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Obagi Medical Products Reports Third Quarter 2012 Earnings; Company Provides Update To Key Initiatives

Obagi Medical Products, Inc. (NASDAQ: OMPI), a leader in topical aesthetic and therapeutic skin health systems, today reported financial results for the third quarter and nine months ended September 30, 2012.

For the third quarter of 2012, net sales rose to $29.1 million from $28.1 million for the third quarter of 2011, benefiting from higher license fees and international sales. The Company also continued to see progress from its re-introduction of hydroquinone products into Texas, which commenced in May 2012.

Net income for the third quarter of 2012 was $3.0 million, or $0.16 per diluted share, and included approximately $1.7 million (or an impact of $0.06 per diluted share) of pre-tax charges for the development of the Company’s e-commerce and other growth initiatives, as previously announced. This compared with net income of $4.4 million, or $0.24 per diluted share, a year ago.

Operating expenses for the third quarter of 2012 were $18.2 million, compared with $15.6 million for the same period last year, primarily due to the investments in e-commerce and other growth initiatives.

Gross margin for the third quarter of 2012 was 79.8%, compared with 79.9% a year ago.

Additional developments of the third quarter and to date included the following:
  • Purchased, in the open market, 1.5 million shares of the Company’s common stock for $19.8 million, reducing the total shares outstanding by 8% to 17.4 million. This was completed under an October 2010 Board-authorized repurchase program as amended in March 2012. There is approximately $10.2 million of remaining capacity for future repurchases in the current authorization.
  • During October, entered into a settlement with its insurers related to the reimbursement of legal and other related fees in connection with the Zein Obagi litigation. The settlement was for $14.0 million and the Company’s portion was $8.4 million as the matter was handled on a contingency-fee basis. The $8.4 million benefit will be recorded during the fourth quarter within the operating expense section of the income statement.
  • Amended its bylaws to adopt a majority vote requirement in the uncontested election of directors, consistent with other recent company adoptions and ISS data.

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