EXHIBIT 99.1
[COMPANY LOGO]
FOR IMMEDIATE RELEASE
MICROTEK MEDICAL HOLDINGS REPORTS FIRST QUARTER 2003 RESULTS
COLUMBUS, MS, May 6, 2003 - Microtek Medical Holdings, Inc. (Nasdaq: MTMD) today
announced its results for the first quarter of 2003. Highlights from the first
quarter of 2003 as compared to the first quarter of 2002 are as follows:
o Net revenues increased by $1.8 million or 8.5 percent to $23.0
million. Net sales (net revenues excluding licensing revenues) in the
first quarter of 2003 increased by $2.2 million or 10.4 percent.
o Net sales by the Company's OREX Technologies International ("OTI")
division increased by $1.2 million to $1.4 million in the first
quarter of 2003, aided significantly by nuclear business revenues
which increased by $1.1 million to $1.2 million in the first quarter
of 2003.
o Net income for the first quarter of 2003 increased by $869,000 or 65.4
percent from the first quarter of 2002. This increase in net income
includes approximately $929,000 from the decrease in the Company's
valuation allowance for its deferred tax assets.
o EPS on a diluted basis was $0.05 per share, as compared to $0.03 per
diluted share for the first quarter of 2002. Included in the first
quarter 2003 EPS is $0.02 from the decrease in the Company's valuation
allowance for its deferred tax assets.
Net income and earnings per basic and diluted share for the 2003 first quarter
were $2.2 million and $0.05, respectively, as compared to net income of $1.3
million and earnings per basic and diluted share of $0.03 in the first quarter
of 2002. Included in earnings for the first quarter of 2003 is approximately
$929,000, or $0.02 per basic and diluted share, related to the decrease in the
Company's valuation allowance for its deferred tax assets, primarily as it
relates to its net operating loss carryforwards. There was no decrease in the
Company's valuation allowance for its deferred tax assets recorded during the
first quarter of 2002. The income tax benefit recorded for the full year of 2002
with respect to the Company's deferred tax assets and the decrease in the
valuation allowance in 2002 approximated $3.5 million, or $0.08 per basic and
diluted share, all of which was recorded during the fourth quarter of 2002.
Net revenues of $23.0 million in the first quarter of 2003 increased by
approximately $1.8 million from $21.2 million in the first quarter of 2002. The
Company's net revenue growth in the 2003 quarter is attributable in part to
Microtek's CleanOp product line which demonstrated growth in excess of 60
percent in the first quarter of 2003 and an increase in OTI's net sales of
approximately $1.2 million in the first quarter of 2003. Nuclear industry
revenues in the first quarter of 2003 approximated $1.2 million as compared to
$89,000 in the first quarter of 2002 and contributed significantly to the
increase in OTI's net sales in the first quarter of 2003. Additionally,
Microtek's domestic core hospital branded revenues increased by approximately
nine percent in the first quarter of 2003, and its international revenues
continued to demonstrate impressive growth in excess of 20 percent. Offsetting
these increases were a decline in safety product revenues of approximately
$381,000 which is attributable to pricing and other competitive pressures, a
decrease in OEM revenues of approximately $573,000, or seven percent, and the
termination of deferred licensing revenues in December 2002. Net revenues for
the first quarter of 2002 included $357,000 for the amortization of deferred
licensing revenues.
The Company's gross margin in the first quarter of 2003 was 38.6 percent, as
compared to 40.6 percent in the first quarter of 2002. Approximately one
percentage point of this gross margin decline is due to the absence of the
amortization of deferred licensing revenues in the first quarter of 2003.
Because there was no cost of sales associated with the deferred licensing
revenues recorded in the first quarter of 2002, these revenues contributed
directly to the Company's gross margin. The balance of the gross margin decline
in the first quarter of 2003 stems from the Company's changing mix of products
and the slightly dilutive nature of Microtek's CleanOp product line, Microtek's
international business and OTI's nuclear revenues.
