PMTI Palomar Medical Technologies, Inc. (MM)

Palomar Medical Reports Record Revenues and Profitability for Second Quarter 2004 Revenues Increase by 53 Percent; Operating Income More than Triples BURLINGTON, Mass., July 29 /PRNewswire-FirstCall/ -- Palomar Medical Technologies Inc (NASDAQ:PMTI), a leading researcher and developer of light- based systems for hair removal and other cosmetic treatments, today announced financial results for the second quarter ended June 30, 2004. Revenues for the quarter ended June 30, 2004, were $13.2 million, up from $8.7 million in the second quarter of 2003. Gross profit from product sales increased to $6.9 million (64 percent of product revenues), up from $4.5 million (58 percent of product revenues) in the year-earlier quarter. The Company reported net income of $2.0 million, or $0.12 per diluted share, for the second quarter of this year, versus net income of $1.1 million, or $0.07 per diluted share, for the second quarter of last year. Revenues for the six months ended June 30, 2004, were $24.1 million, up from $15.5 million for the six months ended June 30, 2003. Gross profit from product sales increased to $13.1 million (64 percent of revenues), up from $8.0 million (58 percent of revenues) in the year-earlier period. The Company reported net income of $3.2 million, or $0.18 per diluted share for the six months ended June 30, 2004, versus net income of $1.4 million, or $0.10 per diluted share for the six months ended June 30, 2003. The Company's total revenues increased by 53 percent, product revenues increased by 38 percent, and its gross profit from product sales improved by 52 percent as compared to the second quarter of 2003. The Company realized a significant increase in operating income of $1.4 million, or 228 percent, and a net income improvement of $961,000, or 90 percent, as compared to the second quarter of 2003. Chief Executive Officer Joseph P. Caruso commented, "We are pleased to report another strong quarter with a substantial increase in profitability, and are especially encouraged that our revenues continue to grow. As we disclosed earlier in the quarter, Palomar and Lumenis, Ltd. reached a settlement resolving their on-going litigation concerning both patent infringement and contractual matters. As a result of this settlement, royalty revenues increased by $1.2 million, or 525%." Mr. Caruso continued, "Over the past year, product gross margins have improved significantly due to a higher margin product mix and increased sales volume. The Company has also strengthened its balance sheet since the end of last year with a 62 percent increase in its cash position. We anticipate this trend to continue as we concentrate on increasing distribution both domestically and internationally. This is all being achieved while investing the necessary resources in research and development to maintain our technology leadership position." During the second quarter of 2004, the Company announced the following events: * The Company and The Gillette Company (NYSE:G) completed the initial phase of their agreement and will move into the next phase. In conjunction with entering this next phase, the parties have amended the agreement to provide for additional development funding to further technical innovations. The original agreement provided for $7 million in development funding from Gillette. Under the amendment, Gillette will provide $2.1 million in additional development funding over a nine month extension of the development phase, which is planned to be completed by August 31, 2006. * The Company and Lumenis Ltd. reached a settlement resolving their on- going litigation concerning both patent infringement and contractual matters. Under the terms of the settlement, Lumenis paid $868,000 in the second quarter for sales of the LightSheer made prior to July 1, 2002 and agreed to pay $3.225 million over the next six quarters, or $537,500 per quarter, for royalties due on sales of the LightSheer made between July 1, 2002 and December 31, 2003. Beginning on January 1, 2004, Lumenis agreed to pay Palomar a 5% royalty on sales of the LightSheer and other professional laser hair removal devices and modules. Lumenis made their first payment of $457,000 in the second quarter for sales made in the first quarter. In addition, Lumenis granted Palomar a paid up license to a variety of Lumenis' patents for Palomar's light based devices. Palomar granted Lumenis a paid up license to the '568 and '844 patents for Lumenis' lamp based devices. Both parties have agreed to the validity and enforceability of each others patents and not to challenge such validity and enforceability in the future. Conference Call: As previously announced, Palomar will conduct a conference call and webcast today at 11:30 AM Eastern Time. Management will discuss financial results and strategic matters. If you would like to participate, please call (888) 339-2688 or listen to the webcast in the Investor Relations section of the Company's website at http://www.palomarmedical.com/. The telephone replay will be available one hour after the call at (888) 286-8010 passcode 15487625 and will continue through Monday, August 9, 2004. A webcast replay will also be available. About Palomar Medical Technologies Inc: Palomar is a leading researcher and developer of light-based systems for hair removal and other