Exhibit 99.1
FOR IMMEDIATE RELEASE
IMPAC Medical Systems
Kendra A. Borrego, CFO
(650) 623-8800
ir@impac.com
IMPAC MEDICAL SYSTEMS, INC.
ANNOUNCES THIRD QUARTER AND PRELIMINARY FISCAL 2004 RESULTS
AND FILING OF RESTATED QUARTERLY FINANCIAL STATEMENTS
MOUNTAIN VIEW, CA, November 19, 2004 –IMPAC Medical Systems, Inc. (NASDAQ:IMPCE), a leading provider of information technology solutions for cancer care, announced today its third quarter and preliminary fiscal 2004 results. The Company also announced that it filed Forms 10-Q/A for the quarters ended December 31, 2003 and March 31, 2004 with the Securities and Exchange Commission.
The amendments to the Company’s Forms 10-Q filed today complete the Company’s restatement of its financial results relating to a particular aspect of the Company’s application of Statement of Position (SOP) 97-2 “Software Revenue Recognition” with respect to the concept of constructive cancellation of undelivered elements in multiple element arrangements.
Preliminary Unaudited Results for Fiscal 2004
Highlights for fiscal 2004 include:
• | Net sales increased 22.3% to $69.0 million in fiscal 2004 compared with $56.4 million for fiscal 2003. |
• | Backlog increased 25.9% to $83.6 million in fiscal 2004 compared to $66.4 million for fiscal 2003 and increased 11.0%, or $8.3 million, in comparison to the third fiscal quarter. |
• | Operating cash flow increased 2.9% to $14.0 million in fiscal 2004 compared to $13.6 million for fiscal 2003. |
• | Operating cash flow increased to $10.9 million in the fourth quarter of fiscal 2004 compared to $2.9 million in the third quarter of fiscal 2004 and $7.3 million in the fourth quarter of fiscal 2003. |
• | Diluted net income per share is estimated between $0.39 to $0.41 per share for fiscal 2004 as compared to $0.40 per share for fiscal 2003. |
• | Cash and cash equivalents and available-for-sale securities at the end of fiscal 2004 was $58.3 million. |
These fiscal 2004 results are preliminary and subject to change pending the completion of the fiscal 2004 audit by the Company’s independent registered public accounting firm. Accordingly, the above results may differ from what the Company eventually files in its Form 10-K for the fiscal year ended September 30, 2004.
“We faced several challenges in fiscal 2004, including our restatements, reimbursement concerns, market uncertainty due to a new generation of treatment devices, and bundling by our competitors. Those challenges notwithstanding, we still achieved respectable sales growth and, more importantly, generated better than anticipated cash flow,” said Joseph K. Jachinowski, Chairman and Chief Executive Officer of IMPAC. “Our backlog attained a new high and our sales pipelines remain strong. We also believe that some of the adverse factors we have faced in the last nine months have begun to turn around, including encouraging reimbursement news, mitigation of bundling, and significant progress on integrating the new treatment devices. Additionally, we are encouraged about our progress in both the domestic medical oncology market as well as in international markets,” stated Jachinowski.
Results for Third Quarter of Fiscal 2004
Highlights for the third quarter of fiscal 2004 include:
• | Net sales increased 12.9% to $19.3 million in the third quarter of fiscal 2004 compared with $17.1 million for the same period in fiscal 2003. |
• | Net sales increased 24.7% to $50.3 million in the nine months ended June 30, 2004 compared with $40.3 million for the same period in fiscal 2003. |
• | Backlog increased 43.1% to $75.3 million in the third quarter of fiscal 2004 compared to $52.7 million for the same period in fiscal 2003 and decreased 5.8%, or $4.7 million, in comparison to the second fiscal quarter. |
• | Operating cash flow decreased 51.2% to $3.1 million for the nine months ended June 30, 2004 compared to $6.3 million for the same period in fiscal 2003. |
• | Diluted net income per share decreased to $0.16 per share for the third quarter of fiscal 2004 from $0.29 per share for the same period in fiscal 2003. |
• | Net income decreased 26.8% to $3.2 million in the nine months ended June 30, 2004 from $4.3 million for the same period in fiscal 2003. |
• | Cash and cash equivalents and available-for-sale securities at the end of the third quarter of fiscal 2004 was $47.5 million. |
Filing of Amended Quarterly Financial Results
As previously announced, the Company has restated its previously filed Forms 10-Q for the quarters ended December 31, 2003 and March 31, 2004 to conform certain of its revenue recognition policies to SOP 97-2. The restatement relates to a particular aspect of the Company’s application of SOP 97-2 with respect to the concept of constructive cancellation of undelivered elements in multiple element arrangements.
