EXHIBIT 99.1
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MedSource Technologies, Inc.
[MedSource Logo]
FOR IMMEDIATE RELEASE
APRIL 29, 2003
MEDSOURCE TECHNOLOGIES ANNOUNCES
FISCAL THIRD-QUARTER RESULTS
COMPANY MEETS REVENUE AND EPS PROJECTIONS; MEDSOURCE POSITIONED TO
RESPOND TO GROWING DEMAND IN MEDICAL TECHNOLOGY OUTSOURCING
MINNEAPOLIS, APRIL 29, 2003--MEDSOURCE TECHNOLOGIES, INC. (NASDAQ: MEDT), today
announced results for its fiscal third-quarter and nine months ended March 30,
2003. Results were prepared in accordance with generally accepted accounting
principles (GAAP), and are also shown on a pro forma basis with certain
adjustments noted below.
Highlights for the quarter included:
o Fiscal third-quarter revenues of $44.5 million, versus $42.2 million in
year-ago period
o GAAP loss per share of $1.10 with pro forma earnings per share of $0.03
o Growth and restructuring plan ahead of previously announced schedule at
reduced cost--charges reduced from $25 to $35 million to $15 to $20 million
with timed completion in F2005 vs. F2006
o Non-cash goodwill impairment charge of $30 million
The company reported fiscal 2003 third-quarter revenues of $44.5 million and a
net loss of $30.4 million, or $1.10 per share. These results compare to revenues
of $42.2 million and a net loss attributed to common stockholders of $28.7
million, or $4.01 per share, in the fiscal 2002 third quarter. For the nine
months ended March 30, 2003, revenues were $130.1 million with a net loss of
$26.1 million, or $0.95 per share, compared to 2002 nine-month revenues of
$114.3 million, and a net loss attributed to common stockholders of $35.6
million, or $6.06 per share.
The largest portion of the third-quarter net loss was due to a non-cash goodwill
impairment charge of $30 million, or $1.08 per share. In accordance with SFAS
No. 142, MedSource initiated a goodwill impairment assessment during the fiscal
2003 third quarter, and the preliminary results of the analysis indicated an
impairment of between $30 and $40 million. As a result, MedSource recorded a $30
million non-cash charge. The non-cash charge amount may be adjusted when the
analysis is finalized during the fourth quarter of 2003.
"During the quarter, we met expectations for both revenue and net income, and
business across all of our industry markets was solid," said Richard J. Effress,
MedSource Chairman and Chief Executive Officer.
In addition to GAAP income statement results, MedSource is also presenting pro
forma income statement results. Management believes that the pro forma results
present a more meaningful comparison of its fiscal 2003 results to past and
future results.
Pro forma results exclude charges related to the company's growth and
restructuring plan, goodwill impairment and calculates a "tax effected" net
income in the results. Please refer to the "Reconciling Items From GAAP to Pro
Forma Results" section of this release and review the attached supplementary
schedules.
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MedSource Technologies, Inc.
Page 2
On a pro forma basis, which reflects adjustments to all quarters, MedSource
reported fiscal 2003 third-quarter revenues of $44.5 million and net income of
$0.9 million, or $0.03 per share, meeting the analysts' consensus estimate,
which is reported on a pro forma basis. These results compare to 2002
third-quarter revenues of $42.2 million and net income of $16,000, or $0.00 per
share. On a pro forma basis for the nine months ended March 30, 2003, revenues
were $130.1 million and net income was $3.6 million, or $0.13 per share. This
compares to revenues of $114.3 million and a net loss of $1.0 million, or $0.17
per share, for the year-earlier nine months.
The 5.6 percent third-quarter revenue increase from the prior-year period was
partially due to the acquisition of Cycam in the first quarter. Revenues for the
nine-month period rose to $130.1 million, up 13.8 percent from $114.3 million
for the same prior-year period. Of this amount, 9.3 percent was due to
acquisitions and 4.5 percent stemmed from internal growth.
Gross margin was 23.6 percent for the quarter, compared with 25.3 percent in the
prior-year period. The year-over-year decrease is a result of costs associated
with the transfer of production of certain products to other company facilities
to achieve long-term operational efficiencies. Gross margin was 24.7 percent for
the nine-month period, unchanged from the prior year.
Selling, general and administrative expense (SG&A) totaled $8.4 million,
compared with $8.3 million for the year-ago period. As a percentage of revenue,
SG&A declined to 18.8 percent from 19.7 percent a year earlier. SG&A expense
totaled $24.5 million for the nine months, or 18.8 percent of revenues, compared
to $22.6 million, or 19.7 percent of revenues, for the year-ago period. The $1.9
million increase in SG&A resulted primarily from the impact of acquisitions.
