EXHIBIT 99.1
[COMPANY LOGO]
FOR IMMEDIATE RELEASE
MICROTEK MEDICAL HOLDINGS REPORTS FOURTH QUARTER
AND FULL YEAR RESULTS
NET PRODUCT SALES FOR FY 2003 INCREASED BY
15.8% OVER PRIOR YEAR TO $98.7 MILLION
RELEASES REVENUE AND EARNINGS FORECASTS FOR FY 2004
COLUMBUS, MS, February 24, 2004 - Microtek Medical Holdings, Inc. (Nasdaq:
MTMD), a leading manufacturer and marketer of infection control products, fluid
control products and safety products to healthcare professionals, today
announced its results for the fourth quarter and twelve months ended December
31, 2003.
Highlights from the fourth quarter and full year of 2003 are as follows:
o Fourth quarter 2003 net product sales increased by 21.5 percent over
the same 2002 quarter to $26.5 million.
o Full year 2003 net product sales increased by 15.8 percent over 2002
to $98.7 million.
o Gross margin and operating margin demonstrated year-over-year
improvements.
o Fourth quarter 2003 net income was $5.7 million or $0.13 per diluted
share, including non-cash benefits of $3.9 million or $0.09 per
diluted share from the decrease in the Company's allowance for its
deferred tax assets.
o Full year 2003, net income was $16.0 million, or $0.37 per diluted
share, including non-cash benefits of $8.8 million, or $0.20 per
diluted share from the decrease in the Company's valuation allowance
for its deferred tax assets.
o The Company broadened its proprietary product offerings and expanded
its distribution capabilities through the acquisition of Plasco, Inc.
completed effective November 1, 2003.
FOURTH QUARTER AND FULL YEAR RESULTS
For the quarter ended December 31, 2003, net revenues increased 19.5 percent to
$26.5 million versus $22.1 million in the same quarter last year and $24.3
million in the third quarter of 2003. Net product sales (which are net revenues
excluding licensing revenues) in the fourth quarter of 2003 increased by $4.7
million, or 21.5 percent, over the fourth quarter of 2002. Included in fourth
quarter 2003 net product sales is approximately $1.1 million from the recently
acquired Plasco division.
Net income and earnings per diluted share for the fourth quarter of 2003 were
$5.7 million or $0.13, respectively, compared to $4.8 million or $0.11,
respectively, for the fourth quarter of 2002. Included in the fourth quarter
2003 earnings was approximately $3.9 million, or $0.09 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
("NOL's"). The decrease in the Company's valuation allowance for its deferred
tax assets in the fourth quarter of 2002 was approximately $3.5 million, or
$0.08 per diluted share. Excluding these valuation allowance benefits, the
Company's net income increased in the fourth quarter of 2003 by approximately
$437 thousand or 33.4 percent, as compared to the fourth quarter of 2002.
For the year ended December 31, 2003, the Company's net revenues reached $98.7
million, as compared to net revenues of $86.7 million in 2002, a 13.9 percent
increase. Net product sales for 2003 increased by approximately 15.8 percent
over 2002. Net income and earnings per diluted share for 2003 were $16.0 million
or $0.37, respectively, versus $8.4 million or $0.20, respectively, in 2002.
Included in earnings for 2003 is approximately $8.8 million, or $0.20 per
diluted share, related to the decrease in the Company's valuation allowance for
its deferred tax assets and a gain of approximately $982 thousand, or $0.02 per
diluted share, from the sale of certain of the Company's non-strategic safety
products during the third quarter of 2003. The decrease in the Company's
valuation allowance for its deferred tax assets in 2002 was approximately $3.5
million, or $0.08 per diluted share. Excluding these valuation allowance
benefits and the gain from the sale of non-strategic safety products, the
Company's earnings in 2003 increased by more than 25 percent to $0.15 per
diluted share from $0.12 per diluted share in 2002.
Dan R. Lee, the Company's President and Chief Executive Officer, commented, "We
achieved solid revenue growth in 2003, and the fourth quarter of 2003 marks the
Company's twelfth consecutive quarter of profitability. Microtek has delivered
solid growth due to our efficient manufacturing processes, proprietary products
and extensive distribution channels. In 2003, we exhibited growth in each of our
principal product lines, except our safety product line which was impacted by
the sale of a portion of that line in September 2003, and across all of our
distribution channels. OEM revenues, which fell behind 2002 levels during the
first quarter, rebounded during the fourth quarter with a 23 percent increase
over the fourth quarter of 2002. For the full year of 2003, OEM revenues
increased by more than eight percent over 2002. The Company's domestic branded
hospital sales increased by 12 percent during the fourth quarter of 2003 and by
11 percent for the full year. Not included in these growth rates is
approximately $1.1 million in revenues from the acquisition of Plasco on
November 1, 2003. Together, the growth in Microtek OEM and domestic branded
hospital revenues and revenues from the Plasco acquisition bring Microtek's
domestic revenues in 2003 to approximately $80 million, an increase of
approximately 12 percent over 2002. International revenues also demonstrated
double-digit revenue growth in the fourth quarter and full year periods of 15
percent and 13 percent, respectively. Net product sales of the Company's OTI
division were $1.2 million in the fourth quarter of 2003 and $5.5 million for
the full year, increases of 18.6 percent and 193.1 percent over the same 2002
periods."