As a result of the restatement, some previously recognized revenues have been shifted to earlier or later quarters (resulting in a change to previously reported deferred revenue) and others have been reclassified to deferred revenue at March 31, 2004 and will be recognized in periods subsequent to March 31, 2004 in accordance with SOP 97-2. In addition, certain previously deferred revenues and related deferred costs have been recognized as revenue and expenses in the restatement period. A summary of the significant effects of the restatement is attached to this press release.
The restatement did not impact any customer receipts, and the change in revenue recognition policy did not change the previously reported total cash flows from operations. However, in connection with the restatement, we have reclassified certain amounts from cash flows from investing activities to cash flows from operating activities. In addition, the review leading to the restatement produced no evidence indicating any fraudulent behavior or intent to mislead investors.
Nasdaq Appeal Status
As previously announced, the Nasdaq Listing Qualifications Panel determined to continue the listing of IMPAC’s common stock on The Nasdaq National Market subject to the requirement that Company file its restated Forms 10-Q/A for the first and second quarters of fiscal 2004 and Form 10-Q for the third quarter of fiscal 2004 by December 3, 2004, as IMPAC requested. As a result of its filings today, the Company is now in compliance with its SEC reporting obligations. The fifth character “E” will remain appended to IMPAC’s ticker symbol pending a determination by the Nasdaq Listing Qualifications Panel that IMPAC has remedied its filing delinquency and evidenced compliance with all other requirements for continued listing on The Nasdaq National Market.
Conference Call Scheduled
A conference call will be held, Monday, November 22, 2004 at 5:30 AM (PT) / 8:30 AM (ET) to discuss operating results for the third quarter of fiscal 2004 and preliminary results for fiscal 2004. Individuals are invited to listen to the call by dialing 1-800-659-2032. International callers can dial 1-617-614-2712. The PIN number, 97811857, is the same for both domestic and international participants. Dial in approximately ten minutes prior to the scheduled teleconference time. The conference call can also be accessed live over the Internet through the IMPAC website,www.impac.com. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. A replay on the Company website will be available for two weeks after the original broadcast.
About IMPAC Medical Systems
IMPAC Medical Systems, Inc. is a leading provider of oncology IT solutions that streamline both clinical and business operations to help improve the process of delivering quality patient care. With systems designed for anatomic pathology, medical oncology, radiation oncology, imaging, clinical laboratory, and cancer registry, IMPAC supports the entire team of healthcare professionals who contribute to the care of the cancer patient. Supporting more than 2500 installations worldwide, IMPAC provides practical solutions that deliver better overall communication, process efficiency and quality patient care. For more information about IMPAC’s products or services, please call 888-GO-IMPAC or visitwww.impac.com.
The statements contained in this press release that are not purely historical are forward looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding the Company’s expectations, beliefs, hopes, intentions or strategies regarding the future. Forward looking statements include statements regarding the Company’s review of its revenue recognition policies and the estimated impact of the proposed financial restatement of previously report results, possible delisting from The NASDAQ Stock Market, business strategy, timing of, and plans for, the introduction of new products and enhancements, future sales, market growth and direction, competition, market share, revenue growth, operating margins and profitability. All forward looking statements included in this document are based upon information available to the Company as of the date hereof, and the Company assumes no obligation to update any such forward looking statement. Actual results could differ materially from the Company’s current expectations. Factors that could cause or contribute to such differences include the Company’s ability to expand outside the radiation oncology market or expand into international markets, our inability to recognize revenue from multiple element software contracts where certain elements have been delivered, installed and accepted but other elements remain undelivered, lost sales or lower sales prices due to competitive pressures, the ability to integrate its products successfully with related products and systems in the medical services industry, reliance on distributors and manufacturers of oncology equipment to market its products, changes in Medicare reimbursement policies, the integration and performance of acquired businesses, and other factors and risks discussed in the 10-K/A and other reports filed by the Company from time to time with the Securities and Exchange Commission.
