ORATEC Reports $12.8 Million in Sales

Profitable Quarter With $0.01 EPS



Apr 25, 2001, 01:00 ET from ORATEC Interventions, Inc.

    MENLO PARK, Calif., April 25 /PRNewswire/ --
 ORATEC Interventions, Inc. (Nasdaq: OTEC), a medical device innovator in the
 use of thermal energy to treat spine and joint disorders, today reported sales
 of $12.8 million for the quarter ended March 31, 2001, up one percent over the
 $12.7 million in sales reported in the same quarter a year ago.  Sales
 increased by $0.6 million, or five percent, from the fourth quarter of 2000.
     For the first quarter, net income increased to $223,000, or $0.01 per
 diluted share, compared to net income of $206,000, or $0.01 per diluted share,
 in the first quarter of the prior year.  Basic net income per share was
 $0.05 in the first quarter of 2000 before the automatic conversion of all
 preferred shares to common shares on April 10, 2000, the closing date of the
 company's initial public offering.  Assuming the conversion of the preferred
 shares in the first quarter of 2000, basic net income per share would be
 $0.01 per share, comparable with basic net income per share in the first
 quarter of 2001 of $0.01 per share.
     Both spine and arthroscopy sales increased sequentially from the fourth
 quarter of 2000.  Spine sales were $6.2 million in the first quarter, up
 $0.3 million over the fourth quarter sales of $5.9 million.  Arthroscopy sales
 reached $6.6 million, a $0.3 million increase over the $6.3 million in sales
 in the fourth quarter. Gross margins expanded from 66% to 69% from the fourth
 quarter of 2000 to the first quarter of 2001.
     In the first quarter of 2001, the company continued to place new SpineCATH
 IntraDiscal ElectroThermal Therapy (IDET(TM)) systems and train additional
 physicians, bringing the total number of spine customers with generators to
 more than 900.  The company estimates that approximately 30,000 patients with
 degenerative disc disease have been treated with ORATEC's proprietary
 technology.
     The company continues to work actively with payors to facilitate the
 expansion of reimbursement coverage for IDET.  Clinical outcomes data from
 multiple studies show IDET's effectiveness in significantly reducing pain and
 improving physical function in the majority of patients suffering from
 degenerative disc disease.  The reimbursement environment continued to be
 challenging in the first quarter of 2001 but the company remains encouraged by
 its ongoing communications with payors.
     In the arthroscopy business, new product introductions and enhancements
 had a favorable impact on sales in the first quarter.  These products included
 suction ablation probes, introduced in the fourth quarter of 2000, and special
 2.0 mm ablators for use in meniscus repair.  Hospitals and surgery centers are
 currently using approximately 2,100 Vulcan(TM) arthroscopy systems to meet
 their electrothermal surgery needs for temperature controlled tissue
 modification, cutting and ablation during joint repair procedures.
     ORATEC Interventions develops and markets innovative medical devices that
 use controlled thermal energy to treat spine and joint disorders.  The company
 currently markets two minimally invasive systems, the SpineCATH IDET system to
 treat chronic low back pain caused by degenerative disc disease and the
 ElectroThermal Arthroscopy System to treat joint disorders.  Its proprietary
 systems use heat to modify, cut or remove damaged or stretched soft tissue.
 The company markets its products to orthopedic surgeons, neurosurgeons and
 pain management specialists.  More than 3,000 physicians have performed over
 300,000 procedures using ORATEC's technologies.
     Except for historical information, the statements in this news release are
 forward-looking statements involving risks and uncertainties that could cause
 actual results to differ materially from those in such forward-looking
 statements.  Potential risks and uncertainties include, but are not limited
 to, the need to establish reimbursement for payors, the need for physicians to
 support the use of the company's products, volatility of the company's stock
 price as a result of earnings announcements and other developments, the
 company's lack of long term clinical results, the company's increasing
 operating expenses, the need for market acceptance of the company's products,
 competition in the industry, the company's need to protect its intellectual
 property rights, the company's susceptibility to intellectual property and
 product liability lawsuits, the company's limited operating history, the
 company's need to build and manage its sales organization, the company's need
 to train physicians, the company's need to support anticipated growth in
 operations, the company's limited control over third party distributors, the
 company's need to comply with FDA and other regulations, and risks related to
 the completion of future acquisitions.  Further information regarding these
 and other risks is included in the company's SEC filings.
 
