EXHIBIT 99.1
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[GRAPHIC OMITTED]
FOR IMMEDIATE RELEASE
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MEDSOURCE TECHNOLOGIES REPORTS
FISCAL FIRST-QUARTER RESULTS
COMPANY MEETS REVENUE AND EPS PROJECTIONS
MINNEAPOLIS, OCTOBER 30, 2003--MEDSOURCE TECHNOLOGIES, INC. (NASDAQ: MEDT), an
engineering and manufacturing services provider to the medical device industry,
today announced results for its fiscal 2004 first quarter ended September 28,
2003.
The Company reported first-quarter revenues of $44.2 million, up 7.8 percent
over the year-ago quarter, and net income of $0.3 million, or $0.01 per diluted
share. Fiscal first-quarter results included a $1.4 million restructuring
charge, or $0.05 per diluted share, related to the previously announced
restructuring plan. These results compare to revenues of $41.0 million and net
income of $1.7 million, or $0.06 per diluted share, in the year-ago quarter.
"With strong year-over-year revenue gains driven by our Orthopedics and
Electro-Medical Implants (EMI) businesses, and effective cost-cutting efforts,
we met both top- and bottom-line expectations for the quarter," said Richard J.
Effress, MedSource Chairman and Chief Executive Officer.
In addition to generally accepted accounting principles (GAAP) income statement
results, MedSource also presents income statement results on a pro forma basis
before restructuring 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, MedSource reported fiscal 2004 first-quarter net income of
$1.1 million, or $0.04 per diluted share, meeting the analysts' consensus
estimate, which is generally reported on a pro forma basis. These results
compare to year-earlier pro forma net income of $1.0 million, or $0.04 per
diluted share.
Gross margin was 23.1 percent for the fiscal 2004 first quarter, compared with
24.9 percent in the year-ago quarter. The decrease was primarily due to
underutilized assembly manufacturing operations that are being addressed by
MedSource's restructuring program.
While gross margin was down in the fiscal 2004 first quarter, the Company
reported progress in reducing expenses. Selling, general and administrative
expense (SG&A) totaled $7.7 million in the fiscal 2004 first quarter, compared
with $8.0 million for the year-ago period. As a percentage of revenues, SG&A
decreased to 17.5 percent from 19.5 percent in the comparable year-earlier
period.
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MedSource Technologies, Inc.
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Net interest expense totaled $0.7 million for the fiscal 2004 first quarter, up
slightly from $0.5 million in the prior-year first quarter due to lower interest
income earned.
By September 28, 2003, MedSource improved its cash balance to $11.7 million,
compared to $10.8 million at the end of June 30, 2003. In addition, the Company
maintains an unutilized revolving credit facility of $15.0 million.
RESTRUCTURING PLAN ON TRACK
MedSource's restructuring plan, announced in January 2003, remains on track and,
as previously stated, the Company expects to complete this initiative by the end
of fiscal 2005. The restructuring initiatives will involve continuing
consolidation of the Company's manufacturing network, resulting in an overall
capacity utilization increase and a reduction in overhead expense. When
finished, MedSource anticipates annual cost savings of $6 million to $8 million.
Toward the end of fiscal 2003, MedSource began transferring five programs to its
low-cost manufacturing operations including Navojoa, Mexico. Three of those five
project transfers are now complete. During the first half of fiscal 2004,
MedSource expects to initiate the transfer of an additional 10 programs.
"Medical device OEMs look to MedSource as a single-source provider of
manufacturing, engineering and supply chain management services. Throughout our
organization, we're focused on speeding product time-to-market and lowering
total product costs for our customers. That's why the Company is implementing a
restructuring plan, and why we continue to invest in new key technologies and
capabilities," said Effress.
An example of a key technology investment, according to Effress, is MedSource's
new 30,000-square-foot metal forging facility. The recently announced facility,
which will be on the grounds of MedSource's existing Houston, Pa. plant, will
include a highly automated state-of-the-art metal forging operation. MedSource
has developed an automated "near-net shape" forging process that produces metal
components used in implantable orthopedic devices, such as artificial hips and
knees. The innovative process helps reduce machining time and costs by forging
metal components very close to their final, usable shape. The new forging
technology increases MedSource's scope of manufacturing processes to serve
customers in the high-growth orthopedic market.
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MedSource Technologies, Inc.
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OUTLOOK
MedSource estimates fiscal 2004 second-quarter revenues of approximately $45.5
million to $47.5 million, GAAP earnings of approximately $0.02 to $0.04 per
diluted share, and pro forma earnings of approximately $0.04 to $0.06 per
diluted share.
As previously stated, MedSource anticipates fiscal 2004 total-year revenues of
$185 million to $190 million, GAAP earnings of approximately $0.22 to $0.25 per
diluted share, and pro forma earnings of approximately $0.25 to $0.28 per
diluted share.