Net interest expense totaled $1.8 million for the fiscal 2003 nine months, down
from $7.2 million for the year-earlier period. This was due to lower debt and
lower interest rates than a year ago.
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GROWTH AND RESTRUCTURING PLAN UPDATE
MedSource's previously announced growth and restructuring plan is a response to
customer and market feedback that strongly indicates meaningful top and bottom
line growth potential at specific targeted cost objectives. MedSource intends to
aggressively meet these objectives to garner a large share of this industry
opportunity. When implemented, MedSource will realize $6 to $8 million in annual
savings, while being positioned to respond to growing demand in medical
technology outsourcing. Pre-tax charges related to these growth investments are
projected to total approximately $15 to $20 million through the end of fiscal
2005, down from $25 to $35 million through the end of fiscal 2006, as initially
anticipated.
In addition, the company continues to focus its engineering and manufacturing
capabilities to help its customers achieve improved time to market, delivery and
cost objectives.
To date, MedSource has:
o Begun transferring select customer products from certain domestic
facilities to Navojoa;
o Initiated the closing of its Santa Clara, Calif., facility and is in the
process of consolidating those operations elsewhere in MedSource's facility
network;
o Allocated additional sales resources to engineering services and complex
assembly.
"Based on discussions with our customers and the insight and planning that grew
out of that effort, we are pleased that we will complete this initiative sooner
than previously announced, and at a lower cost with greater realized cost
savings," said Mr. Effress.
OUTLOOK
The company's guidance for its 2003 fiscal fourth quarter remains unchanged from
guidance provided in MedSource's fiscal second-quarter earnings announcement.
MedSource estimates fiscal fourth-quarter revenues of approximately $44 to $46
million, GAAP EPS (exclusive of additional goodwill impairment charges) of
approximately $0.03 to $0.06, and pro forma EPS of approximately $0.06 to $0.08
per share. Pro forma fiscal fourth quarter 2003 results would exclude charges
related to restructuring and goodwill impairment, and calculate a "tax effected"
net income.
For fiscal year 2003, MedSource anticipates total-year revenues of between $174
and $176 million, higher than previously announced, GAAP loss per share
(exclusive of additional goodwill impairment charges) of approximately $0.88 to
$0.92, and pro forma EPS of approximately $0.19 to $0.21 per share, in line with
prior guidance. Pro forma fiscal 2003 results would exclude charges related to
restructuring and goodwill impairment, and calculate a "tax effected" net
income.
For fiscal year 2004, the company anticipates growth in full-year revenue and
pro forma EPS. MedSource expects revenues of approximately $185 to $190 million,
and will provide further operating results guidance at the end of its fiscal
2003 fourth quarter.
RECONCILING ITEMS FROM GAAP TO PRO FORMA RESULTS
Pro forma income statement results for both fiscal 2003 and fiscal 2002 exclude
restructuring charges, goodwill impairment charges, preferred stock dividends,
accretion of discount on preferred stock and "tax effecting" pro forma earnings.
The company has "net operating loss carryforwards" available to reduce its
income tax expense during its third fiscal quarter. MedSource believes that it
would have recorded income taxes of approximately 38.5 percent of its pro forma
income before taxes if the carryforwards were not available.
MedSource Technologies, Inc.
Page 4
MedSource discloses pro forma or non-GAAP measures of net income and earnings
per share. Management believes that this pro forma information provides greater
comparability to MedSource's past and ongoing operating performance. These
measures should not be considered an alternative to measurements required by
GAAP. These pro forma numbers are unlikely to be comparable to pro forma
information provided by other issuers. In accordance with SEC Regulation G,
reconciliation of the MedSource GAAP to pro forma information is provided in the
table attached. MedSource also will make available on the investor relations
page of its Web site at www.medsourcetech.com this press release, non-GAAP
metrics that may be discussed on the earnings call and Webcast, as well as the
most directly comparable GAAP financial measures and a reconciliation of the
difference between GAAP and non-GAAP metrics.
THIRD-QUARTER CONFERENCE CALL
Mr. Effress and William J. Kullback, senior vice president and CFO, will host a
conference call with the investment community to discuss the company's
third-quarter results today at 10:00 a.m. EDT.
To access the live Webcast of this call, visit the investor relations section of
MedSource's Website at www.medsourcetech.com. A replay will be available at this
site for one month.
If you do not have Internet access and want to listen to an audio replay of the
third-quarter conference call, phone (800) 405-2236 and enter passcode 534121#.
The telephone replay will be available beginning at 12:00 p.m. EDT on Tuesday,
April 29, through 1:00 p.m. EDT on Thursday, May 1.
