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Palomar Medical Reports Financial Results for Second Quarter 2008

Friday, August 1, 2008 General News J E 4
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BURLINGTON, Mass., July 31 Palomar MedicalTechnologies, Inc. (Nasdaq: PMTI), a leading researcher and developer oflight-based systems for cosmetic treatments, today announced financial resultsfor the second quarter ended June 30, 2008. Revenues for the quarter endedJune 30, 2008 were $23.1 million, of which $19.2 million were productrevenues, $2.3 million were royalty revenues, $0.4 million were fundeddevelopment revenues, and $1.25 million were other revenues. Second quartergross margin from product revenues was 67 percent as compared to 63 percent inthe previous quarter. Income before taxes for the second quarter ended June30, 2008 was $1.4 million, which included approximately $2.9 million in legalexpenses related to the Candela lawsuits and a $523,000 FAS 123R stock-basedcompensation expense.

The Company reported net income of $0.8 million, or $0.04 per dilutedshare for the second quarter of 2008 versus net income of $5.8 million, or$0.30 per diluted share for the second quarter of 2007. Non-GAAP net incomefor the quarter ended June 30, 2008, which includes adjustments for the FAS123R compensation expense and non-cash taxes, resulted in $1.8 million, or$0.10 per diluted share. Non-GAAP net income for the quarter ended June 30,2007, which includes adjustments for the FAS 123R compensation expense, otherincome, and non-cash taxes, resulted in $8.4 million, or $0.43 per dilutedshare. Please refer to the financial statements included in this news releasefor a reconciliation of GAAP to non-GAAP results for the three and six monthsended June 30, 2008 and 2007.

The Company's balance sheet continues to be strong and includes $128million in cash and marketable securities. The Company has classifiedapproximately $7.2 million of its marketable securities as non-current assetsdue to the recent illiquidity in the auction-rate securities market. TheCompany has the intent and ability to hold these investments to maturity.

Chief Executive Officer Joseph P. Caruso commented, "We continue to seethe effects of a weakened economy in the United States, but investments madein our domestic sales group over the past few quarters are starting to showimprovement. Specifically, product revenues increased 30 percent in NorthAmerica as compared to the previous quarter and accounted for 76 percent ofour product revenues this quarter. Internationally, we are in the process oftransitioning distribution of the first country to Q-Med. In the meantime, wewill continue to support both our existing and new distributors throughout therest of the world to further enhance sales. Future transition decisions willbe based on the success of the first transition country to Q-Med. Thesechoices, and others, will be made to strengthen our global presence and brandrecognition as we prepare for an expansion of our product line later thisyear."

Mr. Caruso continued, "During the second quarter, we introduced thePalomar Aspire(TM) body sculpting system and SlimLipo(TM) handpiece. Weshowcased the system at the American Society of Lasers in Medicine meeting andother important industry meetings during the quarter. Our technology uses aproprietary wavelength that is preferentially absorbed by fat in addition to aone-time use disposable delivery system. These advantages have beenwell-received by the medical community and we look forward to placing ourfirst Aspire systems during the third quarter. Laser-assisted lipolysis is oneof the fastest growing segments of the aesthetic laser market today. This newplatform complements our laser and pulsed-light systems, including theflagship StarLux 500(R), and the combination of both platforms provides ourcustomers with a full range of treatment options for their patients."

Use of Non-GAAP Financial Measures

To supplement Palomar's consolidated financial statements presented inaccordance with GAAP, this news release uses the followi
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