Operating expenses as a percentage of net revenues were 32.7 percent in the
first quarter of 2003 versus 33.1 percent in the first quarter of 2002. Selling,
general and administrative expenses were $7.2 million or 31.2 percent of net
revenues in the first quarter of 2003, versus $6.7 million or 31.8 percent of
net revenues for the corresponding prior year period. The increase in the
absolute dollar amount of selling, general and administrative expenses in the
first quarter of 2003 is attributable to increases in the Company's variable
selling costs, an increase in marketing expenses resulting from the Company's
expanded marketing campaign for its branded products, and an increase in the
Company's allowance for doubtful accounts of approximately $190,000 following
Maxxim Medical, Inc.'s bankruptcy filing in February 2003. The Company increased
its allowance for doubtful accounts during the first quarter of 2003 for
potentially uncollectible Maxxim Medical receivables, which increased selling,
general and administrative expenses as a percentage of net revenues by
approximately 1.0 percent. Absent such charge, the Company's selling, general
and administrative expenses as a percentage of net revenues would have
demonstrated improvement of approximately 1.4 percentage points.
OTI's research and development expenses, substantially all of which are related
to the nuclear industry, decreased by $75,000 in the first quarter of 2003 as
compared to the first quarter of 2002. Offsetting this decrease was an increase
in Microtek's research and development expenses of $131,000 related to an
expanded product development program launched in early 2003 which includes a
number of product enhancements and new product introductions planned for 2003.
Amortization of intangibles in first quarter of 2003 approximated $117,000 and
was consistent with amortization expense recorded in the first quarter of 2002.
Income from operations for the 2003 first quarter was $1.4 million, versus $1.6
million in the first quarter of 2002. Net cash provided by operating activities
during the first quarter of 2003 was $266,000 as compared to net cash provided
by operating activities of $884,000 for the first quarter of 2002. The decrease
in operating cash flow is attributable to working capital investment during the
first quarter of 2003, due primarily to the successful commercialization of
OTI's nuclear business and the resulting increase in inventories and accounts
receivable attributable to these operations.
The Company's balance sheet remains strong with a current ratio (current assets
divided by current liabilities) of 5.7 to 1 and approximately $10.3 million in
cash on March 31, 2003. At March 31, 2003, the Company's borrowings under its
revolving credit facility were $7.3 million and its additional borrowing
availability was approximately $7.0 million.
The Company reiterated its intention to participate in the previously announced
stock repurchase program, subject to market conditions and restrictions. During
the first quarter of 2003, the Company spent approximately $241,000 to
repurchase a total of 100,000 shares under this program, bringing the total
number of shares repurchased since the inception of the program to approximately
1.2 million. The Company's current share repurchase program, as amended in
August 2002, provides for the repurchase of approximately an additional 830,000
shares and extends through December 31, 2003.
Dan R. Lee, the Company's President and Chief Executive Officer, commented, "We
have added the first quarter of 2003 to our growing list of profitable quarters,
a list that now extends to nine consecutive quarters. We are proud of our first
quarter results and the foundation that these results provide for the full year
of 2003. Of particular importance to us is the first quarter 2003 growth of
OTI's nuclear business, which has exceeded our expectations in terms of timing
and magnitude."
Mr. Lee continued, "We are on track to meet our revenue and earnings per share
goals for 2003. Our results for the first quarter are consistent with our
expectations, with the exception of our recording earlier than we had
anticipated the first quarter income tax benefit related to the decrease in the
valuation allowance for our deferred tax assets. We determined that it was
appropriate to record our anticipated income tax benefit for 2003 on a quarterly
basis in proportion to our before-tax net earnings, based on our estimated
effective tax rate for the year, which may change subject to our expected
performance. The benefit recorded in the first quarter of 2003 amounted to
approximately $0.02 per diluted share. In 2002, the entire income tax benefit
for 2002 of approximately $0.08 per share was recorded in the fourth quarter."
Mr. Lee added, "To provide clarification of our previously announced earnings
per share forecast for 2003 in light of the change in timing of the recording of
this income tax benefit, we currently forecast our earnings per share to be in
the range of $0.30 to $0.32 per diluted share, including future tax benefits
which we forecast will be recorded in 2003. Specifically, this range includes
our forecasted income tax benefit for 2003 of $0.13 per diluted share related to
the forecasted decrease in our valuation allowance for deferred tax assets
during 2003. Except for this forecasted income tax benefit, our earnings
forecast for 2003 is consistent with the forecast that was previously announced.
We continue to expect our 2003 revenues to be approximately $95 million."
Mr. Lee concluded, "The management team of this Company is fully committed to
enhancing the value of this Company to our shareholders and to creating a
valuable asset that represents the sound, well-run profitable company that you
see today."
