Given Imaging Ltd. Reports First Quarter 2010 Results

YOQNEAM, ISRAEL--(Marketwire - May 11, 2010) - Given Imaging Ltd. (NASDAQ: GIVN) today announced financial results for the first quarter ended March 31, 2010.

Worldwide revenues were $32.1 million in the first quarter of 2010, a 5.2 percent increase from $30.5 million in the first quarter of 2009. Gross margin in the first quarter of 2010 was 77.1 percent, compared to gross margin of 76.0 percent in the first quarter of 2009.

Net income for the first quarter of 2010 was $2.1 million, or $0.07 per share on a fully diluted GAAP basis, compared to net income of $239,000 or $0.01 per share on a fully diluted GAAP basis in the first quarter of 2009. Non-GAAP net income for the first quarter of 2010 was $4.4 million, or $0.14 per share, compared to $1.7 million, or $0.06 per share in the same quarter of last year. Non-GAAP net income excludes $0.7 million of acquisition expenses and $1.6 million of equity related compensation expenses (FAS 123R). Non-GAAP net income for the first quarter of last year excluded equity related expenses of $1.5 million. A reconciliation of GAAP results to non-GAAP results is attached.

Cash and cash equivalents, short-term investments and marketable securities at March 31, 2010 totaled $64.9 million. This amount reflects the March 31, 2010 $35 million payment for the acquisition of Sierra Scientific which became effective on April 1, 2010.

“We are pleased that our focus on steadily increasing profitability continues to deliver results as we achieved a solid bottom-line increase in net income this quarter. Since the first quarter is usually our slowest quarter, we are also pleased to grow revenues by 5.2 percent, and we remain on track to achieve our 2010 financial goals,” said Homi Shamir, president and CEO of Given Imaging. “We are optimistic about the potential of expanding our PillCam business worldwide and leveraging our leadership in the specialty GI diagnostics market following our recent acquisition of Sierra Scientific. We believe that we can expand this segment by capitalizing on Given Imaging’s skills in customer education, product development and software expertise.”

First Quarter 2010 Revenue Analysis

Revenues in the Americas region were $20.5 million, including revenue of $3.6 million from the Bravo pH Monitoring System. Revenues in the Americas region in the same period in 2009 were $20.2 million, including revenues of $2.7 million from Bravo. Revenues in the EMEA region were $8.5 million compared to $8.2 million in the same period last year. APAC revenues increased by 45 percent to $3.1 million compared to $2.1 million in the same period in 2009.

Worldwide PillCam SB sales amounted to about 51,000 capsules in the first quarter of 2010, compared to approximately 50,100 in the same period last year. PillCam SB sales in the Americas region decreased by 2.5 percent to 33,500 in the first quarter of 2010 compared to 34,400 in the first quarter of 2009. PillCam SB sales in the EMEA region decreased 2.9 percent compared to the first quarter of 2009, while PillCam SB sales in the APAC region increased 80% to 4,700 from 2,600 in the same period in 2009.

Supplemental first quarter data can be found at www.givenimaging.com in the Investor Relations section.

2010 Guidance Update

The company is updating its 2010 guidance to reflect the acquisition of Sierra Scientific Instruments. The company now projects revenues between $167 million and $174 million, an 18 to 22 percent increase compared to 2009 revenues, and GAAP EPS of between $0.51 - $0.59, and non-GAAP EPS (excluding charges relating to FAS123R and Sierra acquisition expenses) of $0.76 - $0.84. Both GAAP and non-GAAP EPS guidance exclude the effect of the Sierra purchase price allocation which has not yet been completed.

Recent Developments

-- Sierra Scientific Acquisition

Effective April 1, 2010 Given Imaging acquired privately-held Sierra Scientific Instruments. Sierra Scientific is the leading provider of specialty diagnostic devices for the gastrointestinal tract. In 2009, Sierra had unaudited revenues of approximately $18 million of which approximately 60% came from sales in the United States and 40% from sales in the rest of the world, principally Europe.

-- Digestive Disease Week 2010

More than 145 abstracts and scientific studies on Given Imaging’s products were presented at Digestive Disease Week 2010. The presentations included a plenary session during which Dr. Rami Eliakim of Rambam Medical Center, Israel, reviewed updated data from a multi-center PillCam COLON 2 trials. The expanded results corroborate the high sensitivity and specificity of PillCam® COLON 2, and confirm previous data showing PillCam COLON 2 to be a safe and effective method for visualizing the colon to detect polyps in patients.