ABOUT MEDSOURCE
MedSource Technologies, Inc. is an industry-leading engineering and
manufacturing services, and supply-chain management solutions company to the
medical device industry. Customers include many of the largest medical device
companies in the world as well as emerging device companies. Headquartered in
Minneapolis, MedSource offers product development and design services, precision
metal and plastic part manufacturing, and product assembly and supply-chain
management services. Production facilities are located throughout the United
States as well as in Navojoa, Mexico. The company's common stock is traded on
The Nasdaq Stock Market under the symbol "MEDT."
MedSource is on the Internet at WWW.MEDSOURCETECH.COM
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Contacts:
At MedSource:
William J. Kullback Rebekah Bryant
Senior Vice President and Marketing and Communications Manager
Chief Financial Officer (952) 807-1223
(952) 807-1218
At Padilla Speer Beardsley Inc.:
Marian Briggs Matt Sullivan
(612) 455-1700 (612) 455-1700
mbriggs@psbpr.com msullivan@psbpr.com
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FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended. In many cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate, ""predict," "intend,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These forward-looking statements involve risks and uncertainties.
The company's actual results could differ materially from those indicated in
these statements as a result of certain factors contained in the company's
Annual Report on Form 10-K for the year ended June 30, 2002. Readers should not
place undue reliance on any such forward-looking statements, which are made
pursuant to the Private Securities Litigation Reform Act of 1995 and, as such,
speak only as of the date made. The company does not assume any obligation to
update the forward-looking statements after the date hereof.
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MEDSOURCE TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
March 30, 2003
(Unaudited) June 30, 2002
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,126 $ 38,268
Accounts receivable, net 24,800 24,031
Inventories 24,300 20,503
Prepaid expenses and other current assets 3,069 2,402
--------- ---------
Total current assets 66,295 85,204
Property, plant, and equipment, net 52,030 42,045
Goodwill, net 104,170 113,113
Other identifiable intangible assets, net 3,839 4,092
Deferred financing costs 1,838 1,971
Other assets 1,612 1,404
--------- ---------
Total assets $ 229,784 $ 247,829
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Account payable $ 9,671 $ 7,924
Accrued compensation and benefits 4,439 5,352
Other accrued expenses 2,260 3,491
Restructuring reserve 953 2,381
Current portion of long-term debt 7,065 5,939
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Total current liabilities 24,388 25,087
Long-term debt, less current portion 39,845 35,967
Other long-term liabilities 766 455
Stockholders' equity
Common stock 277 269
Redeemable preferred stock -- 1,974
Treasury stock (1,282) (1,282)
Additional paid-in capital 275,197 268,455
Other comprehensive loss (294) --
Accumulated deficit (109,113) (83,025)
Unearned compensation -- (71)
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Total stockholders' equity 164,785 186,320
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Total liabilities and stockholders' equity $ 229,784 $ 247,829
========= =========
MEDSOURCE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
March 30, March 31, March 30, March 31,
2003 2002 2003 2002
--------- --------- --------- ---------
Revenues $ 44,511 $ 42,150 $ 130,135 $ 114,306
Costs and expenses:
Cost of product sold 34,007 31,483 97,989 86,099
Selling, general and administrative expense 8,379 8,283 24,475 22,550
Restructuring charges 1,948 -- 1,948 --
Impairment of goodwill 30,000 -- 30,000 --
------------ ------------ ------------ ------------
Operating income/(loss) (29,823) 2,384 (24,277) 5,657
------------ ------------ ------------ ------------
Interest expense, net (596) (2,363) (1,776) (7,248)
Other income/(expense) 6 (2,857) 28 (2,867)
Loss before income taxes (30,413) (2,836) (26,025) (4,458)
Income tax benefit/(expense) (12) 3 (27) 3
------------ ------------ ------------ ------------
Loss $ (30,425) $ (2,833) $ (26,052) $ (4,455)
Preferred stock dividends and accretion of
discount on preferred stock -- (25,817) -- (31,139)
------------ ------------ ------------ ------------
Net loss attributed to common stockholders $ (30,425) $ (28,650) $ (26,052) $ (35,594)
============ ============ ============ ============
Net loss per share attributed to common stockholders
