SOURCE: Given Imaging

November 11, 2008 16:30 ET

Given Imaging Reports Third Quarter 2008 Results

Third Quarter 2008 Revenues Increase to $31.1 Million; PillCam SB Sales Increase 21% to a Record 56,100 Capsules; Third Quarter 2008 GAAP Net Income Increases 24% to $2.1 Million; Company Revises 2008 Annual Guidance

YOQNEAM, ISRAEL--(Marketwire - November 11, 2008) - Given Imaging Ltd. (NASDAQ: GIVN) today announced financial results for the third quarter ended September 30, 2008.

Worldwide revenues increased by 12% to $31.1 million in the third quarter of 2008, from $27.7 million in the third quarter of 2007. Gross margin in the third quarter of 2008 was 75%. Gross margin in the third quarter of 2007 was 74.3%.

Net income increased 24% to $2.1 million or $0.07 per share on a fully diluted basis in the third quarter of 2008, compared to net income of $1.7 million, or $0.05 per share on a fully diluted basis in the third quarter of 2007. A table detailing certain items affecting net income in the third quarter and first nine months of 2007 and 2008 is available below.

For the third quarter of 2008, net cash generated in operating activities totaled $5.4 million. Cash and cash equivalents, short-term investments and marketable securities at September 30, 2008 totaled $108.4 million

"We are pleased to report that global PillCam SB sales increased by 21% to a record 56,100 in the third quarter, reflecting solid increases in the EMEA region of 45% and the APAC region where sales more than doubled. Our top line this quarter, however, was impacted by a shortfall in equipment sales in Japan. In order to accelerate expansion of our installed base of approximately 140 systems in Japan, we are in the process of adding a leading supplier of medical equipment as a second distributor in Japan." said Homi Shamir, president and CEO. "In light of lower than expected revenues in Japan as well as the continued delay in issuing the effective date for reimbursement in France, we now expect that annual revenues for 2008 will be approximately $125 million, 4% below the lower end ($130 million) of our revenue guidance for the year. As a result, we now expect EPS for 2008 to be approximately $0.25 per share (see discussion below). Nonetheless, we are confident about 2009 based on growth anticipated from changes we are making in the Japanese market, reimbursement becoming effective in France and expanded US market opportunities. We also have significant financial flexibility to take advantage of market opportunities that may emerge as a result of our debt-free balance sheet and strong cash position."

Third Quarter 2008 Revenue Analysis

Sales in the Americas region were $19.4 million, up 7% from the $18.2 million in the same period in 2007. EMEA sales increased 43% to $8.7 million compared to $6.1 million in the same period in 2007, while APAC sales decreased to $3.1 million from $3.4 million in the same period in 2007.

Worldwide PillCam SB sales were 56,100 in the third quarter of 2008, an increase of 21% compared to the same period last year. PillCam SB sales in the Americas increased by 5% to 36,300 in the third quarter of 2008 compared to 34,500 in the third quarter of 2007. PillCam SB sales in the EMEA region increased by 45% and PillCam sales in the APAC region more than doubled in the third quarter. The increase in PillCam SB sales in the APAC region is mainly attributable to PillCam sales in Japan and Australia. Worldwide reorders of PillCam SB increased by 30% to approximately 55,100 compared to approximately 42,300 in the third quarter of 2007. Reorders of PillCam SB in the Americas region increased by 11% to 35,700 compared to 32,100 in the third quarter of 2007. Reorders in the EMEA region increased by 14%, while APAC reorders more than doubled over the same period last year.

PillCam sales accounted for 88% of total revenues compared to 87% in the same period of 2007.

Supplemental third quarter data can be found at www.givenimaging.com in the Investor Relations section.

Nine Month Financial Results

For the nine month period ended September 30, 2008, sales increased by 16% to $91.3 million compared to $78.6 million in the same period in 2007. Gross profit for the nine month period was 74% compared to 74.6% in 2007. On a GAAP basis, net income for the first nine months of 2008 was $6.1 million or $0.20 per share on a fully diluted basis, compared to net income of $2.35 million or $0.08 per share, for the same period in 2007.