Conference Call / Webcast Information

U.S. Call / Webcast

The company will host a conference call in English at 9:00am ET on Wednesday, May 12, 2010. To participate in this teleconference, please dial 800-930-7616 fifteen minutes before the conference is scheduled to begin. Callers outside of the U.S. should dial 913-981-5556. The call will also be webcast live at www.givenimaging.com. A replay of the call will be available for two weeks on the company’s website, or until May 26 by dialing 888-203-1112. Callers outside of the U.S. should dial 719-457-0820. The replay participant code is 3458268.

Hebrew Call

A conference call in Hebrew will take place on May 12 at 2:00pm Israel time, 7:00am ET. To access this call, please dial +972 3 9180610t en minutes before the conference is scheduled to begin. A replay of the call will be available from May 12 until May 14 by dialing +972 3 9255925.

About Given Imaging Ltd.

Since 2001, Given Imaging has advanced gastrointestinal visualization by developing innovative, patient-friendly tools based on its PillCam® Platform. PillCam® capsule endoscopy provides physicians with natural images of the small intestine via PillCam® SB, the esophagus through PillCam® ESO and the colon with PillCam® COLON [PillCam COLON is not cleared for use in the USA]. The PillCam® capsules are miniature video cameras that patients ingest. Given Imaging’s other capsule products include Agile™ patency capsule, to verify intestinal patency, and Bravo®, the only wireless, catheter-free, 48-hour pH test commercially available for pH testing to assess gastroesophageal reflux disease (GERD). Given Imaging’s products use cutting-edge, wireless technology and advanced software to enable gastroenterologists to visualize diseases of the esophagus, small bowel and colon. All Given Imaging products allow patients to maintain normal activities. In April 2010 Given Imaging acquired Sierra Scientific Instruments, a leading provider of specialty GI diagnostic solutions and pioneer of high-resolution manometry for assessing gastrointestinal motility. Sierra Scientific is now a wholly-owned subsidiary of Given Imaging. Given Imaging’s headquarters, manufacturing and R&D facilities are located in Yoqneam, Israel, with operating subsidiaries in the United States, Germany, France, Japan, Australia and Singapore. For more information, please visit www.givenimaging.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, projections about our business and our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as “may,” “anticipates,” “estimates,” “expects,” “intends,” “plans,” “believes,” and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual events, results, performance, circumstances or achievements of the Company to be materially different from any future events, results, performance, circumstances or achievements expressed or implied by such forward-looking statements. Factors that could cause actual events, results, performance, circumstances or achievements to differ from such forward-looking statements include, but are not limited to, the following: (1) our ability to develop and bring to market new products, (2) our ability to successfully complete any necessary or required clinical studies with our products, (3) our ability to receive regulatory clearance or approval to market our products or changes in regulatory environment, (4) our success in implementing our sales, marketing and manufacturing plans, (5) the level of adoption of our products by medical practitioners, (6) the emergence of other products that may make our products obsolete, (7) lack of an appropriate bowel preparation materials to be used with our PillCam COLON capsule, (8) protection and validity of patents and other intellectual property rights, (9) the impact of currency exchange rates, (10) the effect of competition by other companies, (11) the outcome of significant litigation, (12) our ability to obtain reimbursement for our product from government and commercial payors, (13) quarterly variations in operating results, (14) the possibility of armed conflict or civil or military unrest in Israel, (15) the impact of global economic conditions, (16) our ability to successfully integrate acquired businesses, (17) changes and reforms in applicable healthcare laws and regulations and (18) other risks and factors disclosed in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, risks and factors identified under such headings as “Risk Factors,” “Cautionary Language Regarding Forward-Looking Statements” and “Operating Results and Financial Review and Prospects” in the Company’s Annual Report on Form 20-F for the year ended December 31, 2009. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except for the Company’s ongoing obligations to disclose material information under the applicable securities laws, it undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