Basic and diluted $ (1.10) $ (4.01) $ (0.95) $ (6.06)
============ ============ ============ ============
Weighted average common shares outstanding
Basic and diluted 27,736,703 7,146,444 27,511,065 5,876,987
MEDSOURCE TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
For the Quarter Ended March 30, 2003 For the Nine Months Ended March 30, 2003
------------------------------------ ----------------------------------------
Restructuring Restructuring
and Other Pro Forma and Other Pro Forma
As Reported Charges Results As Reported Charges Results
----------- ------------- --------- ----------- ------------- ---------
Revenues $ 44,511 -- $ 44,511 $ 130,135 -- $ 130,135
Costs and expenses:
Cost of product sold 34,007 -- 34,007 97,989 -- 97,989
Selling, general and
administrative expense 8,379 -- 8,379 24,475 -- 24,475
Restructuring charges 1,948 (1,948)(a) -- 1,948 (1,948)(a) --
Impairment of goodwill 30,000 (30,000)(b) -- 30,000 (30,000)(b) --
------------ ------------ ------------ ------------ ------------ ------------
Operating income/(loss) (29,823) 31,948 2,125 (24,277) 31,948 7,671
------------ ------------ ------------ ------------ ------------ ------------
Interest expense, net (596) -- (596) (1,776) -- (1,776)
Other income 6 -- 6 28 -- 28
------------ ------------ ------------ ------------ ------------ ------------
Income/(loss) before
income taxes (30,413) 31,948 1,535 (26,025) 31,948 5,923
Income tax expense (12) (591)(c) (603) (27) (2,280)(c) (2,307)
------------ ------------ ------------ ------------ ------------ ------------
Net income/(loss) attributed
to common stockholders $ (30,425) $ 31,357 $ 932 $ (26,052) $ 29,668 $ 3,616
============ ============ ============ ============ ============ ============
Net income/(loss) per share
attributed to common
stockholders
Basic and diluted $ (1.10) $ 1.13 $ 0.03 $ (0.95) $ 1.08 $ 0.13
============ ============ ============ ============ ============ ============
Weighted average common
shares outstanding
Basic 27,736,703 27,736,703 27,736,703 27,511,065 27,511,065 27,511,065
Diluted 27,736,703 27,900,063 27,900,063 27,511,065 27,707,600 27,707,600
(a) Adjustment to exclude restructuring charges related to consolidation
of facilities from pro forma results.
(b) Adjustment to exclude goodwill impairment charge from pro forma
results
(c) Adjustment to tax effect pre-tax earnings at a rate of 38.5% for pro
forma purposes. The Company does not expect to have significant tax
expense due to available net operating loss carryforwards.
MEDSOURCE TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(CONT'D)
For the Quarter Ended March 30, 2003 For the Nine Months Ended March 30, 2003
------------------------------------ ----------------------------------------
Restructuring Restructuring
and Other Pro Forma and Other Pro Forma
As Reported Charges Results As Reported Charges Results
----------- ------------- --------- ----------- ------------- ---------
Revenues $ 42,150 -- $ 42,150 $ 114,306 -- $ 114,306
Costs and expenses:
Cost of product sold 31,483 -- 31,483 86,099 -- 86,099
Selling, general and
administrative expense 8,283 -- 8,283 22,550 -- 22,550
----------- ----------- ----------- ----------- ----------- -----------
Operating income 2,384 -- 2,384 5,657 -- 5,657
----------- ----------- ----------- ----------- ----------- -----------
Interest expense, net (2,363) -- (2,363) (7,248) -- (7,248)
Other expense (2,857) 2,857(a) -- (2,867) 2,867(a) --
Income/(loss) before
income taxes (2,836) 2,857 21 (4,458) 2,867 (1,591)
Income tax benefit/(expense) 3 (8)(c) (5) 3 613(c) 616
----------- ----------- ----------- ----------- ----------- -----------
Net income/(loss) $ (2,833) $ 2,849 $ 16 $ (4,455) $ 3,480 $ (975)
Preferred stock dividends
and accretion of
discount on preferred stock (25,817) 25,817(b) -- (31,139) 31,139(b) --
----------- ----------- ----------- ----------- ----------- -----------
Net income/(loss)
attributed to common
stockholders $ (28,650) $ 28,666 $ 16 $ (35,594) $ 34,619 $ (975)
=========== =========== =========== =========== =========== ===========
Net income/(loss) per
share attributed to
common stockholders
Basic and diluted $ (4.01) $ 4.01 $ 0.00 $ (6.06) $ 5.89 $ (0.17)
=========== =========== =========== =========== =========== ===========
Weighted average common
shares outstanding
Basic and diluted 7,146,444 7,146,444 7,146,444 5,876,987 5,876,987 5,876,987
(a) Adjustment to exclude one time management termination fee.
(b) Adjustment to exclude non-recurring preferred stock charges.
(c) Adjustment to tax effect pre-tax earnings at a rate of 38.5% for pro
forma purposes. The Company does not expect to have significant tax
expense due to available net operating loss carryforwards.