                           ORATEC INTERVENTIONS, INC.
 
                       CONDENSED STATEMENTS OF OPERATIONS
 
                (In thousands, except per share data; unaudited)
 
                                                             Three months
                                                            ended March 31,
                                                         2001           2000
 
     Sales                                           $ 12,811       $ 12,663
     Cost of sales                                      4,020          3,646
 
     Gross profit                                       8,791          9,017
     Operating expenses:
       Research and development                         1,428          1,318
       Sales and marketing                              6,702          6,035
       General and administrative                         973          1,035
       Stock compensation                                 182            259
 
     Total operating expenses                           9,285          8,647
 
     Income (loss) from operations                      (494)            370
 
     Interest and other income (expense), net             729          (153)
 
     Income before income taxes                           235            217
 
     Provision for income taxes                            12             11
 
     Net income                                          $223           $206
 
     Basic net income per share                         $0.01          $0.05
     Diluted net income per share                       $0.01          $0.01
 
     Shares used in computing basic net
      income per share                                 22,671          4,555
     Shares used in computing diluted net
      income per share                                 23,475         18,873
 
 
                           ORATEC INTERVENTIONS, INC.
 
                            CONDENSED BALANCE SHEETS
 
                                 (In thousands)
 
 
                                                    March 31,    December 31,
                                                         2001       2000 (A)
                                                   (unaudited)
     Assets
     Current assets:
       Cash and cash equivalents                      $28,968        $33,264
       Available-for-sale investments                  22,291         16,683
       Accounts receivable, net                         8,566          8,352
       Inventories                                      5,449          6,450
       Prepaid expenses and other current assets        2,544          3,324
         Total current assets                          67,818         68,073
     Property and equipment, net                        9,384          8,985
                                                      $77,202        $77,058
 
     Liabilities and stockholders' equity
     Current liabilities:
       Accounts payable and accrued liabilities        $5,598         $6,700
       Current portion of debt                             16             22
         Total current liabilities                      5,614          6,722
     Redeemable convertible preferred stock and
      stockholders' equity                             71,588         70,336
     Total liabilities and stockholders' equity       $77,202        $77,058
 
 
     (A)  Derived from the audited balance sheet as of that date.
 
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SOURCE ORATEC Interventions, Inc.
    MENLO PARK, Calif., April 25 /PRNewswire/ --
 ORATEC Interventions, Inc. (Nasdaq: OTEC), a medical device innovator in the
 use of thermal energy to treat spine and joint disorders, today reported sales
 of $12.8 million for the quarter ended March 31, 2001, up one percent over the
 $12.7 million in sales reported in the same quarter a year ago.  Sales
 increased by $0.6 million, or five percent, from the fourth quarter of 2000.
     For the first quarter, net income increased to $223,000, or $0.01 per
 diluted share, compared to net income of $206,000, or $0.01 per diluted share,
 in the first quarter of the prior year.  Basic net income per share was
 $0.05 in the first quarter of 2000 before the automatic conversion of all
 preferred shares to common shares on April 10, 2000, the closing date of the
 company's initial public offering.  Assuming the conversion of the preferred
 shares in the first quarter of 2000, basic net income per share would be
 $0.01 per share, comparable with basic net income per share in the first
 quarter of 2001 of $0.01 per share.
     Both spine and arthroscopy sales increased sequentially from the fourth
 quarter of 2000.  Spine sales were $6.2 million in the first quarter, up
 $0.3 million over the fourth quarter sales of $5.9 million.  Arthroscopy sales
 reached $6.6 million, a $0.3 million increase over the $6.3 million in sales
 in the fourth quarter. Gross margins expanded from 66% to 69% from the fourth
 quarter of 2000 to the first quarter of 2001.
     In the first quarter of 2001, the company continued to place new SpineCATH
 IntraDiscal ElectroThermal Therapy (IDET(TM)) systems and train additional
 physicians, bringing the total number of spine customers with generators to
 more than 900.  The company estimates that approximately 30,000 patients with
 degenerative disc disease have been treated with ORATEC's proprietary
 technology.
     The company continues to work actively with payors to facilitate the
 expansion of reimbursement coverage for IDET.  Clinical outcomes data from
 multiple studies show IDET's effectiveness in significantly reducing pain and
 improving physical function in the majority of patients suffering from
 degenerative disc disease.  The reimbursement environment continued to be
 challenging in the first quarter of 2001 but the company remains encouraged by
 its ongoing communications with payors.
     In the arthroscopy business, new product introductions and enhancements
 had a favorable impact on sales in the first quarter.  These products included
 suction ablation probes, introduced in the fourth quarter of 2000, and special
 2.0 mm ablators for use in meniscus repair.  Hospitals and surgery centers are
 currently using approximately 2,100 Vulcan(TM) arthroscopy systems to meet
 their electrothermal surgery needs for temperature controlled tissue
 modification, cutting and ablation during joint repair procedures.
     ORATEC Interventions develops and markets innovative medical devices that
 use controlled thermal energy to treat spine and joint disorders.  The company
 currently markets two minimally invasive systems, the SpineCATH IDET system to
 treat chronic low back pain caused by degenerative disc disease and the
 ElectroThermal Arthroscopy System to treat joint disorders.  Its proprietary
 systems use heat to modify, cut or remove damaged or stretched soft tissue.
 The company markets its products to orthopedic surgeons, neurosurgeons and
 pain management specialists.  More than 3,000 physicians have performed over
 300,000 procedures using ORATEC's technologies.
     Except for historical information, the statements in this news release are
 forward-looking statements involving risks and uncertainties that could cause
 actual results to differ materially from those in such forward-looking
 statements.  Potential risks and uncertainties include, but are not limited
 to, the need to establish reimbursement for payors, the need for physicians to
 support the use of the company's products, volatility of the company's stock
 price as a result of earnings announcements and other developments, the
 company's lack of long term clinical results, the company's increasing
 operating expenses, the need for market acceptance of the company's products,
 competition in the industry, the company's need to protect its intellectual
 property rights, the company's susceptibility to intellectual property and
 product liability lawsuits, the company's limited operating history, the
 company's need to build and manage its sales organization, the company's need
 to train physicians, the company's need to support anticipated growth in
 operations, the company's limited control over third party distributors, the
 company's need to comply with FDA and other regulations, and risks related to
 the completion of future acquisitions.  Further information regarding these
 and other risks is included in the company's SEC filings.
 