 Given Imaging Ltd. and its Consolidated Subsidiaries Specified Items For the Three Months Ended March 31, 2009 and 2010 (Unaudited, dollars in thousands) General Research Selling And And And Administra- Development Marketing tion Total Three month period ended March 31, 2010 Compensation expenses $ 83 $ 327 $ 1,203 $ 1,613 Acquisition expenses - - 686 686 ----------- ----------- ----------- ----------- Total $ 83 $ 327 $ 1,889 $ 2,299 =========== =========== =========== =========== Three month period ended March 31, 2009 Compensation expenses $ 78 $ 153 $ 1,279 $ 1,510 ----------- ----------- ----------- ----------- Total $ 78 $ 153 $ 1,279 $ 1,510 =========== =========== =========== =========== Given Imaging Ltd. and its Consolidated Subsidiaries Reconciliation of GAAP results to non-GAAP results For the three months ended March 31, 2010 and 2009 Condensed, in thousands except share and per share data Q1 2010 Q1 2009 Specified Specified Items Non Items Non GAAP (*) GAAP GAAP (*) GAAP -------- ------- -------- -------- ------- -------- Revenues $ 32,097 - $ 32,097 $ 30,473 - $ 30,473 Cost of revenues (7,336) - (7,336) (7,318) - (7,318) -------- ------- -------- -------- ------- -------- Gross profit 24,761 - 24,761 23,155 - 23,155 -------- ------- -------- -------- ------- -------- Gross profit as a % of revenues 77.1% - 77.1% 76.0% - 76.0% Operating expenses Research and development, net (3,777) 83 (3,694) (3,676) 78 (3,598) Sales and marketing (14,749) 327 (14,422) (13,958) 153 (13,805) General and administrative (5,134) 1,889 (3,245) (4,415) 1,279 (3,136) Termination of marketing agreement - - - - - - Other, net (63) - (63) (12) - (12) -------- ------- -------- -------- ------- -------- Total operating expenses (23,723) 2,299 (21,424) (22,061) 1,510 (20,551) -------- ------- -------- -------- ------- -------- Operating profit 1,038 2,299 3,337 1,094 1,510 2,604 Operating profit as a % of revenues 3.2% 10.4% 3.6% 8.5% Financing income (expense), net 978 - 978 (1,126) - (1,126) -------- ------- -------- -------- ------- -------- Profit (loss) before taxes on income 2,016 2,299 4,315 (32) 1,510 1,478 Income tax expense (129) - (129) (28) - (28) -------- ------- -------- -------- ------- -------- Net Profit (loss) 1,887 2,299 4,186 (60) 1,510 1,450 Net loss attributable to non-controlling interest 166 - 166 299 - 299 -------- ------- -------- -------- ------- -------- Net profit attributable to shareholders $ 2,053 $ 2,299 $ 4,352 $ 239 $ 1,510 $ 1,749 ======== ======= ======== ======== ======= ======== Net profit attributable to shareholders as a % of revenues 6.4% 13.6% 0.8% 5.7% Earnings per share Basic Earnings attributable to shareholders per Ordinary Share $ 0.07 $ 0.08 $ 0.15 $ 0.01 $ 0.05 $ 0.06 ======== ======= ======== ======== ======= ======== Diluted Earnings attributable to shareholders per Ordinary Share $ 0.07 $ 0.07 $ 0.14 $ 0.01 $ 0.05 $ 0.06 ======== ======= ======== ======== ======= ======== Given Imaging Ltd. and its Consolidated Subsidiaries Interim Consolidated Balance Sheets In thousands except share data (Unaudited) March 31 December 31 ----------- ----------- 2010 2009 ----------- ----------- Assets Current assets Cash and cash equivalents $ 26,975 $ 46,458 Short-term investments 27,916 31,736 Accounts receivable: Trade (Net of provisions for doubtful debts of $259 and of $252 as of March 31, 2010 and December 31, 2009, respectively) 21,714 24,742 Other 4,572 3,799 Inventories 16,444 17,302 Prepaid expenses 1,595 1,036 Deferred tax assets 2,001 2,207 Advances to suppliers 377 534 ----------- ----------- Total current assets 101,594 127,814 ----------- ----------- Deposits 1,084 1,062 Assets held for employee severance payments 5,231 4,968 Marketable Securities 9,987 16,956 Non-current Inventory 5,448 6,015 Fixed assets, at cost, less accumulated depreciation 13,742 13,843 Advance on account of business combination (See Note 4) 35,000 - Deferred tax assets 192 192 Intangible assets, less accumulated amortization 11,046 11,284 Goodwill 3,586 3,586 ----------- ----------- Total Assets $ 186,910 $ 185,720 =========== =========== Given Imaging Ltd. and its Consolidated Subsidiaries Interim Consolidated Balance Sheets In thousands except share data (Unaudited) March 31 December 31 ----------- ----------- 2010 2009 ----------- ----------- Liabilities and equity Current liabilities Current installments of obligation under capital lease $ 145 $ 145 Accounts payable Trade 5,817 6,789 Other 15,902 20,060 Deferred income 486 234 ----------- ----------- Total current liabilities 22,350 27,228 ----------- ----------- Long-term liabilities Obligation under capital lease, net 320 356 Liability in respect of employees’ severance payments 5,795 5,530 ----------- ----------- Total long-term liabilities 6,115 5,886 ----------- ----------- Total liabilities 28,465 33,114 ----------- ----------- Equity Shareholders’ equity Ordinary Shares, NIS 0.05 par value each (90,000,000 shares authorized; 29,615,152 