IMPAC MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| June 30, 2004 | September 30, 2003 | ||||||
Restated | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 41,242 | $ | 57,979 | ||||
Available-for-sale securities | 2,600 | 7,052 | ||||||
Accounts receivable, net | 21,298 | 12,100 | ||||||
Unbilled accounts receivable | 603 | — | ||||||
Inventories | 95 | 66 | ||||||
Deferred income taxes, net | 7,079 | 6,400 | ||||||
Income tax refund receivable | — | 339 | ||||||
Prepaid expenses and other current assets | 5,245 | 4,691 | ||||||
Total current assets | 78,162 | 88,627 | ||||||
Available-for-sale securities | 3,688 | 2,719 | ||||||
Property and equipment, net | 4,604 | 3,573 | ||||||
Deferred income taxes | 861 | 883 | ||||||
Goodwill | 15,351 | 1,227 | ||||||
Other intangible assets, net | 8,276 | 918 | ||||||
Other assets | 482 | 459 | ||||||
Total assets | $ | 111,421 | $ | 98,406 | ||||
Liabilities, Common Stock Subject to Rescission Rights and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Capital lease obligations, current | $ | 1 | $ | 74 | ||||
Accounts payable | 275 | 864 | ||||||
Accrued liabilities | 2,984 | 4,758 | ||||||
Income taxes payable | 1,928 | 2,353 | ||||||
Deferred revenue | 38,156 | 27,552 | ||||||
Customer deposits, current | 10,518 | 10,864 | ||||||
Total current liabilities | 53,862 | 46,465 | ||||||
Customer deposits, net of current portion | 284 | 232 | ||||||
Deferred revenue, net of current portion | 62 | — | ||||||
Capital lease obligations, net of current portion | — | 41 | ||||||
Total liabilities | 54,208 | 46,738 | ||||||
Common stock subject to rescission rights | — | 98 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock | — | — | ||||||
Common stock | 10 | 10 | ||||||
Additional paid-in capital | 50,307 | 47,792 | ||||||
Accumulated other comprehensive loss | (50 | ) | (16 | ) | ||||
Retained earnings | 6,946 | 3,784 | ||||||
Total stockholders’ equity | 57,213 | 51,570 | ||||||
Total liabilities, common stock subject to rescission rights and stockholders’ equity | $ | 111,421 | $ | 98,406 | ||||
IMPAC MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
(In thousands, except per share data)
| 2004 | 2003 | 2004 | 2003 | ||||||||||||
Restated | Restated | |||||||||||||||
Net sales: | ||||||||||||||||
Software license and other, net | $ | 11,476 | $ | 11,802 | $ | 29,308 | $ | 25,852 | ||||||||
Maintenance and services | 7,859 | 5,317 | 20,982 | 14,489 | ||||||||||||
Total net sales | 19,335 | 17,119 | 50,290 | 40,341 | ||||||||||||
Cost of sales: | ||||||||||||||||
Software license and other, net | 3,815 | 2,893 | 10,276 | 7,208 | ||||||||||||
Maintenance and services | 2,643 | 1,919 | 7,358 | 5,294 | ||||||||||||
Amortization of purchased technology | 382 | 35 | 833 | 192 | ||||||||||||
Total cost of sales | 6,840 | 4,847 | 18,467 | 12,694 | ||||||||||||
Gross profit | 12,495 | 12,272 | 21,823 | 27,647 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 3,117 | 2,620 | 8,557 | 7,090 | ||||||||||||
Sales and marketing | 5,085 | 3,812 | 13,010 | 10,272 | ||||||||||||
General and administrative | 1,781 | 1,439 | 4,875 | 3,978 | ||||||||||||
Amortization of intangible assets | 199 | 35 | 449 | 83 | ||||||||||||
Write-off of purchased in-process research and development | — | — | 557 | — | ||||||||||||
Total operating expenses | 10,182 | 7,906 | 27,448 | 21,423 | ||||||||||||
Operating income | 2,313 | 4,366 | 4,375 | 6,224 | ||||||||||||
Interest expense | — | (4 | ) | (4 | ) | (15 | ) | |||||||||
Interest and other income | 95 | 150 | 347 | 376 | ||||||||||||
