Exhibit 99.1
[LOGO]
FOR IMMEDIATE RELEASE
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MEDSOURCE TECHNOLOGIES REPORTS
FISCAL SECOND-QUARTER RESULTS
REVENUE AND EPS IN-LINE WITH GUIDANCE
MINNEAPOLIS, JANUARY 30, 2004--MEDSOURCE TECHNOLOGIES, INC. (NASDAQ:MEDT) today
announced results for its fiscal 2004 second quarter ended December 28, 2003.
MedSource 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. Production facilities are located throughout the United States as
well as in Mexico.
The Company reported second-quarter revenues of $46.0 million, up 3.1 percent
from the year-ago quarter, and net income of $0.9 million, or $0.03 per diluted
share. These results compare to revenues of $44.6 million and net income of $2.7
million, or $0.10 per diluted share, in the year-ago quarter. Fiscal 2004
second-quarter results included $1.5 million of restructuring charges, or $0.04
per diluted share on an after tax basis, related to the previously announced
restructuring plan.
For the six months ended December 28, 2003, revenues were $90.2 million, up 5.4
percent over the year-ago period, with net income of $1.2 million, or $0.04 per
diluted share. This compares to prior year six-month revenues of $85.6 million,
and net income of $4.4 million, or $0.16 per diluted share. First-half results
in fiscal 2004 included $2.9 million of restructuring charges, or $0.09 per
diluted share on an after tax basis, again related to the restructuring plan.
"Solid performance in our Orthopedic and Electro-Medical Implant (EMI)
businesses helped us achieve revenue and EPS 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 second-quarter net income
of $1.5 million, or $0.05 per diluted share, meeting the analysts' First Call
consensus estimate, which is reported on a pro forma basis.
For the six-month period ended December 28, 2003, pro forma net income totaled
$2.6 million, or $0.09 per diluted share, versus $2.7 million, or $0.10 per
diluted share, for the year-earlier period.
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Gross margin of 23.8 percent for the fiscal 2004 second quarter was down from
25.7 percent in the year-ago quarter, but up sequentially from the fiscal 2004
first quarter rate of 23.1 percent. The decrease from the prior year was due in
part to the absorption of costs associated with certain underutilized
manufacturing operations. Such expenses will be eliminated through future plant
closings and consolidations under the Company's previously announced
restructuring program as MedSource transitions itself to become the low cost
provider of engineering and manufacturing services to the medical device
industry.
Selling, general and administrative expense (SG&A) totaled $7.8 million in the
fiscal 2004 second quarter, compared with $8.1 million for the year-ago period.
As a percentage of revenues, SG&A decreased to 16.9 percent from 18.2 percent in
the comparable year-earlier period, and 17.5 percent sequentially from the
fiscal 2004 first quarter. For the six-month period, SG&A was $15.5 million, or
17.2 percent of revenues, versus $16.1 million, or 18.8 percent, in fiscal 2003.
The decrease in SG&A as a percentage of revenues in each period was primarily
due to headcount reductions, discretionary expense management and the positive
impact of Business Excellence programs.
Net interest expense totaled $0.7 million for the fiscal 2004 second quarter, up
slightly from $0.6 million in the prior-year second quarter due to lower
interest income earned. Net interest expense for the first half of fiscal 2004
was $1.4 million, compared to $1.2 million in fiscal 2003, also the result of
lower interest income earned in the current year.
As of December 28, 2003, MedSource improved its cash balance to $13.6 million,
compared to $11.7 million at September 28, 2003, and $10.8 million at June 30,
2003. This increase was the result of positive operating cash flows due in part
to a nine-day reduction in the Company's cash cycle, which decreased from 72
days at the end of the first quarter to 63 days for the quarter ended December
28, 2003. In addition to a quarter-end cash balance of $13.6 million, the
Company maintains an unutilized revolving credit facility of $15.0 million.
Said Effress, "Reflecting our diligent focus on cash management and cost
controls, MedSource delivered sequential gains in the fiscal second quarter. In
addition to a stronger cash position, higher gross margin, and SG&A declining as
a percentage of revenue, we improved in a number of other metrics including days
sales outstanding, days payables outstanding, and inventory turns.
