Thirty Percent Sales Growth Highlights ArthroCare's Third Quarter Report
BY JOHN MCCORMICK, OCTOBER 25, 2004
Last week, ArthroCare Corp (Nasdaq: ARTC) announced that for the third quarter ending September 30, revenues rose 30% on year-over-year (YOY) basis. Total revenues, which include product revenues, license fees and royalties, for 3Q:04 were $38.2 million versus the $29.4 million reported 3Q:03. The company reported 3Q:04 product revenues of $36.8 million versus $28.6 million recorded in 3Q:03 - a 29% YOY increase. 3Q:04 income was $3.6 million, or EPS of $0.16, up from $2.1 million, or EPS of $0.10, in 3Q:03. Earnings and revenues exceeded analysts' EPS expectations of $0.15 on revenue of $37.8 million.
The Sports Medicine business unit produced 16% revenue growth during 3Q:04 versus 3Q:03, and accounted for 63% of total product revenue. Revenues in the spine unit increased 61% during 3Q:04 versus 3Q:03 and accounted for 16% of product sales. Management noted on a conference call with analysts that it will be introducing new spine products at this week's NASS conference in Chicago. ENT product sales grew 59% 3Q:04 versus 3Q:03, with ENT sales accounting for 20% of product revenue during the quarter. ENT growth continues to be driven by tonsillectomy sales in the United States.
During the quarter, ArthroCare announced the pending acquisition of Opus Medical, Inc. - a privately held company that makes arthroscopic soft tissue repair systems. The Company expects to close the Opus deal toward the end of the year while the State of California completes a standard review of the transaction. Nearly two weeks ago, ArthroCare closed on a new credit facility of $50 million, which will be used to fund the Opus Medical acquisition. This credit facility consists of a $30 million term loan and a $20 million revolving credit with essentially the same terms as the previous $15 million credit facility that ArthroCare has now paid off.
The company said it expects 2004 EPS of between $0.52 and $0.56 on 2004 revenue growth that exceeds 20% from the prior year. For 2005, the Company's management said it expects revenues to grow by at least 30 percent compared to 2004. Analysts expect the company to achieve EPS of $0.84 cents on $202.3 million in revenue for 2005