The difference between GAAP and pro forma earnings relates to restructuring
expenses of $0.05 per diluted share for the second quarter of fiscal 2004, and
$0.21 per diluted share for the fiscal year 2004, offset by the tax effecting of
pro forma earnings of $0.03 per diluted share for the second quarter of fiscal
2004, and $0.18 per diluted share for fiscal 2004.
RECONCILING ITEMS FROM GAAP TO PRO FORMA RESULTS
Pro forma income statement results for fiscal first quarter of 2004 and 2003
exclude restructuring charges, and include "tax effecting" pro forma earnings.
The Company also has "net operating loss carryforwards" available to reduce its
income tax expense for the foreseeable future. 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.
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FIRST-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
first-quarter results today at 10:00 a.m. ET.
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 553749#.
The telephone replay will be available beginning at 12:00 p.m. ET on Thursday,
October 30, through 12:59 p.m. ET on Saturday, November 1.
ABOUT MEDSOURCE
MedSource Technologies, Inc. provides engineering and manufacturing services and
supply chain management solutions 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
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
MedSource Technologies, Inc.
Page 5
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, 2003. 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.
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MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 28, JUNE 30,
2003 2003
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(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 11,746 $ 10,781
Accounts receivable, net 22,177 23,710
Inventories 23,980 25,617
Prepaid expenses and other current assets 3,802 4,318
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Total current assets 61,705 64,426
Property, plant, and equipment, net 51,780 52,752
Goodwill 96,637 96,582
Other identifiable intangible assets, net 1,388 1,432
Deferred financing costs 1,588 1,682
Other assets 1,319 1,343
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Total assets $ 214,417 $ 218,217
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,208 $ 10,868
Accrued compensation and benefits 4,372 5,498
Other accrued expenses 1,774 2,293
Reserve for restructuring 353 958
Current portion of obligations under capital leases 1,323 1,326
Current portion of long-term debt 6,428 6,427
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Total current liabilities 23,458 27,370
Obligations under capital leases, less current portion 3,636 3,962
Long-term debt, less current portion 30,073 30,073
Other long-term liabilities 671 731
Stockholders' equity:
Common stock 289 289
Additional paid-in capital 277,847 277,791
Treasury stock (1,486) (1,463)
Accumulated other comprehensive loss (236) (288)
Accumulated deficit (118,004) (118,326)
Unearned compensation (1,831) (1,922)
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Total stockholders' equity 156,579 156,081
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Total liabilities and stockholders' equity $ 214,417 $ 218,217
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MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
THREE MONTHS ENDED
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SEPTEMBER 28, SEPTEMBER 29,
2003 2002
Revenues $ 44,208 $ 41,003
Cost and expenses:
Cost of products sold 34,008 30,812
Selling, general, and administrative expense 7,737 7,988
Restructuring charges 1,396 --
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Total cost and expenses 43,141 38,800
Operating income 1,067 2,203
Interest expense, net (684) (522)
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Income before income taxes 383 1,681
Income tax expense (61) (2)
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Net income $ 322 $ 1,679
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Net income per share (basic and diluted) $ 0.01 $ 0.06
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Weighted average common shares outstanding
Basic 27,967,085 27,135,481
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Diluted 28,482,313 27,453,441
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MEDSOURCE TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
FOR THE QUARTER ENDED SEPTEMBER 28, 2003 FOR THE QUARTER ENDED SEPTEMBER 29, 2002
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AS REPORTED RESTRUCTURING PRO FORMA AS REPORTED RESTRUCTURING PRO FORMA
AND OTHER CHARGES RESULTS AND OTHER CHARGES RESULTS
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Revenues $ 44,208 $ -- $ 44,208 $ 41,003 $ -- $ 41,003
Costs and expenses:
Cost of product sold 34,008 -- 34,008 30,812 -- 30,812
Selling, general and
administrative expense 7,737 -- 7,737 7,988 -- 7,988
Restructuring charges 1,396 (1,396)(a) -- -- --
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Total cost and expenses 43,141 (1,396) 41,745 38,800 -- 38,800
Operating income 1,067 1,396 2,463 2,203 -- 2,203
Interest expense, net (684) -- (684) (522) -- (522)
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Income before income taxes 383 1396 1,779 1,681 -- 1,681
Income tax expense (61) (624)(b) (685) (2) (645)(b) (647)
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Net income (loss) $ 322 $ 772 $ 1,094 $ 1,679 $ (645) $ 1,034
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Net income (loss) per share
Basic and diluted $ 0.01 $ 0.03 $ 0.04 $ 0.06 $ (0.02) $ 0.04
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Weighted average common
shares outstanding
Basic 27,967,085 27,967,085 27,135,481 27,135,481
Diluted 28,482,313 28,482,313 27,453,441 27,453,441
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(a) Adjustment to exclude restructuring charges related to consolidation of
facilities from pro forma results.
(b) 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.