                           ORATEC INTERVENTIONS, INC.
 
                       CONDENSED STATEMENTS OF OPERATIONS
 
                (In thousands, except per share data; unaudited)
 
                                                             Three months
                                                            ended March 31,
                                                         2001           2000
 
     Sales                                           $ 12,811       $ 12,663
     Cost of sales                                      4,020          3,646
 
     Gross profit                                       8,791          9,017
     Operating expenses:
       Research and development                         1,428          1,318
       Sales and marketing                              6,702          6,035
       General and administrative                         973          1,035
       Stock compensation                                 182            259
 
     Total operating expenses                           9,285          8,647
 
     Income (loss) from operations                      (494)            370
 
     Interest and other income (expense), net             729          (153)
 
     Income before income taxes                           235            217
 
     Provision for income taxes                            12             11
 
     Net income                                          $223           $206
 
     Basic net income per share                         $0.01          $0.05
     Diluted net income per share                       $0.01          $0.01
 
     Shares used in computing basic net
      income per share                                 22,671          4,555
     Shares used in computing diluted net
      income per share                                 23,475         18,873
 
 
                           ORATEC INTERVENTIONS, INC.
 
                            CONDENSED BALANCE SHEETS
 
                                 (In thousands)
 
 
                                                    March 31,    December 31,
                                                         2001       2000 (A)
                                                   (unaudited)
     Assets
     Current assets:
       Cash and cash equivalents                      $28,968        $33,264
       Available-for-sale investments                  22,291         16,683
       Accounts receivable, net                         8,566          8,352
       Inventories                                      5,449          6,450
       Prepaid expenses and other current assets        2,544          3,324
         Total current assets                          67,818         68,073
     Property and equipment, net                        9,384          8,985
                                                      $77,202        $77,058
 
     Liabilities and stockholders' equity
     Current liabilities:
       Accounts payable and accrued liabilities        $5,598         $6,700
       Current portion of debt                             16             22
         Total current liabilities                      5,614          6,722
     Redeemable convertible preferred stock and
      stockholders' equity                             71,588         70,336
     Total liabilities and stockholders' equity       $77,202        $77,058
 
 
     (A)  Derived from the audited balance sheet as of that date.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X08202782
 
 SOURCE  ORATEC Interventions, Inc.