EXHIBIT 99.1
[COMPANY LOGO]
FOR IMMEDIATE RELEASE
MICROTEK MEDICAL HOLDINGS REPORTS SECOND QUARTER 2003 RESULTS
Income from Operations increases 94.2% Over the Prior Year Quarter
Net revenues increased 17.5% to $24.9 million
COLUMBUS, MS, August 5, 2003 - Microtek Medical Holdings, Inc. (Nasdaq:
MTMD) today announced its results for the second quarter and six months ended
June 30, 2003. Highlights from the second quarter as compared to the second
quarter ended June 30, 2002 are as follows:
o Net revenues increased 17.5% to $24.9 million.
o Operating income increased by 94.2% to $1.8 million.
o Net income increased $2.4 million to $3.2 million while diluted earnings
per share increased from $0.02 to $0.08 per share.
Second Quarter and Six Month Results
For the second quarter ended June 30, 2003 net revenues increased 17.5% to
$24.9 million versus $21.2 million in the same quarter a year ago. Income from
operations also increased for the period rising 94.2% to $1.8 million versus
$924 thousand in the second quarter of 2002. Finally for the second quarter of
2003, net income and diluted earnings per share increased to $3.2 million or
$0.08, respectively, compared to $790 thousand or $0.02, respectively, a year
ago.
Included in earnings for the second quarter of 2003 is approximately $1.6
million, or $0.04 per 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 (NOLs). At December 31, 2002, the Company had a
federal net operating loss carryforward of approximately $85 million, which can
be used to offset approximately $29 million in federal tax liability in future
years.
Dan R. Lee, the Company's President and Chief Executive Officer commented,
"We are pleased with our second quarter results, particularly our top-line
performance which was a record. Microtek's sales to hospital customers,
representing approximately 57% of Microtek's quarterly domestic revenues,
continued to grow. Growth for the domestic hospital business was approximately
15% over the prior year quarter. Additionally, our OEM business reported
significant revenue growth of approximately 6% over the prior year quarter. Our
international business, representing 16% of total sales for the second quarter,
grew approximately 20% over the same quarter last year. The international
business continues to build on the solid platform that has been established.
Also, OTI reported an increase in net sales over the same quarter of the prior
year of approximately $1.5 million, as the Company continues to commercialize
its nuclear products." Mr. Lee continued, "At the core of our recent success is
execution and diversity. We have consciously broadened our distribution
channels, diversified our brands, and improved our international presence. In
the process, Microtek has mitigated its reliance on any one sales channel or
asset and, as we move forward, we will continue with this philosophy."
For the six months ended June 30, 2003, net revenues were $47.9 million
versus $42.4 million. Income from operations was $3.2 million versus $2.5
million, a 26% increase. Net income and diluted earnings per share were $5.4
million or $0.13 versus $2.1 million or $0.05, respectively. Included in
earnings for the first six months of 2003 is approximately $2.5 million, or
$0.06 per diluted share, related to the decrease in the Company's valuation
allowance for its deferred tax assets, primarily as it relates to its NOLs.
For the quarter, the Company's gross margin was 39.1%, as compared to 40%
in the second quarter of 2002. The slight decrease was primarily due to the
absence of Microtek's licensing revenue in 2003 versus the same quarter a year
ago when licensing revenues totaled $356 thousand. Because there were no costs
associated with those revenues, gross margin was disproportionally affected.
Operating expenses as a percentage of net revenues for the second quarter
were 31.9% versus 35.6% in the second quarter of 2002. The 370 basis point
decline was largely due to higher revenues leveraging expenses.
Selling, general and administrative expenses were $7.6 million or 30.5% of
net revenues in the second quarter of 2003 compared to $7.2 million or 33.9% of
net revenues for the second quarter of 2002. The increases in the absolute
dollar amount of selling, general and administrative expenses in the second
quarter were primarily attributable to increases in the Company's variable
selling costs.
During the quarter, Microtek decreased its long-term debt by 13.2% to $6.3
million while maintaining a strong current ratio (current assets divided by
current liabilities) of 5.7 to 1. Moreover, the Company ended the quarter with
approximately $10.3 million in cash and additional borrowings availability under
its revolving credit facility of roughly $7.1 million.