Mr. Lee continued, "In addition to strong revenue growth, we also experienced
improved gross margins and operating margins during 2003. This is a notable
achievement considering that we made planned investments in sales and marketing
during the year to promote our brand, strengthen our distribution channels and
improve our market position for the long-term."
For the fourth quarter of 2003, the Company's gross profit margin increased to
40.9 percent, as compared to 38.3 percent in the fourth quarter of 2002. Gross
profit margins for the full year of 2003 of 39.7 percent increased slightly from
39.4 percent in 2002. The fourth quarter and full year of 2002 benefited from
licensing revenues of $357 thousand and $1.4 million, respectively, which had no
associated costs. Excluding licensing revenues in the 2002 periods, the gross
profit margin improvement in the fourth quarter and full year of 2003 was
approximately 3.6 percentage points and 1.4 percentage points, respectively.
These improvements are attributable to the effect of leveraging higher net
revenues on our existing manufacturing infrastructures and efficiency and
utilization improvements realized in 2003.
Operating expenses for the fourth quarter of 2003 were $9.0 million, or 34.0
percent of net product sales, as compared to $7.1 million, or 32.6 percent of
net product sales in the fourth quarter of 2002. For the full year of 2003,
operating expenses were $32.6 million, or 33.1 percent of net product sales, as
compared to $28.5 million, or 33.5 percent of net product sales, in 2002. The
increases in the absolute dollar amount of operating expenses in fourth quarter
and full year of 2003 resulted from higher selling, general and administrative
expenses ("SG&A expenses"), primarily due to the Company's additional investment
in branded sales and marketing and higher distribution and other variable
selling costs. SG&A expenses were $8.7 million or 32.8 percent of net product
sales in the fourth quarter of 2003, compared to $6.8 million or 31.4 percent of
net product sales for the fourth quarter of 2002. For the full year of 2003,
SG&A expenses were $31.3 million, or 31.7 percent of net product sales, versus
$27.3 million, or 32.1 percent of net product sales in 2002.
The Company's balance sheet remains strong with cash and investments totaling
$9.5 million at December 31, 2003, and a strong current ratio (current assets
divided by current liabilities) of 5.5 to 1. The Company's borrowings under its
revolving credit facility amounted to $7.2 million and additional available
borrowings totaled approximately $7.9 million at December 31, 2003.
During the quarter, the Company repurchased a total of 19 thousand shares under
its current share repurchase authorization bringing the total shares repurchased
in 2003 to 274 thousand shares at an average price of $2.72 per share.
Approximately 1.3 million shares have been repurchased since the inception of
the program. The Company's current share repurchase program, as amended in
December 2003, provides for the repurchase of approximately 658 thousand shares
of additional stock and extends through December 31, 2004.
Mr. Lee stated, "Our results for 2003 are generally consistent with our
expectations, except for the non-cash increase in the income tax benefit related
to a larger than anticipated decrease in the valuation allowance for NOL's
during the fourth quarter. At December 31, 2003, we assessed the future
realizability of our Federal NOL's, considering among other things management's
forecast of taxable income in future periods during which those NOL's may be
utilized. In accordance with generally accepted accounting principles and based
on currently available information, the Company's valuation allowance was
adjusted to reflect management's best estimate of the tax benefit that will be
realized from the utilization of these NOL's prior to their expiration. This
resulted in a decrease in the valuation allowance of approximately $8.8 million,
or $0.20 per diluted share. We had previously estimated that this adjustment
would be approximately $0.15 per diluted share. This increase resulted from a
combination of an increase in our actual 2003 taxable income over our earlier
expectations and increases in forecasted utilization of the Company's tax
benefits. Going forward, we will evaluate the reasonableness of the remaining
valuation allowance on our deferred tax assets and will make adjustments to the
valuation allowance as circumstances indicate."
Mr. Lee continued, "Excluding the effect of any possible future acquisitions, we
believe that our revenues for 2004 will be in the range of $115 million to $120
million, and we believe income from operations in 2004 will increase by more
than 30 percent over 2003. Additionally, we believe that our earnings for 2004
will be in the range of $0.19 to $0.22 per diluted share. Our forecasted
earnings exclude any non-cash benefits which may be recorded in 2004 from
decreases in the Company's valuation allowance for deferred tax assets.
