EXHIBIT 99.1
[GRAPHIC OMITTED]
FOR IMMEDIATE RELEASE
JULY 31, 2003
MEDSOURCE TECHNOLOGIES ANNOUNCES
FISCAL FOURTH-QUARTER RESULTS
COMPANY REPORTS REVENUE GAINS; MEETS PRO FORMA EPS PROJECTIONS
MINNEAPOLIS, JULY 31, 2003--MEDSOURCE TECHNOLOGIES, INC. (NASDAQ: MEDT),
today announced results for its fiscal fourth-quarter and year ended June 30,
2003. Results were prepared in accordance with generally accepted accounting
principles (GAAP), and also are shown on a pro forma basis with certain
adjustments noted below.
MedSource reported fiscal 2003 fourth-quarter revenues of $47.2 million and a
net loss of $9.2 million, or $0.33 per share. These results compare to revenues
of $44.6 million and a net loss of $3.2 million, or $0.12 per share, in the
fiscal 2002 fourth quarter.
For the fiscal year ended June 30, 2003, revenues were $177.3 million with a net
loss of $35.3 million, or $1.28 per share, compared to 2002 full-year revenues
of $158.9 million, and a net loss of $38.8 million, or $3.50 per share.
Included in fiscal fourth-quarter results is a non-cash impairment charge of
$10.0 million, or $0.36 per share, for goodwill and other intangible assets. In
accordance with SFAS No.142, MedSource initiated a goodwill impairment
assessment during the third quarter of fiscal 2003. As a result, MedSource
recorded a $30.0 million non-cash charge in the fiscal third quarter and a $7.7
million non-cash charge in the fourth quarter upon finalization of its
assessment. In addition, MedSource recorded a $2.3 million non-cash charge in
the fiscal fourth quarter related to the impairment of certain other intangible
assets in accordance with SFAS No.144, Accounting for the Impairment or Disposal
of Long-Lived Assets.
"We are pleased with the financial performance of the Company during the fourth
quarter," said Richard J. Effress, MedSource Chairman and Chief Executive
Officer. "The Company met its revenue and pro forma earnings per share
projections, with especially strong performance in our EMI and Orthopedic
markets."
In addition to GAAP income statement results, MedSource also presents income
statement results on a pro forma basis before impairment and restructuring
charges, and preferred stock charges and after tax effecting pro forma earnings.
Please refer to the "Reconciling Items From GAAP to Pro Forma Results" section
of this release and review the attached supplementary schedules.
On a pro forma basis, which reflects adjustments to all quarters, MedSource
reported fiscal 2003 fourth-quarter net income of $1.7 million, or $0.06 per
share, meeting the analysts' consensus estimate, which is generally reported on
a pro forma basis. These results compare to 2002 fourth-quarter pro forma net
income of $3.4 million, or $0.13 per share. On a pro forma basis for the 12
months ended June 30, 2003, net income was $5.4 million, or $0.19 per share.
This compares to pro forma net income of $3.4 million, or $0.17 per share, for
the previous year.
The 5.8 percent fourth-quarter revenue increase from the prior-year period was
due to continued strength in Electro-Medical Implants (EMI), as well as growth
in Orthopedics resulting from the first-quarter acquisition of Cycam, Inc.
Excluding non-core medical and non-medical business, which had planned decreases
of $2.2 million, fourth-quarter revenue increased by 11.6 percent over the
prior-year period.
Revenues for the fiscal year grew by $18.4 million, or 11.6 percent. Of this
amount, 4.5 percent was due to acquisitions and 7.1 percent resulted from
internal growth. Excluding non-core medical and non-medical business, which had
planned decreases of $6.8 million, fiscal 2003 revenue increased by 17.9 percent
over fiscal 2002.
Orthopedic revenue increased by 72.4 percent from the prior year due in large
part to the Cycam acquisition. Interventional market revenue rose by 28.4
percent over the prior-year period, with EMI and Surgical Instrumentation up
15.7 percent and 5.8 percent, respectively.
Gross margin was 28.0 percent for the quarter, compared with 30.5 percent in the
prior-year period. For the year, gross margin of 25.6 percent was down from 26.3
percent in fiscal 2002. The decreases in gross margin for the quarter and the
full year were due to costs incurred in the manufacturing transfers of certain
products to other MedSource facilities to achieve long-term operational
efficiencies.