CUSTOMER UPDATE
During the fiscal second quarter MedSource initiated projects with a number of
top-tier customers including:
o St. Jude Medical's Cardiac Rhythm Management Division for cardiac
rhythm management lead components and
o Guidant where MedSource secured new orders from Guidant Endovascular
Systems for precision tubing.
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RESTRUCTURING PLAN
MedSource's restructuring plan, announced in January 2003, continues to track
according to plan and, as previously stated, the Company expects to complete
this initiative by the end of fiscal 2005 at a cost of between $15 million and
$20 million. When completed, MedSource anticipates annual cost savings of $6
million to $8 million.
Late in fiscal 2003, MedSource began transfer activities to its low-cost
manufacturing operations including Navojoa, Mexico. During the first half of
fiscal 2004, MedSource completed the transfer of five programs and expects to
complete five more programs in the second half of fiscal 2004. Additionally,
MedSource expects that an additional 10 program transfers will be under way by
the end of fiscal 2004.
OUTLOOK
MedSource estimates fiscal 2004 third-quarter revenues of approximately $46.5
million to $48.5 million, GAAP earnings of approximately $0.07 to $0.09 per
diluted share, and pro forma earnings of approximately $0.06 to $0.08 per
diluted share. Note that GAAP earnings in the third quarter are expected to
exceed pro forma earnings due to the impact of tax effecting all earnings in the
pro forma presentation.
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 $0.04 per diluted share for the third quarter of fiscal 2004, and
$0.19 per diluted share for fiscal year 2004, offset by the tax effecting of pro
forma earnings of $0.05 per diluted share for the third quarter of fiscal 2004,
and $0.16 per diluted share for fiscal 2004.
RECONCILING ITEMS FROM GAAP TO PRO FORMA RESULTS
Pro forma income statement results for fiscal second 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 this
press release available on the investor relations page of its Web site at
www.medsourcetech.com It will also make available on the
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investor relations page of its Web site: any other non-GAAP metrics that may be
discussed on the earnings call and Webcast; the most directly comparable GAAP
financial measures; and a reconciliation of the difference between GAAP and
non-GAAP metrics.
SECOND-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
second-quarter results today at 10:30 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
second-quarter conference call, phone (800) 405-2236 and enter passcode 565194#.
The telephone replay will be available beginning at 12:30 p.m. ET on Friday,
January 30, through 12:30 p.m. ET on Monday, February 2.
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
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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
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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, 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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
DECEMBER 28, 2003 JUNE 30, 2002
(UNAUDITED)
------------------------ -----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 13,644 $ 10,781
Accounts receivable, net 22,775 23,710
Inventories, net 22,929 25,617
Prepaid expenses and other current assets 4,717 4,318
--------- ---------
Total current assets 64,065 64,426
Property, plant and equipment, net 51,013 52,752
Goodwill, net 96,637 96,582
Other identifiable intangible assets, net 1,357 1,432
Deferred financing costs 1,477 1,682
Other assets 1,335 1,343
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Total assets $ 215,884 $ 218,217
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,538 $ 10,868
Accrued compensation and benefits 4,626 5,498
Other accrued expenses 3,110 2,293
Reserve for restructuring 219 958
Current portion of obligations under capital lease 1,307 1,326
Current portion of long-term debt 7,518 6,427
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Total current liabilities 26,318 27,370
Obligations under capital leases, less current portion 3,319 3,962
Long-term debt, less current portion 27,975 30,073
Other long-term liabilities 623 731
Stockholders' equity:
Common stock 289 289
Additional paid-in capital 277,880 277,791
Treasury stock (1,495) (1,463)
Accumulated other comprehensive loss (207) (288)
Accumulated deficit (117,150) (118,326)
Unearned compensation (1,668) (1,922)