Decreases in the valuation allowance are recorded as a deferred tax benefit on
our statement of operations, which consequently causes a non-cash increase in
our net income. Because our valuation allowance at December 31, 2003 takes into
account our current risk-adjusted forecast of our taxable income over more than
the next 10 years, we currently do not expect to record any material changes to
our valuation allowance in 2004 and, consequently, do not currently expect any
material change in our forecasted 2004 earnings as a result of changes in our
valuation allowance. Changes in this valuation allowance are subject to
judgments about unknown future events, so future developments could have a
significant effect on the amount of our valuation allowance and, consequently, a
non-cash effect on our net income."
Mr. Lee concluded, "Our forecasted earnings of $0.19 to $0.22 per diluted share
for 2004 compare favorably to earnings of $0.15 per diluted share in 2003,
excluding the $8.8 million in valuation allowance benefits and one-time gain of
$982 thousand. We will continue to focus on organic growth in our product lines
through innovation and expanding our distribution channels, and we will seek to
maintain our strong financial position with direct focus on our favorable cash
position, modest debt and sound working capital. Additionally, we will continue
to seek strategic acquisitions which complement our goal of being a market
leader in the design, manufacture and marketing of a wide range of innovative,
high-quality products for infection and fluid control and for the enhancement of
patient and healthcare professionals' safety."
CONFERENCE CALL: The Company invites its shareholders and other interested
parties to join its conference call which will be conducted by Dan R. Lee,
President and Chief Executive Officer, and Jerry Wilson, Chief Financial
Officer, at 4:30 p.m. Eastern Time on February 24, 2004. This conference call
will be accessible to the public by calling 1-877-407-9210 (U.S.), Reference:
Microtek Medical. International callers dial 1-201-689-8049. 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 through 11:59 p.m. Eastern Time on
March 1, 2004 and can be accessed by calling 1-877-660-6853 (U.S.) or
1-201-612-7415 (international); for both reference conference call account
#1628, Conference ID #93422.
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, the Company's forecasted revenues, forecasted
increase in income from operations and forecasted earnings per diluted share for
2004, the Company's ability to continue to focus on organic growth in its
product lines through innovation and expanding its distribution channels, the
Company's ability to maintain its strong financial position with direct focus on
its favorable cash position, modest debt and sound working capital, and the
Company's ability to consummate strategic acquisitions that complement the
Company's goal of being a market leader in the design, manufacture and marketing
of a wide range of innovative, high-quality products for infection and fluid
control and for the engagement of patient and healthcare professionals' safety.
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
John Mills, Investor Relations
InvestorRelations@MicrotekMed.com
-TABLES FOLLOW -
MICROTEK MEDICAL HOLDINGS, INC.
Unaudited Financial Highlights
THREE MONTHS ENDED TWELVE MONTHS ENDED
(in thousands, except per share data) DECEMBER 31 DECEMBER 31
-------------------------------------- -------------------------------------
2003 2002 2003 2002
----------------- ----------------- ----------------- ----------------
Net product sales $ 26,462 $ 21,780 $ 98,664 $ 85,228
Licensing revenues - 357 - 1,427
----------------- ----------------- ----------------- ----------------
Net revenues 26,462 22,137 98,664 86,655
Gross profit 10,828 8,472 39,216 34,101
Operating expenses:
Selling, general and administrative 8,670 6,830 31,261 27,326
Research and development 227 164 940 736
Amortization of intangibles 113 114 440 456
----------------- ----------------- ----------------- ----------------
Total operating expenses 9,010 7,108 32,641 28,518
----------------- ----------------- ----------------- ----------------
Income from operations 1,818 1,364 6,575 5,583
Interest expense, net (45) (21) (179) (429)
Gain on sale of product line - - 982 -
Other income, net 56 15 135 89
----------------- ----------------- ----------------- ----------------
Income before income taxes 1,829 1,358 7,513 5,243
Current tax expense - state and foreign (81) (47) (301) (332)
Deferred tax benefit 3,930 3,503 8,811 3,503
----------------- ----------------- ----------------- ----------------
Net income $ 5,678 $ 4,814 $ 16,023 $ 8,414
================= ================= ================= ================
Net income per share:
Basic $ 0.13 $ 0.11 $ 0.38 $ 0.20
================= ================= ================= ================
Diluted $ 0.13 $ 0.11 $ 0.37 $ 0.20
================= ================= ================= ================
Weighted average shares outstanding:
Basic 42,490 42,024 42,206 42,125
Diluted 44,016 42,398 43,251 42,789
BALANCE SHEET DATA: DECEMBER 31 DECEMBER 31
2003 2002
----------------- -----------------
Cash and cash equivalents $ 9,462 $ 9,823
Other current assets 54,749 41,757
Total current assets 64,211 51,580
Total assets 118,299 96,696
================= =================
Current liabilities $ 11,691 $ 8,630
Long term debt 8,056 7,136
Other liabilities 2,008 2,044
----------------- -----------------
Total liabilities 21,755 17,810
Shareholders' equity 96,544 78,886
----------------- -----------------
Total liabilities and shareholders' equity $ 118,299 $ 96,696
================= =================