Selling, general and administrative expense (SG&A) totaled $9.4 million in the
2003 fourth quarter, compared with $7.7 million for the year-ago period. As a
percentage of revenues, SG&A increased to 19.8 percent from 17.2 percent in
fiscal 2002. SG&A expense totaled $33.8 million for the 12 months, or 19.1
percent of revenues, compared to $30.2 million, or 19.0 percent of revenues, a
year earlier. The $3.6 million fiscal 2003 increase was chiefly the result of
the Cycam acquisition, continued investment in information technology systems,
and new investments in engineering services and business excellence programs.
Net interest expense totaled $2.7 million for fiscal 2003, down from $7.7
million for fiscal 2002. This was due to lower debt and interest rates from a
year ago.
By fiscal 2003 year end, MedSource improved its cash cycle to 61 days, an 11-day
improvement from the third quarter and a 26-day improvement from the year's high
of 87 days at September 30, 2002.
GROWTH AND RESTRUCTURING UPDATE
MedSource's previously announced growth and restructuring plan remains on
schedule and the Company expects to complete this initiative by the end of
fiscal 2005. When completed, the reorganization is expected to create $6 million
to $8 million in annual savings.
"We began our growth and restructuring efforts to better position MedSource to
respond to the growing demand and customer requirements in medical technology
outsourcing," said Effress. "I'm pleased to report all elements of this program
are tracking according to plan. We are creating the infrastructure and
capabilities to help customers achieve improved time to market, delivery and
cost objectives."
During the second half of fiscal 2003 MedSource initiated the transfer of five
programs to its low-cost manufacturing operation in Navojoa, Mexico. During the
first half of fiscal 2004, MedSource expects to initiate the transfer of another
ten customer programs to Navojoa.
FOURTH-QUARTER HIGHLIGHTS
MedSource received the 2003 Minnesota Business Ethics Award (MBEA) for the
Company's commitment to high ethical business practices, earning top honors in
the "large company" category. The MBEA's independent panel of judges commended
MedSource for its strong efforts to build a sustainable, ethical corporate
culture and praised the Company's mission, values and clear, accessible
policies, as well as its commitment to corporate citizenship and philanthropy.
OUTLOOK
MedSource estimates fiscal 2004 first-quarter revenues of approximately $43
million to $45 million, GAAP earnings of approximately $0.00 to $0.03 per share,
and pro forma earnings of approximately $0.03 to $0.05 per share.
For fiscal year 2004, MedSource anticipates total-year revenues of $185 million
to $190 million, GAAP earnings of approximately $0.22 to $0.25 per share, and
pro forma earnings of approximately $0.25 to $0.28 per share.
The difference between GAAP and pro forma earnings relates to restructuring
expenses of $0.05 per share for the first quarter of fiscal 2004 and $0.21 per
share for fiscal 2004, offset by the tax effecting of pro forma earnings of
$0.02 per share for the first quarter of fiscal 2004 and $0.18 per share for
fiscal 2004.
RECONCILING ITEMS FROM GAAP TO PRO FORMA RESULTS
Pro forma income statement results for both fiscal 2003 and fiscal 2002 exclude
restructuring charges, goodwill and other intangible asset impairment charges,
preferred stock dividends, and accretion of discount on preferred stock and
includes "tax effecting" pro forma earnings. The Company also has "net operating
loss carryforwards" available to reduce its income tax expense during its fourth
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. Accordingly, management believes that this pro
forma information provides greater comparability to MedSource's past and ongoing
operating performance.
MedSource discloses pro forma or non-GAAP measures of net income and earnings
per share. 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.
FOURTH-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
fourth-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 Web site 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
fourth-quarter conference call, phone (800) 405-2236 and enter passcode 544746#.
The telephone replay will be available beginning at 12:00 p.m. EDT on Thursday,
July 31, through 11:59 p.m. EDT on Saturday, August 2.
ABOUT MEDSOURCE
MedSource Technologies, Inc. is an 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
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
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.