CONFERENCE CALL: A conference call will be conducted by Dan R. Lee, President
and Chief Executive Officer, and Jerry Wilson, Chief Financial Officer, at 11:00
a.m. Eastern Time on May 6, 2003, and will be accessible to the public by
calling 1-877-792-5693 (U.S. and Canada), Reference: Microtek Medical.
International callers dial 1-706-679-4663. Callers should dial in approximately
10 minutes before the call begins.
To access the live broadcast of the call over the Internet, go to Investor
Relations page at www.MicrotekMed.com.
A conference call replay will be available at 5:00 p.m. Eastern Time on May 6,
2003 through 5:00 p.m. Eastern Time May 12, 2003 and can be accessed by calling
(U.S. and Canada) 1-800-642-1687 or (international) 1-706-645-9291; for both
reference conference call ID number: 97126606.
ACTUAL RESULTS COULD DIFFER FROM FORWARD-LOOKING STATEMENTS: This Press Release
contains forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, future repurchases of shares under the
Company's stock repurchase program, the Company's ability to meet its revenue
and earnings per share goals for 2003, forecasted earnings per share for 2003,
the forecasted income tax benefit to be recorded during 2003 relative to the
reduction in the Company's valuation allowance for its deferred tax assets,
forecasted revenues for 2003, and the Company's ability enhance the long-term
value of the Company for its shareholders. Such statements are subject to
certain factors, risks and uncertainties that may cause actual results, events
and performance to differ from those referred to in such statements. These risks
include, without limitation, those identified in Risk Factors in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002, including,
without limitation, the risks described in Risk Factors under the captions
"-History of Net Losses", "-Reliance upon Microtek", "-Competition", "-Product
Liability", "-Stock Price Volatility", "-Dependence on Key Personnel",
"-Anti-takeover Provisions", "-Low Barriers to Entry for Competitive Products",
"-Potential Erosion of Profit Margins", "-Risks of Completing Acquisitions",
"-Small Sales and Marketing Force", "-Reliance upon Distributors", "-Microtek
Regulatory Risks", "-Risks of Obsolescence", "-Reduced OREX Market Potential", "
OREX Commercialization Risks", "-OREX Manufacturing and Supply Risks", "-Risks
Affecting Protection of Technology", "-Risks of Technological Obsolescence" and
"-OTI Regulatory Risks". We do not undertake to update our forward-looking
statements to reflect future events or circumstances.
ABOUT MICROTEK: The Company, a market leader in the healthcare industry,
develops, manufactures and sells infection control products, fluid control
products and safety products to healthcare professionals for use in environments
such as operating rooms and outpatient surgical centers.
FOR MORE INFORMATION, PLEASE CALL (800) 476-5973
Dan R. Lee, President & CEO
Jerry Wilson, CFO
Victor P. Thompson, Investor Relations
InvestorRelations@MicrotekMed.com
-TABLES FOLLOW-
MICROTEK MEDICAL HOLDINGS, INC.
Unaudited Financial Highlights
(in thousands, except for per share data)
THREE MONTHS ENDED
MARCH 31,
------------------------------------------
2003 2002
-------------------- -------------------
Net sales $ 22,986 $ 20,824
Licensing revenues - 357
-------------------- -------------------
Net revenues 22,986 21,181
Gross profit 8,864 8,596
Operating expenses:
Selling, general and administrative 7,172 6,744
Research and development 219 163
Amortization of intangibles 117 114
-------------------- -------------------
Total operating expenses 7,508 7,021
-------------------- -------------------
Income from operations 1,356 1,575
Interest expense, net (38) (158)
Other income, net 21 -
Income tax benefit (expense) 858 (89)
-------------------- -------------------
Net income $ 2,197 $ 1,328
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Net income per share - basic and diluted $ 0.05 $ 0.03
==================== ===================
Weighted average shares outstanding - basic 42,115 42,074
Weighted average shares outstanding - diluted 42,775 42,938
BALANCE SHEET DATA: MARCH 31, DECEMBER 31,
2003 2002
-------------------- -------------------
Cash and cash equivalents $ 10,344 $ 9,823
Other current assets 43,374 41,757
Total current assets 53,718 51,580
Total assets 99,779 96,696
==================== ===================
Current liabilities $ 9,400 $ 8,630
Long term debt 7,286 7,136
Other liabilities 2,039 2,044
-------------------- -------------------
Total liabilities 18,725 17,810
Shareholders' equity 81,054 78,886
-------------------- -------------------
Total liabilities and shareholders' equity $ 99,779 $ 96,696
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