SUNNYVALE, Calif., Nov. 1 /PRNewswire-FirstCall/ -- Kyphon Inc. today announced that net sales for the quarter totaled $79.0 million, an increase of 42% over the $55.8 million in net sales reported for the third quarter of 2004. Earnings per diluted share for the quarter increased 86% to $0.26 compared to earnings per diluted share of $0.14 for the same period a year ago.
Kyphon’s total net sales for the third quarter included $66.9 million in net sales in the United States and $12.1 million in net sales from its international operations, representing growth in those markets of 35% and 97%, respectively, over the third quarter of 2004.
For the nine-month period ended September 30, 2005, Kyphon reported net sales of $220.3 million, which was an increase of 46% over the $151.0 million reported for the same period in 2004. Earnings per diluted share for the first nine months of 2005 were $0.58, an increase of 61% over the $0.36 reported for the same period last year.
“Our third quarter results reflect our continued progress in several major areas,” commented Richard Mott, president and chief executive officer of Kyphon. “Our revenue growth demonstrates continued strong clinician adoption of the kyphoplasty procedure using our expanding KyphX instrument product line. We also achieved improved operating leverage during the quarter while continuing to invest in selling and marketing initiatives designed to fuel future growth.”
“We are especially pleased with the performance of our international business in the quarter which continues to exhibit strong momentum, particularly in Germany and Italy,” Mott continued. “While our U.S. business was affected by the adverse weather conditions experienced in the southeast in August and September, we saw continued procedural penetration in other regions of the country allowing us to post another quarter of significant domestic growth. We remain committed to our long-term growth strategies and anticipate continued investment in expanding the key drivers to sustain our success,” Mott concluded.
Financial Outlook for the Year and Quarter Ending December 31, 2005
It is anticipated that recovery in certain parts of the southeast region affected by the Gulf Coast hurricanes in August and September will take up to several months. In addition, it is expected that hurricane Wilma that affected Florida, our largest revenue state, will have a suppressive effect upon the number of procedures performed in that state during the fourth quarter. Accordingly, for the full-year 2005, revenues are targeted to be between $304 million to $307 million, which is within the previously announced target range of $304 million to $310 million. Revenue growth for the full year 2005 versus 2004 is now expected to be 43% to 44%. For the fourth quarter of 2005, the company anticipates net sales of $84 million to $87 million, which represents an increase of 35% to 39% versus the fourth quarter of 2004. Net sales from the company’s international operations are targeted to constitute 17% to 18% of total worldwide net sales in the fourth quarter.
Based on the higher-than-expected net income performance in the third quarter, the company is increasing its full-year 2005 target range for earnings per diluted share to between $0.84 and $0.86, up from its previously announced target range of $0.80 to $0.83. Full-year 2005 earnings per diluted share growth versus 2004 is now anticipated to be between 68% and 72%. Earnings per diluted share for the fourth quarter are targeted to be between $0.26 and $0.28, an increase of 86% to 100% over the same period a year ago.
Selected Metrics
Kyphon ended the third quarter of 2005 with 241 device sales representatives and 49 primary care sales professionals in the U.S. Internationally, the company ended the third quarter with approximately 75 sales professionals. Kyphon is planning to end the year with approximately 260 device sales representatives and 25 primary care sales representatives in the U.S., along with approximately 90 sales representatives outside of the U.S. These sales representatives work with spine specialists worldwide who perform, or who are candidates to perform, the kyphoplasty procedure and the primary care physician community to educate them about the option of kyphoplasty. To date, approximately 4,750 spine specialists in the U.S. and 2,650 outside the U.S. have been trained to perform kyphoplasty. For the year 2005, Kyphon expects to train a total of approximately 2,000 physicians to perform kyphoplasty procedures, 1,000 in the U.S. and 1,000 outside of the U.S.
Earnings Call Information
Kyphon will host a conference call today at 2:00 p.m. Pacific Time to discuss its third quarter 2005 results and expectations for the remainder of 2005. A live webcast of the call will be available from the Investor Relations section of the company’s corporate Web site at www.kyphon.com. The call will be archived on this site for a minimum of two months. An audio replay of the call will also be available beginning from 6:00 p.m. Pacific Time on Tuesday, November 1, 2005, until 12:00 a.m. Pacific Time on Tuesday, November 22, 2005. To access the replay, dial 888-203-1112 (U.S.) or 719-457-0820 (International) and enter the access code 7648132.