Income before provision for income taxes | 2,408 | 4,512 | 4,718 | 6,585 | ||||||||||||
Provision for income taxes | (794 | ) | (1,553 | ) | (1,556 | ) | (2,267 | ) | ||||||||
Net income | 1,614 | 2,959 | 3,162 | 4,318 | ||||||||||||
Accretion of redeemable convertible preferred stock | — | — | — | (2,229 | ) | |||||||||||
Net income available to common stockholders | $ | 1,614 | $ | 2,959 | $ | 3,162 | $ | 2,089 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.16 | $ | 0.31 | $ | 0.32 | $ | 0.24 | ||||||||
Diluted | $ | 0.16 | $ | 0.29 | $ | 0.31 | $ | 0.22 | ||||||||
Weighted-average shares used in computing net income per common share: | ||||||||||||||||
Basic | 9,903 | 9,526 | 9,841 | 8,771 | ||||||||||||
Diluted | 10,275 | 10,050 | 10,280 | 9,581 | ||||||||||||
IMPAC MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended June 30, | ||||||||
(In thousands)
| 2004 | 2003 | ||||||
Restated | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 3,162 | $ | 4,318 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization of property and equipment | 1,490 | 1,239 | ||||||
Amortization of intangible assets | 1,282 | 275 | ||||||
Accretion of available-for-sale securities | 98 | — | ||||||
Write-off of purchased in-process research and development | 557 | — | ||||||
Provision for doubtful accounts | 100 | 107 | ||||||
Deferred income taxes | (678 | ) | 295 | |||||
Loss on disposal of property and equipment | — | 92 | ||||||
Changes in assets and liabilities, net of effects of acquisitions: | ||||||||
Accounts receivable | (7,686 | ) | (4,120 | ) | ||||
Unbilled accounts receivable | 422 | — | ||||||
Inventories | (29 | ) | 2 | |||||
Prepaid expenses and other current assets | (537 | ) | 157 | |||||
Other assets | 14 | (116 | ) | |||||
Customer deposits | (295 | ) | (325 | ) | ||||
Accounts payable | (593 | ) | 413 | |||||
Accrued liabilities | (1,775 | ) | (494 | ) | ||||
Income tax payable/refund receivable | (86 | ) | (1,454 | ) | ||||
Deferred revenue | 6,957 | 5,893 | ||||||
Tax benefits from employee stock options | 662 | — | ||||||
Net cash provided by operating activities | 3,065 | 6,282 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of property and equipment | (2,206 | ) | (1,828 | ) | ||||
Proceeds from disposal of property and equipment | — | 94 | ||||||
Payments for the acquisition of Tamtron and MRS product lines | (22,507 | ) | — | |||||
Purchases of available-for-sale securities | (1,076 | ) | (26,622 | ) | ||||
Proceeds from sales of available-for-sale securities | 100 | 27,261 | ||||||
Proceeds from maturities of available-for-sale securities | 4,295 | 66 | ||||||
Net cash used in investing activities | (21,394 | ) | (1,029 | ) | ||||
Cash flows from financing activities: | ||||||||
Principal payments on capital leases | (194 | ) | (48 | ) | ||||
Proceeds from the issuance of common stock, net | 1,756 | 29,005 | ||||||
Net cash provided by financing activities | 1,562 | 28,957 | ||||||
Effect of exchange rates on cash | 30 | (40 | ) | |||||
Net increase (decrease) in cash and cash equivalents | (16,737 | ) | 34,210 | |||||
Cash and cash equivalents at beginning of period | 57,979 | 23,432 | ||||||
Cash and cash equivalents at end of period | $ | 41,242 | $ | 57,602 | ||||
IMPAC MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
SUPPLEMENTAL RESTATEMENT INFORMATION
(Unaudited)
Three Months Ended December 31, | ||||||||||||||||||||||
2003 | 2002 | |||||||||||||||||||||
As Reported | Restated | Net Change | As Reported | Restated | Net Change | |||||||||||||||||