Finally, during the quarter, the Company repurchased a total of 105
thousand shares under its current share repurchase authorization bringing the
total for the year to date period to 205 thousand shares at an average price of
$2.43 per share. This brings the total number of shares repurchased since the
inception of the program to approximately 1.3 million. Microtek's current share
repurchase program, as amended in August 2002, provides for the repurchase of
approximately 726 thousand shares of additional stock and extends through
December 31, 2003.
Guidance
Based on second quarter results and the current outlook, Microtek issued
the following guidance for the full year ending December 31, 2003:
o Net revenues of $95 to $98 million
o Diluted earnings per share of $0.30 to $0.32, which includes an income tax
benefit of about $0.13 per diluted share
The increase in expectations is primarily due to a combination of improving
performance in Microtek's hospital and OEM businesses, an increase in
international sales, and an increase in OTI nuclear revenues. Management also
believes that gross margins will remain stable during 2003 and the operating
expense improvements achieved in the first six months of 2003 will be
sustainable throughout the remainder of the year.
Mr. Lee concluded, "Microtek continues to make progress and our second
quarter performance was evidence of that fact. We plan to build on these results
and continue to utilize our improving cash flow and balance sheet to reinvest in
our core business and acquire complementary businesses with a disciplined
approach. We will also use our improving financial condition, when appropriate,
to return capital to shareholders below the operating line via share repurchases
or debt reduction which was the case this past quarter. Ultimately, we believe
this multidimensional approach to creating value to our shareholders positions
Microtek to add dynamic and trusted brands to its growing portfolio and reward
investors over the long run as we build a leader in infection control in the
healthcare industry."
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 August 5, 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
August 5, 2003 through 5:00 p.m. Eastern Time August 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, estimated offsets in federal tax
liability in future years, the Company's belief that it has mitigated its
reliance on any one sales channel or asset, the Company's ability to continue to
mitigate its reliance on any one sales channel or asset, the Company's guidance
for full-year 2003 net revenues, diluted earnings per share and diluted income
tax benefit per share, the Company's belief that gross margins will remain
stable during 2003, the Company's belief that the operating expense improvements
achieved in the first six months of 2003 will be sustainable throughout the
remainder of the year, whether or not the Company will continue to improve its
cash flow and balance sheet, the Company's plan to reinvest in its business, the
Company's ability to acquire complementary businesses with a disciplined
approach, the Company's plan to continue share repurchases, the Company's plan
to continue to reduce debt, the Company's belief that its business plan will
create value to its shareholders, the Company's ability to add brands, the
Company's ability to reward investors in the long run and the Company's ability
to build a leader in infection control in the healthcare industry. 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 Six months ended
June 30 June 30
----------------------------------- -------------------------------
2003 2002 2003 2002
--------------- --------------- --------------- --------------
Net sales $ 24,874 $ 20,816 $ 47,860 $ 41,640
Licensing revenues - 356 - 713
--------------- --------------- --------------- --------------
Net revenues 24,874 21,172 47,860 42,353
Gross profit 9,737 8,465 18,601 17,061
Operating expenses:
Selling, general and administrative 7,576 7,173 14,748 13,917
Research and development 259 254 478 417
Amortization of intangibles 108 114 225 228
--------------- --------------- --------------- --------------
Total operating expenses 7,943 7,541 15,451 14,562
--------------- --------------- --------------- --------------
Income from operations 1,794 924 3,150 2,499
Interest expense, net 56 137 94 295
Other income, net (2) (64) (23) (64)
Income tax (benefit) expense (1,467) 61 (2,325) 150
--------------- --------------- --------------- --------------
Net income $ 3,207 $ 790 $ 5,404 $ 2,118
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Net income per share - basic and diluted $ 0.08 $ 0.02 $ 0.13 $ 0.05
=============== =============== ================ ==============
Weighted average shares outstanding - basic 42,063 42,252 42,089 42,184
Weighted average shares outstanding - diluted 42,759 43,184 42,763 43,058
Balance Sheet Data: June 30 December 31
2003 2002
--------------- ---------------
Cash and cash equivalents $ 10,307 $ 9,823
Other current assets 46,853 41,757
Total current assets 57,160 51,580
Total assets $ 102,726 $ 96,696
================ ================
Current liabilities $ 10,052 $ 8,630
Long-term debt 6,327 7,136
Other liabilities 2,032 2,044
--------------- ---------------
Total liabilities 18,411 17,810
Shareholders' equity 84,315 78,886
--------------- ---------------
Total liabilities and shareholders' equity $ 102,726 $ 96,696
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