MEDSOURCE TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ IN THOUSANDS)
JUNE 30, 2003 JUNE 30, 2002
(UNAUDITED)
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 10,781 $ 38,268
Accounts receivable, net 23,710 24,031
Inventories 25,617 20,503
Prepaid expenses and other current assets 4,318 2,402
--------- ---------
Total current assets 64,426 85,204
Property, plant and equipment, net 52,752 42,045
Goodwill, net 96,582 113,113
Other identifiable intangible assets, net 1,432 4,092
Deferred financing costs 1,682 1,971
Other assets 1,343 1,404
--------- ---------
Total assets $ 218,217 $ 247,829
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,868 $ 7,924
Accrued compensation and benefits 5,498 5,352
Other accrued expenses 2,293 3,491
Restructuring reserve 958 2,381
Current portion of long-term debt 7,753 5,939
--------- ---------
Total current liabilities 27,370 25,087
Long-term debt, less current portion 34,035 35,967
Other long-term liabilities 731 455
Stockholders' equity:
Common stock 279 269
Redeemable preferred stock -- 1,974
Treasury stock (1,282) (1,282)
Additional paid-in capital 275,698 268,455
Other comprehensive loss (288) --
Accumulated deficit (118,326) (83,025)
Unearned compensation -- (71)
--------- ---------
Total stockholders' equity 156,081 186,320
--------- ---------
Total liabilities and stockholders' equity $ 218,217 $ 247,829
========= =========
MEDSOURCE TECHNOLOGIES, INC.
GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended Twelve Months Ended
------------------------------- -------------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
Revenues $ 47,163 $ 44,593 $ 177,298 $ 158,899
Costs and expenses:
Cost of product sold 33,981 30,990 131,970 117,089
Selling, general and administrative expense 9,358 7,666 33,833 30,216
Restructuring charges 1,776 -- 3,724 --
Impairment of intangible assets 10,000 -- 40,000 --
------------ ------------ ------------ ------------
Operating (loss)/income (7,952) 5,937 (32,229) 11,594
------------ ------------ ------------ ------------
Interest expense, net (893) (423) (2,669) (7,671)
Loss on debt extinguishment -- (6,857) -- (6,857)
Other expense (128) (1,915) (100) (4,782)
------------ ------------ ------------ ------------
Loss before income taxes (8,973) (3,258) (34,998) (7,716)
Income tax (expense)/benefit (240) 115 (267) 118
------------ ------------ ------------ ------------
Net loss (9,213) (3,143) (35,265) (7,598)
Preferred stock dividends and accretion of
discount on preferred stock -- (29) -- (31,168)
------------ ------------ ------------ ------------
Net loss attributed to common stockholders $ (9,213) $ (3,172) $ (35,265) $ (38,766)
============ ============ ============ ============
Net loss per share attributed to common stockholders
Basic and diluted $ (0.33) $ (0.12) $ (1.28) $ (3.50)
============ ============ ============ ============
Weighted average common shares outstanding
Basic and diluted 27,856,085 26,779,727 27,602,806 11,086,103
============ ============ ============ ============
MEDSOURCE TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
For the Quarter Ended June 30, 2003
------------------------------------------------
Restructuring
and Pro Forma
As Reported Other Charges Results
------------------------------------------------
Revenues $ 47,163 -- $ 47,163
Costs and expenses:
Cost of product sold 33,981 -- 33,981
Selling, general and
administrative expense 9,358 -- 9,358
Restructuring charges 1,776 (1,776)(a) --
Impairment of intangible assets 10,000 (10,000)(b) --
------------ ------------ ------------
Operating (loss)/income (7,952) 11,776 3,824
------------ ------------ ------------
Interest expense, net (893) -- (893)
Other expense (128) -- (128)
------------ ------------ ------------
(Loss)/income before income taxes (8,973) 11,776 2,803
Net income/(loss) before taxes
and extraordinary item
Income tax expense (240) (839)(c) (1,079)
------------ ------------ ------------
Net (loss)/income attributed to
common stockholders $ (9,213) $ 10,937 $ 1,724
============ ============ ============
Net (loss)/income per share
attributed to common stockholders
Basic and diluted $ (0.33) $ 0.06
============ ============
Weighted average common
shares outstanding
Basic 27,856,085 27,856,085
Diluted 27,856,085 28,204,157
For the Fiscal Year Ended June 30, 2003
------------------------------------------------
Restructuring
and Pro Forma
As Reported Other Charges Results
------------------------------------------------
Revenues $ 177,298 -- $ 177,298
Costs and expenses:
Cost of product sold 131,970 -- 131,970
Selling, general and
administrative expense 33,833 -- 33,833
Restructuring charges 3,724 (3,724)(a) --
Impairment of intangible assets 40,000 (40,000)(b) --
------------ ------------ ------------
Operating (loss)/income (32,229) 43,724 11,495
------------ ------------ ------------
Interest expense, net (2,669) -- (2,669)
Other expense (100) -- (100)
------------ ------------ ------------
(Loss)/income before income taxes (34,998) 43,724 8,726
Net income/(loss) before taxes
and extraordinary item
Income tax expense (267) (3,093)(c) (3,360)
------------ ------------ ------------
Net (loss)/income attributed to
common stockholders $ (35,265) $ 40,631 $ 5,366
============ ============ ============
Net (loss)/income per share
attributed to common stockholders
Basic and diluted $ (1.28) $ 0.19
============ ============
Weighted average common
shares outstanding
Basic 27,602,806 27,602,806
Diluted 27,602,806 27,840,372
(a) Adjustment to exclude restructuring charges related to consolidation of
facilities from pro forma results.