and 29,370,972 shares issued and fully paid as of March 31, 2010 and December 31, 2009, respectively) 348 345 Additional paid-in capital 186,257 182,203 Capital reserve 2,166 2,166 Accumulated other comprehensive loss 294 399 Accumulated deficit (31,132) (33,185) ----------- ----------- Shareholders’ equity 157,933 151,928 ----------- ----------- Non-controlling interest 512 678 ----------- ----------- Total Equity 158,445 152,606 ----------- ----------- Total liabilities and equity $ 186,910 $ 185,720 =========== =========== Given Imaging Ltd. and its Consolidated Subsidiaries Interim Consolidated Statements of Operations In thousands except share and per share data (Unaudited) Three month period ended March 31 Year ended ---------------------- December 31 2010 2009 2009 ---------- ---------- ----------- Revenues $ 32,097 $ 30,473 $ 141,763 Cost of revenues (7,336) (7,318) (33,145) ---------- ---------- ----------- Gross profit 24,761 23,155 108,618 ---------- ---------- ----------- Operating expenses Research and development, gross (4,024) (4,010) (17,842) Government grants 247 334 1,109 ---------- ---------- ----------- Research and development, net (3,777) (3,676) (16,733) Sales and marketing (14,749) (13,958) (61,428) General and administrative (5,134) (4,415) (18,919) Other, net (63) (12) (1,220) ---------- ---------- ----------- Total operating expenses (23,723) (22,061) (98,300) ---------- ---------- ----------- Operating income 1,038 1,094 10,318 Financing income (expense), net 978 (1,126) 1,584 ---------- ---------- ----------- Income (loss) before taxes on income 2,016 (32) 11,902 Income tax expense (129) (28) 1,542 ---------- ---------- ----------- Net income (loss) 1,887 (60) 13,444 Net loss attributable to non-controlling interest 166 299 891 ---------- ---------- ----------- Net profit attributable to owners of the company $ 2,053 $ 239 14,335 ========== ========== =========== Earnings per share Basic Earnings attributable to shareholders per Ordinary Share $ 0.07 $ 0.01 $ 0.49 ========== ========== =========== Diluted Earnings attributable to shareholders per Ordinary Share $ 0.07 $ 0.01 $ 0.47 ========== ========== =========== Weighted average number of Ordinary Shares used to compute basic Earnings per Ordinary share 29,427,767 29,257,785 29,281,897 ========== ========== =========== Weighted average number of Ordinary Shares used to compute diluted Earnings per Ordinary share 30,646,418 29,910,943 30,423,162 ========== ========== =========== Given Imaging Ltd. and its Consolidated Subsidiaries Consolidated Statements of Cash Flows In thousands (Unaudited) Three month period ended March 31, Year ended ------------------ December 31, 2010 2009 2009 -------- -------- ------------ Cash flows from operating activities: Net income (loss) $ 1,887 $ (60) $ 13,444 Adjustments required to reconcile net profit (loss) to net cash used in operating activities: Depreciation and amortization 1,498 1,465 6,096 Goodwill impairment - - 483 Deferred tax assets 206 10 (1,221) Stock option compensation 1,613 1,510 7,268 Other 87 9 570 Decrease (increase) in accounts receivable - trade 3,028 (181) (3,069) Decrease (increase) in accounts receivable - other (320) 2,334 863 Decrease (increase) in prepaid expenses (559) (255) 595 Decrease (increase) in advances to suppliers 157 (41) 3,006 Decrease (increase) in inventories 1,425 (3,364) (4,386) Increase (decrease) in accounts payable (5,210) 178 1,819 Increase (decrease) in deferred income 252 (394) (1,289) -------- -------- ------------ Net cash provided by operating activities 4,064 1,211 24,179 -------- -------- ------------ Cash flows from investing activities: Purchase of fixed assets and intangible assets (1,222) (1,056) (4,794) Payment on account of business combination (35,000) - - Deposits (24) 3 34 Proceeds from sales of marketable securities and short term investments 18,208 21,781 38,085 Investments in trading and marketable securities (7,546) (250) (27,410) -------- -------- ------------ Net cash provided by (used in) investing activities (25,584) 20,478 5,915 -------- -------- ------------ Cash flows from financing activities: Principal payments on capital lease obligation (34) (33) (131) Proceeds from the issuance of Ordinary Shares 1,991 - 954 Dividend distribution - (15,799) (15,799) Purchase of shares from a non-controlling shareholder in a subsidiary - - (382) -------- -------- ------------ Net cash (used in) provided by financing activities 1,957 (15,832) (15,358) -------- -------- ------------ Effect of exchange rate changes on cash 80 (258) 25 -------- -------- ------------ Increase (decrease) in cash and cash equivalents (19,483) 5,599 14,761 Cash and cash equivalents at beginning of period 46,458 31,697 31,697 -------- -------- ------------ Cash and cash equivalents at end of period $ 26,975 $ 37,296 $ 46,458 ======== ======== ============ Supplementary cash flow information Income taxes paid $ 48 $ 44 $ 877 ======== ======== ============