Additional Income Statement Information

The following charges (credits) are included in the income statements for the three and nine month periods ended September 30, 2008 and in the corresponding periods of 2007 (in millions of USD):

                                             Nine                  Nine
                                Third Qtr    Months   Third Qtr    Months
                                  2008       2008       2007       2007
                                ---------  ---------  ---------- ----------
Stock based compensation
 expenses (FAS123R)                   1.8        5.1         1.6        4.0
                                ---------  ---------  ---------- ----------
InScope gain                            -       (5.4)          -          -
                                ---------  ---------  ---------- ----------
IP litigation expenses               (0.2)       3.1         1.4        2.8
                                ---------  ---------  ---------- ----------
Settlement agreement  with
 Olympus Corporation                    -       (2.3)          -          -
                                ---------  ---------  ---------- ----------
Loss from sale of securities         (0.4)      (0.4)          -          -
                                ---------  ---------  ---------- ----------

As of September 30, 2008 the Company had approximately $50 million in cash, $35 million of US government marketable securities and approximately $23 million of corporate bonds, including AIG bonds valued at $4 million. In marking these AIG bonds to market, the Company recorded a $1.1 million temporary loss charged against Shareholders' Equity. The EPS guidelines provided today exclude any potential impairment of the value of the AIG bonds, or other corporate bonds, which may be required if instability in the US financial markets continues. Also, during the quarter the Company sold bonds of certain financial institutions, resulting in a loss of $0.4 million included in Finance Income, Net.

Recent Developments

New Product and Service Launches

Given Imaging recently launched new products and services developed to facilitate physician use of PillCam Capsule Endoscopy. These include:

--  VueSpan Diagnostic Services: a service using an independent faculty of
    gastroenterologists with recognized experience in capsule endoscopy to read
    PillCam video capsule studies submitted for interpretation by other
    gastroenterologists. VueSpan is currently offered in 14 states and is
    expanding nationwide.
    
--  RAPID 5 Access: New software that allows a physician to read PillCam
    videos anytime and anywhere with the most advanced software tools. RAPID 5
    Access also enables network-based storage of PillCam studies and the import
    and export of patient data to and from electronic medical record systems.
    

Conference Call / Webcast Information

U.S. Call / Webcast

The company will host a conference call in English on Wednesday, November 12 at 9:00am ET. To participate in this teleconference, please dial 800-926-7061 fifteen minutes before the conference is scheduled to begin. Callers outside of the U.S. should dial 913-312-0379. The call will also be webcast live at www.givenimaging.com. A replay of the call will be available for two weeks on the company's website, or until November 26, 2008 by dialing 888-203-1112. Callers outside of the U.S. should dial 719-457-0820. The replay participant code is 3443955.

Hebrew Call

The company will host a call in Hebrew on November 12 at 14:00 Israel time (7:00am ET). To access this call, please dial +972-3-9180650 fifteen minutes before the conference is scheduled to begin. A replay of the call will be available November 12-14 by dialing +972-3-9255941.

About Given Imaging Ltd.

Given Imaging is redefining gastrointestinal diagnosis by developing, producing and marketing innovative, patient-friendly products for detecting gastrointestinal disorders. The company's technology platform is the PillCam® Platform, featuring the PillCam video capsule, a disposable, miniature video camera contained in a capsule, which is ingested by the patient, a sensor array, data recorder and RAPID® software. Given Imaging markets a number of available capsules: the second-generation PillCam SB 2 video capsule to visualize the entire small intestine which is currently marketed in the United States and in more than 60 other countries; the second-generation PillCam ESO 2 video capsule to visualize the esophagus; the Agile™ patency capsule to determine the free passage of the PillCam capsule in the GI tract and the PillCam COLON video capsule to visualize the colon that has been cleared for marketing in the European Union. PillCam COLON has received a CE Mark, but is not cleared for marketing or available for commercial distribution in the USA. More than 820,000 patients worldwide have benefited from the PillCam capsule endoscopy procedure. Given Imaging's headquarters, manufacturing and R&D facilities are located in Yoqneam, Israel. It has operating subsidiary companies in the United States, Germany, France, Japan, Australia and Singapore. Given Imaging's largest shareholders include Elron Electronic Industries (NASDAQ:ELRN) (TELAVIV:ELRN). For more information, visit http://www.givenimaging.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, projections about our business and our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as "may," "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual events, results, performance, circumstances or achievements of the Company to be materially different from any future events, results, performance, circumstances or achievements expressed or implied by such forward-looking statements. Factors that could cause actual events, results, performance, circumstances or achievements to differ from such forward-looking statements include, but are not limited to, the following: (1) our ability to develop and bring to market new products, (2) our ability to receive regulatory clearance or approval to market our products or changes in regulatory environment, (3) our success in implementing our sales, marketing and manufacturing plans, (4) protection and validity of patents and other intellectual property rights, (5) the impact of currency exchange rates, (6) the effect of competition by other companies, (7) the outcome of significant litigation, (8) our ability to obtain reimbursement for our product from government and commercial payors, (9) quarterly variations in operating results, (10) the possibility of armed conflict or civil or military unrest in Israel, and (11) other risks and factors disclosed in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, risks and factors identified under such headings as "Risk Factors," "Cautionary Language Regarding Forward-Looking Statements" and "Operating Results and Financial Review and Prospects" in the Company's Annual Report on Form 20-F for the year ended December 31, 2007. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except for the Company's ongoing obligations to disclose material information under the applicable securities laws, it undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