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Total stockholders' equity 157,649 156,081
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Total liabilities and stockholders' equity $ 215,884 $ 218,217
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MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------ -----------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 28, DECEMBER 29,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Revenues $ 46,023 $ 44,621 $ 90,231 $ 85,624
Costs and expenses:
Cost of product sold 35,062 33,170 69,070 63,982
Selling, general and administrative expense 7,795 8,108 15,532 16,096
Restructuring charges 1,493 -- 2,889 --
------------ ------------ ------------ ------------
Operating income 1,673 3,343 2,740 5,546
Interest expense, net (675) (636) (1,359) (1,158)
------------ ------------ ------------ ------------
Income before income taxes 998 2,707 1,381 4,388
Income tax expense (144) (13) (205) (15)
------------ ------------ ------------ ------------
Net income $ 854 $ 2,694 $ 1,176 $ 4,373
============ ============ ============ ============
Net income per share
Basic and diluted $ 0.03 $ 0.10 $ 0.04 $ 0.16
============ ============ ============ ============
Weighted average common shares outstanding
Basic 28,039,843 27,652,413 28,003,868 27,398,219
Diluted 28,647,397 27,682,127 28,654,017 27,622,816
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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 THREE MONTHS ENDED DECEMBER 28, 2003 FOR THE THREE MONTHS ENDED DECEMBER 29, 2002
------------------------------------------------- -------------------------------------------------
RESTRUCTURING AND PRO FORMA RESTRUCTURING AND PRO FORMA
AS REPORTED OTHER CHARGES RESULTS AS REPORTED OTHER CHARGES RESULTS
----------------- ---------------- ------------- ---------------- --------------- ---------
Revenues $ 46,023 $ -- $ 46,023 $ 44,621 $ -- $ 44,621
Costs and expenses:
Cost of product sold 35,062 -- 35,062 33,170 -- 33,170
Selling, general and
administrative expense 7,795 -- 7,795 8,108 -- 8,108
Restructuring charges 1,493 (1,493)(a) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Operating income 1,673 1,493 3,166 3,343 -- 3,343
Interest expense, net (675) -- (675) (636) -- (636)
------------ ------------ ------------ ------------ ------------ ------------
Income before income taxes 998 1,493 2,491 2,707 -- 2,707
Income tax expense (144) (814)(b) (958) (13) (1,029) (1,042)
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) $ 854 $ 679 $ 1,533 $ 2,694 $ (1,029) $ 1,665
============ ============ ============ ============ ============ ============
Net income per share
Basic and diluted $ 0.03 $ 0.05 $ 0.10 $ 0.06
============ ============ ============ ============
Weighted average common
shares outstanding
Basic 28,039,843 28,039,843 27,652,413 27,652,413
Diluted 28,647,397 28,647,397 27,862,127 27,862,127
(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.
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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 SIX MONTHS ENDED DECEMBER 28, 2003 FOR THE SIX MONTHS ENDED DECEMBER 29, 2002
------------------------------------------------- ----------------------------------------------------
RESTRUCTURING AND PRO FORMA RESTRUCTURING AND PRO FORMA
AS REPORTED OTHER CHARGES RESULTS AS REPORTED OTHER CHARGES RESULTS
---------------- --------------- -------------- ----------------- ------------- -----------------
Revenues $ 90,231 $ -- $ 90,231 $ 85,624 $ -- $ 85,624
Costs and expenses:
Cost of product sold 69,070 -- 69,070 63,982 -- 63,982
Selling, general and
administrative expense 15,532 -- 15,532 16,096 -- 16,096
Restructuring charges 2,889 (2,889)(a) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Operating income 2,740 2,889 5,629 5,546 -- 5,546
Interest expense, net (1,359) -- (1,359) (1,158) -- (1,158)
------------ ------------ ------------ ------------ ------------ ------------
Income before income taxes 1,381 2,889 4,270 4,388 -- 4,388
Income tax expense (205) (1,438)(b) (1,643) (15) (1,674)(b) (1,689)
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) $ 1,176 $ 1,451 $ 2,627 $ 4,373 $ (1,674) $ 2,699
============ ============ ============ ============ ============ ============
Net income per share
Basic and diluted $ 0.04 $ 0.09 $ 0.16 $ 0.10
============ ============ ============ =============
Weighted average common
shares outstanding
Basic 28,003,868 28,003,868 27,398,219 27,398,219
Diluted 28,564,017 28,564,017 27,622,816 27,622,816
(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.
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