(in thousands except per share data) | ||||||||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||||
Net sales | $ | 14,391 | $ | 15,432 | $ | 1,041 | $ | 11,160 | $ | 10,952 | $ | (208 | ) | |||||||||
Gross profit | 9,258 | 10,169 | 911 | 7,465 | 7,177 | (288 | ) | |||||||||||||||
Operating income | 907 | 1,950 | 1,043 | 979 | 776 | (203 | ) | |||||||||||||||
Net income | 684 | 1,404 | 720 | 687 | 559 | (128 | ) | |||||||||||||||
Net income (loss) available to common stockholders | 684 | 1,404 | 720 | (1,542 | ) | (1,670 | ) | (128 | ) | |||||||||||||
Net income (loss) per common share: | ||||||||||||||||||||||
Basic | $ | 0.07 | $ | 0.14 | $ | 0.07 | $ | (0.21 | ) | $ | (0.22 | ) | $ | (0.01 | ) | |||||||
Diluted | $ | 0.07 | $ | 0.14 | $ | 0.07 | $ | (0.21 | ) | $ | (0.22 | ) | $ | (0.01 | ) | |||||||
Three Months Ended March 31, | ||||||||||||||||||||||
2004 | 2003 | |||||||||||||||||||||
As Reported | Restated | Net Change | As Reported | Restated | Net Change | |||||||||||||||||
(in thousands except per share data) | ||||||||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||||
Net sales | $ | 15,432 | $ | 15,523 | $ | 91 | $ | 12,690 | $ | 12,270 | $ | (420 | ) | |||||||||
Gross profit | 9,471 | 9,159 | (312 | ) | 8,653 | 8,200 | (453 | ) | ||||||||||||||
Operating income | 161 | 112 | (49 | ) | 1,440 | 1,083 | (357 | ) | ||||||||||||||
Net income | 170 | 144 | (26 | ) | 1,027 | 801 | (226 | ) | ||||||||||||||
Net income available to common stockholders | 170 | 144 | (26 | ) | 1,027 | 801 | (226 | ) | ||||||||||||||
Net income per common share: | ||||||||||||||||||||||
Basic | $ | 0.02 | $ | 0.01 | $ | (0.01 | ) | $ | 0.11 | $ | 0.09 | $ | (0.02 | ) | ||||||||
Diluted | $ | 0.02 | $ | 0.01 | $ | (0.01 | ) | $ | 0.10 | $ | 0.08 | $ | (0.02 | ) | ||||||||
Six Months Ended March 31, | ||||||||||||||||||||||
2004 | 2003 | |||||||||||||||||||||
As Reported | Restated | Net Change | As Reported | Restated | Net Change | |||||||||||||||||
(in thousands except per share data) | ||||||||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||||
Net sales | $ | 29,823 | $ | 30,955 | $ | 1,132 | $ | 23,850 | $ | 23,221 | $ | (629 | ) | |||||||||
Gross profit | 18,729 | 19,328 | 599 | 16,118 | 15,375 | (743 | ) | |||||||||||||||
Operating income | 1,068 | 2,062 | 994 | 2,419 | 1,858 | (561 | ) | |||||||||||||||
Net income | 854 | 1,548 | 694 | 1,714 | 1,359 | (355 | ) | |||||||||||||||
Net income (loss) available to common stockholders | 854 | 1,548 | 694 | (515 | ) | (870 | ) | (355 | ) | |||||||||||||
Net income (loss) per common share: | ||||||||||||||||||||||
Basic | $ | 0.09 | $ | 0.16 | $ | 0.07 | $ | (0.06 | ) | $ | (0.10 | ) | $ | (0.04 | ) | |||||||
Diluted | $ | 0.08 | $ | 0.15 | $ | 0.07 | $ | (0.06 | ) | $ | (0.10 | ) | $ | (0.04 | ) | |||||||
As of March 31, 2004 | As of December 31, 2003 | |||||||||||||||||||||
As Reported | Restated | Net Change | As Reported | Restated | Net Change | |||||||||||||||||
(in thousands except per share data) | ||||||||||||||||||||||
Consolidated Balance Sheets Data: | ||||||||||||||||||||||
Prepaid expenses and other current assets | $ | 5,809 | $ | 5,695 | $ | (114 | ) | $ | 4,905 | $ | 4,824 | $ | (81 | ) | ||||||||
Deferred income tax assets, net | 8,082 | 7,592 | (490 | ) | 8,082 | 7,606 | (476 | ) | ||||||||||||||
Goodwill | 14,959 | 15,532 | 573 | 13,760 | 14,333 | 573 | ||||||||||||||||
Deferred revenue | 36,343 | 35,684 | (659 | ) | 32,694 | 32,126 | (568 | ) | ||||||||||||||
Retained earnings | 4,668 | 5,332 | 664 | 4,496 | 5,188 | 692 |