(Financial Tables Follow)

           Given Imaging Ltd. and its Consolidated Subsidiaries
                        Consolidated Balance Sheets
                      In thousands except share data


                                                     September   December
                                                         30,        31,
                                                        2008       2007
                                                    ----------- -----------
                                                    (Unaudited)  (Audited)
                                                    ----------- -----------

Assets

Current assets
Cash and cash equivalents                           $    43,580 $    37,103
Short-term investments                                   23,505      23,191
Accounts receivable:
  Trade (Net of provisions for doubtful debts of
   $279 and of $286 as of September 30, 2008 and
   December 31, 2007, respectively)                      19,020      23,315
  Other                                                   3,610      10,385
Inventories                                              19,756      15,960
Prepaid expenses                                          1,921       1,289
Deferred tax assets                                       1,066       1,350
Advances to suppliers                                       501         190
                                                    ----------- -----------

Total current assets                                    112,959     112,783
                                                    ----------- -----------

Deposits                                                  1,110         892

Assets held for employee severance payments               4,198       3,007

Marketable Securities                                    41,363      41,629

Fixed assets, at cost, less accumulated
 depreciation                                            15,585      15,422

Other assets, at cost, less accumulated
 amortization                                             4,759       3,583
                                                    ----------- -----------



Total assets                                        $   179,974 $  177,316
                                                    =========== ==========



           Given Imaging Ltd. and its Consolidated Subsidiaries
                        Consolidated Balance Sheets
                      In thousands except share data


                                                September 30, December 31,
                                                    2008         2007
                                                ------------  ------------
                                                (Unaudited)    (Audited)
                                                ------------  ------------
Liabilities and shareholders' equity

Current liabilities
Current installments of obligation under
 capital lease                                  $        125  $        121
Accounts payable
  Trade                                                8,610         7,275
  Other                                               17,143        21,012
Deferred income                                        2,794         9,379
                                                ------------  ------------
Total current liabilities                             28,672        37,787
                                                ------------  ------------

Long-term liabilities
Obligation under capital lease, net                      466           448
Liability in respect of employees’ severance
 payments                                              4,955         3,490
                                                ------------  ------------
Total long-term liabilities                            5,421         3,938
                                                ------------  ------------

Total liabilities                                     34,093        41,725
                                                ------------  ------------

Minority interest                                      2,555         1,996
                                                ------------  ------------

Shareholders’ equity
Share capital:
Ordinary Shares, NIS 0.05 par value each
 (90,000,000 shares authorized; 29,257,785
 and 29,241,875 shares issued and fully paid
 as of September 30, 2008 and
 December 31, 2007, respectively)                        343           343
Additional paid-in capital                           172,191       166,813
Capital reserve                                        2,166         2,166
Accumulated other comprehensive loss                  (1,716)            -
Accumulated deficit                                  (29,658)      (35,727)
                                                ------------  ------------
Total shareholders' equity                           143,326       133,595
                                                ------------  ------------



Total liabilities and shareholders' equity      $    179,974  $    177,316
                                                ============  ============




          Given Imaging Ltd. and its Consolidated Subsidiaries
                  Consolidated Statements of Operations
               In thousands except share and per share data


