6.0 million, compared with $3.3 million for the same period in 2003. Diluted earnings per share were $0.34, versus $0.20 in the second quarter of 2003. SECOND-QUARTER 2004 "We continue to be pleased with our progress to date," commented Christopher Gleeson, president and chief executive officer. "We again experienced strong demand for our BenchMark family of instruments with both placements and capital conversions running ahead of our expectations," Gleeson added. "We are also benefiting from menu expansion on our existing base and with the recent launch of new antibody tests for c-Kit and EGFR we see the opportunity for continued growth in reagents and consumables." Reagent and other revenues grew 32% versus last year's second quarter. Sequentially, reagent and other revenues were up 9%, and instrument revenues improved by 55%. Gross margin was 74% in the quarter, versus 72% in the second quarter of 2003, reflecting the ongoing revenue mix shift to consumables, volume-based manufacturing efficiencies, and pricing. R&D investment was $5.2 million, up 6% versus second quarter 2003. This increase was driven primarily by the company's new platform development programs for the histology market and its reagent chemistry application initiatives for the histology, cytology, and molecular discovery/research businesses. The company generated $5.4 million in cash flow from operations for the quarter and $12.8 million year to date. Day's sales outstanding and day's sales in inventory were 55 and 95, respectively, versus 64 and 102 for the same period in 2003. The company repurchased 54,300 common shares for approximately $2.3 million in the quarter and has repurchased 281,900 common shares for approximately $11.5 million since the beginning of 2004. In addition, Ventana's board of directors has authorized the repurchase of a further 1 million shares of common stock. YEAR-TO-DATE 2004 Net sales for the six months ended June 30, 2004, increased to a record $78.8 million from $62.7 million for the same period in 2003. The overall 26% increase was paced by 33% year-over-year reagent and other revenue growth. Gross margins improved 219 basis points, and R&D spending increased by 13%. Year-to-date net income of $8.6 million compared favorably with the $4.7 million of net income reported in the first six-month period of 2003. Year-to-date net income per share improved by $0.20 to $0.48 per fully diluted share from $0.28 for the first six months of 2003. CALENDAR YEAR 2004 AND 2005 OUTLOOK The company advised it now expects 2004 revenues and diluted earnings per share to be within the range of $159 million to $160 million and $1.15 to $1.17, respectively. The company also confirmed it expects 2005 revenues to grow at 20% or better over 2004, with operating margins to reach approximately 20%. CONFERENCE CALL Ventana will hold a conference call to discuss second-quarter 2004 results and the outlook for the rest of the year at 10 a.m. EST on Friday, July 16, 2004. The call can be accessed live and will be available for replay over the Internet via www.viavid.net. Ventana develops, manufactures and markets instrument/reagent systems that automate slide preparation and staining in clinical histology and drug discovery laboratories worldwide. Ventana's clinical systems are important tools used in the diagnosis and treatment of cancer and infectious diseases. Ventana's drug discovery systems are used to accelerate the discovery of new drug targets and evaluate the safety of new drug compounds. Any statements made about the company's anticipated financial results are forward-looking statements subject to risks and uncertainties, such as the risks inherent in the development, manufacturing, marketing and sale of medical products, competitive factors, general economic conditions, legal disputes, and government actions as more fully described in Ventana's Annual Report on Form 10-K for the year ended Dec. 31, 2003. Actual results may differ materially from anticipated results. Visit the Ventana Medical Systems Inc. Web site at www.ventanamed.com. The Molecular Discovery Systems Division has its own Web site at www.ventanadiscovery.com. Ventana Medical Systems Inc. Condensed Consolidated Balance Sheets (in