cosmetic treatments. Last year, Palomar and the Gillette Company (NYSE:G) entered into an agreement to complete development and commercialize a patented home-use, light-based hair removal device for women. New and exciting indications are being tested to further advance the hair removal market and other cosmetic applications. Palomar pioneered the optical hair removal field, when, in 1997, it introduced the first high-powered laser hair removal system. Since then, many of the major advances in light-based hair removal have been based on Palomar technology. There are now millions of light-based cosmetic procedures performed around the world every year in physician offices, clinics, spas and salons. For more information on Palomar and its products, visit Palomar's website at http://www.palomarmedical.com/. To continue receiving the most up-to-date information and latest news on Palomar as it happens, sign up to receive automatic e-mail alerts by going to the E-mail Alerts page in the Investor Relations' section of the website. With the exception of the historical information contained in this release, the matters described herein contain forward-looking statements, including but not limited to statements relating to new markets, development and introduction of new products, and financial projections that involve risk and uncertainties that may individually or mutually impact the matters herein, and cause actual results, events and performance to differ materially from such forward-looking statements. These risk factors include, but are not limited to, results of future operations, technological difficulties in developing or introducing new products, the results of future research, lack of product demand and market acceptance for current and future products, the effect of economic conditions, challenges in managing joint ventures and research with third parties and government contracts, the impact of competitive products and pricing, governmental regulations with respect to medical devices, including whether FDA clearance will be obtained for future products, the results of litigation, difficulties in collecting royalties, potential infringement of third-party intellectual property rights, and/or other factors, which are detailed from time to time in the Company's SEC reports, including the report on Form 10-K for the year ended December 31, 2003 and the Company's quarterly reports on Form 10-Q. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Contacts: Investor Relations Palomar Medical Technologies Inc 781-993-2411 Palomar Financial Summary (Amounts in thousands, except per share data): Consolidated Statements of Operations (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 Revenues: Product revenues $ 10,686,773 $7,738,882 $20,313,888 $13,844,726 Royalty revenues 1,455,227 232,938 1,648,505 468,786 Funded product development revenues 1,088,172 700,000 2,101,636 1,200,000 Total revenues 13,230,172 8,671,820 24,064,029 15,513,512 Costs and expenses: Cost of product revenues 3,822,507 3,227,585 7,241,020 5,878,396 Cost of royalty revenues 582,091 93,175 659,402 187,514 Research and development 2,490,182 1,492,910 5,029,345 2,893,582 Selling and marketing 3,124,608 2,127,549 5,805,718 3,673,298 General and administrative 1,176,854 1,110,026 2,264,183 1,951,569 Total costs and expenses 11,196,242 8,051,245 20,999,668 14,584,359 Income from operations 2,033,930 620,575 3,064,361 929,153 Interest income 38,794 19,770 67,553 34,991 Interest expense (1,521) (1,014) (3,042) (24,790) Other income 18,000 - 161,067 58,333 Income before income taxes 2,089,203 639,331 3,289,939 997,687 Provision (benefit) from income taxes 59,114 (429,521) 100,629 (429,521) Net income $2,030,089 $1,068,852 $3,189,310 $1,427,208 Net income per share: Basic $0.13 $0.08 $0.21 $0.11 Diluted $0.12 $0.07 $0.18 $0.10 Weighted average number of shares outstanding: Basic 15,697,135 13,507,281 15,380,446 12,703,061 Diluted 17,607,376 15,941,140 17,465,459 14,739,107 Consolidated Balance Sheets (Unaudited) June 30, December 31, 2004 2003 Assets Current assets: Cash and cash equivalents $17,111,918 $10,558,946 Accounts receivable, net 7,824,865 6,637,246 Inventories 4,141,907 3,385,316 Other current assets 722,862 384,785 Total current assets 29,801,552 20,966,293 Property and equipment, net 909,627 582,898 Other assets 111,074 111,074 Total Assets $30,822,253 $21,660,265 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $812,327 $655,923 Accrued liabilities 6,457,549 4,979,896 Deferred income taxes 1,100,000 1,100,000 Deferred revenue 2,320,270 560,897 Total current liabilities 10,690,146 7,296,716 Stockholders' equity: Preferred stock, $.01 par value- Authorized - 1,500,000 shares Issued - none - - Common stock, $.01 par value- Authorized - 45,000,000 shares Issued - 15,826,558 and 14,554,407 shares, respectively 158,266 145,544 Additional paid-in capital 170,834,346 168,267,820 Accumulated deficit (150,860,505) (154,049,815) Total stockholders' equity 20,132,107 14,363,549 Total liabilities and stockholders' equity $30,822,253 $21,660,265 DATASOURCE: Palomar Medical Technologies Inc CONTACT: Investor Relations of Palomar Medical Technologies Inc, +1-781- 993-2411, Web site: http://www.palomarmedical.com/ Company News On-Call: http://www.prnewswire.com/comp/107555.html

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