About Kyphon Inc.
Kyphon develops and markets medical devices designed to restore spinal function using minimally invasive technologies. The company’s KyphX line of products are used in Balloon Kyphoplasty, a minimally invasive procedure to treat spinal fractures caused by osteoporosis or cancer. For more information, visit Kyphon’s Web site at http://www.kyphon.com .
NOTE: Kyphon and KyphX are registered trademarks of Kyphon Inc.
This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements include, but are not limited to, those that use words such as “believes,” “expects,” “anticipates,” “targets,” “intends,” “plans,” “projects,” and words of similar effect, and specifically include the company’s future financial projections and anticipated business direction and performance. Forward-looking statements are based on management’s current preliminary expectations and are subject to risks, uncertainties and assumptions, which may cause the company’s actual results to differ materially from the statements contained herein. Information on potential risk factors that could affect Kyphon, its business and its financial results are detailed in the company’s periodic filings with the Securities and Exchange Commission (SEC), including, but not limited to, those risks and uncertainties listed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors Affecting Future Operating Results,” which can be found in Kyphon’s quarterly report on Form 10-Q for the quarter ended June 30, 2005, filed with the SEC on August 5, 2005 and in Kyphon’s annual report on Form 10-K for the year ended December 31, 2004 filed with the SEC on March 2, 2005. Kyphon undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof.
KYPHE Kyphon Inc. Condensed Consolidated Balance Sheets (unaudited, in thousands) September 30, December 31, 2005 2004 Assets Current assets: Cash and cash equivalents $131,700 $87,236 Investments 34,966 24,421 Accounts receivable, net 48,180 42,347 Inventories 9,689 11,457 Prepaid expenses and other current assets 7,408 4,521 Deferred tax assets 13,135 13,537 Total current assets 245,078 183,519 Investments 4,501 4,142 Property and equipment, net 14,850 12,728 Goodwill and other intangible assets, net 4,465 5,039 Deferred tax assets 4,009 4,009 Other assets 2,677 3,952 Total assets $275,580 $213,389 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $5,595 $5,544 Accrued liabilities 30,586 24,049 Total current liabilities 36,181 29,593 Deferred rent and other 3,828 4,161 Total liabilities 40,009 33,754 Commitments and contingencies Stockholders’ equity: Common stock, par value: $0.001 per share 43 41 Additional paid-in capital 220,269 189,410 Treasury stock, at cost (201) (201) Deferred stock-based compensation, net (423) (2,113) Accumulated other comprehensive income 763 3,489 Retained earnings (accumulated deficit) 15,120 (10,991) Total stockholders’ equity 235,571 179,635 Total liabilities and stockholders’ equity $275,580 $213,389 Kyphon Inc. Condensed Consolidated Income Statements (unaudited; in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 U. S. net sales $66,863 $49,645 $188,426 $135,314 International net sales 12,151 6,166 31,848 15,675 Net sales 79,014 55,811 220,274 150,989 Cost of goods sold 9,456 6,247 25,875 17,164 Gross profit 69,558 49,564 194,399 133,825 Operating expenses: Research and development 6,415 5,604 18,513 15,214 Sales and marketing 36,151 26,855 107,310 74,708 General and administrative 8,280 7,216 26,321 18,558 Purchased in-process research and development -- -- 1,000 -- Total operating expenses 50,846 39,675 153,144 108,480 Income from operations 18,712 9,889 41,255 25,345 Interest income and other, net 1,212 343 2,556 803 Income before income taxes 19,924 10,232 43,811 26,148 Provision for income taxes 8,170 4,100 17,700 10,500 Net income $11,754 $6,132 $26,111 $15,648 Net income per share: Basic $0.27 $0.15 $0.61 $0.39 Diluted $0.26 $0.14 $0.58 $0.36 Weighted-average shares outstanding: Basic 43,195 40,733 42,522 40,216 Diluted 45,898 43,734 45,035 43,503
Kyphon Inc.
CONTACT: investors and media, Julie D. Tracy, Vice President, InvestorRelations and Corporate Marketing of Kyphon Inc., +1-408-548-6500, orjtracy@kyphon.com
Web site: http://www.kyphon.com/