                       Nine month            Three month
                      period ended           period ended
                      September 30,          September 30,     Year ended
                ----------------------  ---------------------- December 31,
                   2008        2007        2008        2007        2007
                ----------  ----------  ----------  ----------  ----------
                (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
                ----------  ----------  ----------  ----------  ----------
Revenues        $   91,332  $   78,572  $   31,136  $   27,676  $  112,868
Cost of
 revenues          (23,736)    (19,960)     (7,793)     (7,114)    (29,721)
Early repayment
 of royalty
 bearing
 government
 grants                  -           -           -           -      (4,843)
                ----------  ----------  ----------  ----------  ----------

Gross profit        67,596      58,612      23,343      20,562      78,304
                ----------  ----------  ----------  ----------  ----------

Operating
 expenses
Research and
 development,
 Gross             (11,529)     (9,093)     (3,840)     (3,105)    (12,847)
Royalty and
 non-royalty
 bearing grants      1,090       1,673         300         980       1,242
                ----------  ----------  ----------  ----------  ----------

Research and
 development,
 net               (10,439)     (7,420)     (3,540)     (2,125)    (11,605)
Sales and
 marketing
 expenses          (46,569)    (38,581)    (14,647)    (13,169)    (55,446)
General and
 administrative
 expenses          (14,449)    (14,507)     (4,276)     (5,486)    (20,981)
Termination of
 marketing
 agreement           5,443           -           -           -      22,860
Other                    -           -           -           -        (422)
                ----------  ----------  ----------  ----------  ----------

Total operating
 expenses          (66,014)    (60,508)    (22,463)    (20,780)    (65,594)
                ----------  ----------  ----------  ----------  ----------

Operating
 profit (loss)       1,582      (1,896)        880        (218)     12,710
Financing
 income, net         3,195       4,015         729       2,086       5,520
                ----------  ----------  ----------  ----------  ----------

Profit before
 taxes on
 income and
 minority
 share               4,777       2,119       1,609       1,868      18,230
Income tax
 expense              (233)       (489)       (107)       (245)     (4,548)
                ----------  ----------  ----------  ----------  ----------

Profit before
 minority
 Share               4,544       1,630       1,502       1,623      13,682

Minority share
 in losses of
 subsidiary          1,525         720         607          33       1,503
                ----------  ----------  ----------  ----------  ----------

Net profit      $    6,069  $    2,350       2,109  $    1,656  $   15,185
                ==========  ==========  ==========  ==========  ==========

Earnings per
 share

Basic Earnings
 per Ordinary
 Share          $     0.21  $     0.08  $     0.07  $     0.06  $     0.52
                ==========  ==========  ==========  ==========  ==========

Diluted
 Earnings  per
 Ordinary Share $     0.20  $     0.08  $     0.07  $     0.05  $     0.49
                ==========  ==========  ==========  ==========  ==========

Weighted
 average number
 of Ordinary
 Shares used
 to compute basic
 Earnings per
 Ordinary share 29,252,785  28,880,299  29,254,618  29,119,996  28,961,968
                ==========  ==========  ==========  ==========  ==========

Weighted
 average number
 of Ordinary
 Shares used
 to compute
 diluted
 Earnings
 per Ordinary
 share          30,791,425  30,911,256  30,601,355  31,239,196  31,030,458
                ==========  ==========  ==========  ==========  ==========



           Given Imaging Ltd. and its Consolidated Subsidiaries
                  Consolidated Statements of Cash Flows
                               In thousands



                  Nine month period       Three month period
                        ended                   ended
                    September 30,           September 30,      Year ended
                ----------------------  ---------------------- December 31,
                   2008        2007        2008        2007        2007
                ----------  ----------  ----------  ----------  ----------
                (Unaudited) (Unaudited) (Unaudited) (Unaudited)  (Audited)
                ----------  ----------  ----------  ----------  ----------
Cash flows from
 operating
 activities:
Net profit
 (loss)         $    6,069  $    2,350  $    2,109  $    1,656  $   15,185