thousands, except per share data) (Unaudited) June 30, Dec. 31, ASSETS 2004 2003 --------- --------- Current assets: Cash and cash equivalents $18,409 $19,711 Short-term investments 19,980 19,974 Trade accounts receivable, net 28,702 27,398 Inventories, net 10,665 10,483 Prepaid expenses 932 594 Deferred tax assets 3,243 3,200 Other current assets 1,145 967 --------- --------- Total current assets 83,076 82,327 Property and equipment, net 46,348 42,516 Goodwill 2,804 2,804 Intangible assets, net 4,320 3,982 Other assets 5,198 3,983 Deferred tax assets, net of current portion 5,602 5,602 --------- --------- Total assets $147,348 $141,214 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $11,332 $10,081 Other current liabilities 18,362 16,304 --------- --------- Total current liabilities 29,694 26,385 Long-term debt 2,291 2,453 Commitments and Contingencies Stockholders' equity: Common stock - $.001 par value; 50,000 shares authorized; 17,287 and 16,709 shares issued and outstanding at June 30, 2004 and Dec. 31, 2003, respectively 17 17 Additional paid-in capital 160,848 154,395 Accumulated deficit (26,553) (35,149) Accumulated other comprehensive loss (692) (171) Treasury stock - 532 shares and 250 shares at cost at June 30, 2004 and at Dec. 31, 2003, respectively (18,257) (6,716) --------- --------- Total stockholders' equity 115,363 112,376 --------- --------- Total liabilities and stockholders' equity $147,348 $141,214 ========= ========= Ventana Medical Systems Inc. Condensed Consolidated Statements of Operations (in thousands except per share data) (Unaudited) Three Months Six Months Ended Ended June 30, June 30, --------- --------- 2004 2003 2004 2003 -------- -------- -------- -------- Sales: Reagents and other $33,855 $25,726 $64,891 $48,902 Instruments 8,461 7,725 13,935 13,809 -------- -------- -------- -------- Total net sales 42,316 33,451 78,826 62,711 Cost of goods sold 11,022 9,357 20,714 17,854 -------- -------- -------- -------- Gross profit 31,294 24,094 58,112 44,857 Operating expenses: Research and development 5,170 4,872 10,320 9,167 Selling, general and administrative 18,297 15,615 36,550 30,308 Amortization of intangible assets 328 462 617 919 -------- -------- -------- -------- Income from operations 7,499 3,145 10,625 4,463 Interest and other income 35 215 85 383 -------- -------- -------- -------- Income before taxes 7,534 3,360 10,710 4,846 Provision for income taxes (1,541) (62) (2,114) (129) -------- -------- -------- -------- Net income $5,993 $3,298 $8,596 $4,717 ======== ======== ======== ======== Earnings per common share: --Basic $0.36 $0.20 $0.51 $0.29 ======== ======== ======== ======== --Diluted $0.34 $0.20 $0.48 $0.28 ======== ======== ======== ======== Shares used in computing per common share: --Basic 16,723 16,354 16,755 16,358 ======== ======== ======== ======== --Diluted 17,870 16,878 17,866 16,766 ======== ======== ======== ======== Ventana Medical Systems Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) Six Months Ended June 30, ----------------- 2004 2003 -------- -------- Operating activities: Net income $8,596 $4,717 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 4,078 4,635 Changes in operating assets and liabilities 92 3,591 -------- -------- Net cash provided by operating activities 12,766 12,943 Investing activities: Purchase of property and equipment (7,293) (3,792) Purchase of intangible assets, net (955) (193) Purchases of short-term investments (14,120) - Proceeds from sale of short-term investments 13,995 - -------- -------- Net cash used in investing activities (8,373) (3,985) Financing activities: Issuance of common stock 6,453 1,789 Repayments of debt (162) (26) Purchases of common stock for treasury (11,541) (1,650) -------- -------- Net cash (used in) provided by financing activities (5,250) 113 Effect of exchange rate change on cash and cash equivalents (445) 13 -------- -------- Net (decrease) increase in cash and cash equivalents (1,302) 9,084 Cash and cash equivalents, beginning of period 19,711 18,708 -------- -------- Cash and cash equivalents, end of period $18,409 $27,792 ======== ======== CONTACT: Ventana Medical Systems Inc., Tucson Christopher M. Gleeson, 520-229-3787 Nick Malden, 520-229-3857