(b) Adjustment to exclude goodwill and other intangible asset 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.
For the Quarter Ended June 30, 2002
------------------------------------------------
Restructuring
and Pro Forma
As Reported Other Charges Results
------------------------------------------------
Revenues $ 44,593 -- $ 44,593
Costs and expenses:
Cost of product sold 30,990 -- 30,990
Selling, general and administrative
expense 7,666 -- 7,666
------------ ------------ ------------
Operating income 5,937 -- 5,937
------------ ------------ ------------
Interest expense, net (423) -- (423)
Loss on debt extinguishment (6,857) 6,857(c) --
Other (expense)/benefit (1,915) 1,986(c) 71
------------ ------------ ------------
(Loss)/income before income taxes (3,258) 8,843 5,585
Income tax benefit/(expense) 115 (2,265) (2,150)
------------ ------------ ------------
Net (loss)/income (3,143) 6,578 3,435
Preferred stock dividends and accretion
of discount on preferred stock (29) 29(b) --
------------ ------------ ------------
Net (loss)/income attributed to
common stockholders $ (3,172) $ 6,607 $ 3,435
============ ============ ============
Net (loss)/income per share
attributed to common stockholders
Basic $ (0.12) $ 0.13
============ ============
Diluted $ (0.12) $ 0.13
============ ============
Weighted average common
shares outstanding
Basic 26,779,727 26,779,727
Diluted 26,779,727 27,067,650
For the Fiscal Year Ended June 30, 2002
------------------------------------------------
Restructuring
and Pro Forma
As Reported Other Charges Results
------------------------------------------------
Revenues $ 158,899 -- 158,899
Costs and expenses:
Cost of product sold 117,089 -- 117,089
Selling, general and administrative
expense 30,216 (1,474)(a) 28,742
------------ ------------ ------------
Operating income 11,594 1,474 13,068
------------ ------------ ------------
Interest expense, net (7,671) -- (7,671)
Loss on debt extinguishment (6,857) 6,857(c) --
Other (expense)/benefit (4,782) 4,853(a)(c) 71
------------ ------------ ------------
(Loss)/income before income taxes (7,716) 13,184 5,468
Income tax benefit/(expense) 118 (2,223) (2,105)
------------ ------------ ------------
Net (loss)/income (7,598) 10,961 3,363
Preferred stock dividends and accretion
of discount on preferred stock (31,168) 31,168(b) --
------------ ------------ ------------
Net (loss)/income attributed to
common stockholders $ (38,766) $ 42,129 $ 3,363
------------ ------------ ------------
Net (loss)/income per share
attributed to common stockholders
Basic $ (3.50) $ 0.30
============ =========
Diluted $ (3.50) $ 0.17
============ =========
Weighted average common
shares outstanding
Basic 11,086,103 11,086,103
Diluted 11,086,103 19,840,124
(a) Represents costs of management agreements entered into with Kidd & Company
and Whitney & Company that were terminated in conjunction with the initial
public offering.
(b) Represents charges on preferred stock that was converted to common
in conjunction with the initial public offering.
(c) Represents charges associated with the repayment of former debt.