Adjustments
 required to
 reconcile net
 loss to net
 cash used in
 operating
 activities:
Minority share
 in losses
 of subsidiary      (1,525)       (720)       (607)        (33)     (1,503)
Depreciation
 and
 amortization        3,839       3,532       1,298       1,252       4,771
Deferred tax
 assets                284        (309)        109         134          24
Stock based
 compensation        5,126       3,977       1,870       1,640       5,651
Excess tax
 benefits
 related to
 stock based
 compensation            -           -           -           -        (693)
Other                  197          18         188         129         380
Net decrease
 (increase) in
 trading
 securities              -       3,060           -        (418)      5,092
Decrease
 (increase) in
 accounts
 receivable -
 trade               4,295           3       1,507      (1,343)     (4,428)
Decrease
 (increase)  in
 accounts
 receivable -
 other               6,775      (2,298)      2,192        (810)     (8,922)
Decrease
 (increase) in
 prepaid
 expenses             (632)       (922)       (714)       (541)         51
Increase in
 advances
 to suppliers         (311)       (175)       (286)        (42)       (108)
Decrease
 (Increase) in
 inventories        (3,796)       (714)     (1,179)       (522)      2,208
Increase
 (decrease) in
 accounts
 payable            (2,792)      2,961      (1,007)        828       8,570
Increase
 (decrease) in
 deferred
 income             (6,585)       (445)        (72)         85     (14,903)
                ----------  ----------  ----------  ----------  ----------
Net cash
 provided by
 operating
 activities         10,944      10,318       5,408       2,015  $   11,375
                ----------  ----------  ----------  ----------  ----------

Cash flows from
 investing
 activities:
Excess of cash
 investment
 over
 equity share
 in subsidiary         965           -           -           -           -
Purchase of
 fixed assets
 and
 intangible
 assets             (5,166)     (4,082)     (1,569)     (2,077)     (5,772)
Deposits, net         (247)       (405)         (3)       (427)       (355)
Proceeds from
 sales of
 marketable
 securities         52,396      15,503      17,682       6,371      18,753
Proceeds from
 sales of fixed
 assets                 30           -           -           -           -
Purchase of
 marketable
 securities and
 short term
 investment        (54,071)    (27,789)    (21,557)       (992)    (36,584)
                ----------  ----------  ----------  ----------  ----------
Net cash (used
 in) provided
 by investing
 activities         (6,093)    (16,773)     (5,447)      2,875  $  (23,958)
                ----------  ----------  ----------  ----------  ----------



          Given Imaging Ltd. and its Consolidated Subsidiaries
                  Consolidated Statements of Cash Flows
               In thousands except share and per share data


                       Nine month            Three month
                      period ended           period ended
                      September 30,          September 30,     Year ended
                ----------------------  ---------------------- December 31,
                   2008        2007        2008        2007        2007
                ----------  ----------  ----------  ----------  ----------
                (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
                ----------  ----------  ----------  ----------  ----------

Cash flows from
 financing
 activities:
Principal
 payments on
 capital
 lease
 obligation            (91)        (10)         (6)         (4) $      (37)
Proceeds from
 issuance of
 ordinary shares       252       3,928          56       1,036       4,280
Issuance of
 shares to a
 minority
 shareholder in
 a consolidated
 company             1,207           -           -           -           -
Excess tax
 benefits
 related to
 stock based
 compensation            -           -           -           -         693
                ----------  ----------  ----------  ----------  ----------
Net cash
 provided by
 financing
 activities          1,368       3,918          50       1,032  $    4,936
                ----------  ----------  ----------  ----------  ----------

Effect of
 exchange rate
 changes
 on cash               258         121         (15)        138         240
                ----------  ----------  ----------  ----------  ----------

Increase
 (decrease) in
 cash and cash
 equivalents         6,477      (2,416)         (4)      6,060      (7,407)

Cash and cash
 equivalents
 at beginning of
 period             37,103      44,510      43,584      36,034      44,510
                ----------  ----------  ----------  ----------  ----------

Cash and cash
 equivalents at
 end of period  $   43,580  $   42,094  $   43,580  $   42,094  $   37,103
                ==========  ==========  ==========  ==========  ==========

Supplementary
 cash flow
Information
Income taxes
 paid           $      194  $      283  $       72  $      130  $    1,098
                ==========  ==========  ==========  ==========  ==========

Assets acquired
 under capital
 lease         $      109           -           -           -  $      569
                ==========  ==========  ==========  ==========  ==========

Contact Information