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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
For additional information contact: Paul A. Miller, Vice President and CFO
(614) 718-0530
CROSS MEDICAL PRODUCTS AND INTERPORE INTERNATIONAL
SIGN DEFINITIVE MERGER AGREEMENT
CROSS MEDICAL ANNOUNCES FOURTH QUARTER AND YEAR END OPERATING RESULTS
DUBLIN, Ohio--Feb. 12, 1998--Cross Medical Products, Inc.
(Nasdaq: CRSS) and Interpore International (Nasdaq: BONZ) today announced the
execution of a definitive merger agreement, creating a combined medical device
company offering an expanded range of products to orthopaedic and neurosurgeons.
This stock-for-stock transaction, creating a company with a
combined 1997 revenues of approximately $28 million, combines Interpore's
strength as a leading manufacturer and marketer of synthetic bone graft
materials with Cross Medical's strength as a worldwide supplier of spinal
implant systems used to treat degenerative conditions and deformities of the
spine.
The agreement, a merger of equals, calls for Cross to be merged
with a wholly-owned subsidiary of Interpore. Each shareholder of Cross Medical
shall receive 1.275 shares of Interpore common stock in exchange for each of
their shares of Cross Medical common stock. The transaction is intended to be
accounted for as a pooling of interests and is expected to be tax-free.
The boards of directors of both companies have voted unanimously
to approve the transaction. Certain key shareholders of each company have agreed
to vote in favor of the merger. Each company has granted the other an option to
acquire 19.9 percent of its common stock under certain conditions.
Consummation of this transaction is subject to customary
conditions, including regulatory approvals and approval of the merger by the
shareholders of each company. It is anticipated that this transaction will close
prior to the end of the second quarter of 1998.
The companies have agreed that:
The corporate headquarters will be located in Irvine, California
but Cross Medical will maintain operations in Dublin, Ohio for the foreseeable
future.
Interpore's President, Chief Executive Officer and Chairman of
the Board, David C. Mercer, will serve as Chairman and Chief Executive Officer
of Interpore after the merger. Cross Medical's President and Chief Executive
Officer, Joseph A. Mussey, will serve as President and Chief Operating Officer
of Interpore following the merger. Both Mercer and Mussey will serve on the
Board. The key management team will consist of top managers of both Interpore
and Cross Medical.
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The new company will be governed by a six-member Board of
Directors, with three directors designated by each company.
David C. Mercer, Interpore President and Chief Executive Officer,
said: "This transaction presents an outstanding opportunity for both companies.
The complementary strengths of each partner's product portfolio and the critical
mass achieved by the combination should bring greater value to our stakeholders,
including our customers, employees and shareholders. An analysis of the
respective distribution channels for Interpore and Cross Medical revealed an
opportunity for growth with relatively few territory conflicts."
Mercer added: "This merger is a 'defining moment' for Interpore.
The combined company will be able to offer a more complete range of products to
meet the needs of surgeons throughout the world. Our ability to cross-sell and
bundle our products will be a key driver of our future growth."
"The strong management teams of both companies will provide the
expertise necessary to continue rapid growth and expansion to new areas. And we
share the same values and commitment to product quality, service and creating
shareholder value. The cultures of our companies are quite similar. That should
make the integration of operations relatively seamless. We will immediately form
transition task forces in order to hit the ground running," Mercer continued.
Joseph A. Mussey, President and CEO of Cross Medical, said: "The
merger of Interpore and Cross Medical is a natural marriage, providing
tremendous opportunities for growth. At a time when the medical industry is
rapidly consolidating, the merger creates a company with financial strengths
that should allow us to accelerate our growth in the future. We both have high
gross margin product lines and high operating leverage. The potential bottom
line impact of incremental revenues expected from combining the companies could
be significant."
Dr. Edward R. Funk, Chairman of Cross Medical, expressed strong
support for the merger, citing the complementary technologies of the two
companies. Funk founded Danninger Medical Technology, Inc., the predecessor
company to Cross Medical, with his son, Dr. Daniel A. Funk, M.D., in 1982.
Both companies expect to realize synergies as well as cost
savings from the merger. Most importantly, the combination of their respective
sales distribution channels and many corporate support functions will provide
substantial efficiencies.
Piper Jaffray Inc. served as financial adviser to Cross Medical
and Genesis Merchant Group Securities, L.L.C. served as financial adviser to
Interpore.
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1997 YEAR END AND FOURTH QUARTER
Revenue in 1997 increased 51% to $12.9 million, from $8.5
million in 1996. Net income for 1997 was $1.6 million ($0.32 per share) versus
net income of $1.3 million ($0.27 per share) in 1996. Net income in 1997
included a gain on the sale of discontinued operations of $2.2 million ($0.43
per share) while 1996 results included income from discontinued operations of
$1.2 million ($0.26 per share).
For the fourth quarter of 1997, sales increased to $3.4 million
from $3.0 million in the fourth quarter of 1996. The fourth quarter of 1996
benefited from a high level of initial stocking shipments for international
distributors of the Company's titanium version of the Synergy(TM) spinal
system. These shipments did not recur in 1997. However, in the fourth quarter
of 1997, U.S. revenues increased 83% from the 1996 fourth quarter. The Company
continues to expand and upgrade its force of sales reps in the U.S.
Results for the fourth quarter of 1997 included an inventory
charge of $775,000 created by lower costs of implants and a reserve for
implants and instrument designs replaced with improved products. Absent this
charge, gross margins increased to 60% in 1997 from 55% in 1996. Results for
the fourth quarter of 1996 benefited by $460,000 from recognition of
previously-deferred tax benefits.
FIRST QUARTER 1997 RESTATEMENT OF EARNINGS
In addition, the Company restated its earnings for the quarter
ended March 31, 1997, to expense certain product liability insurance premiums.
The change resulted in a reduction in net income per share of $0.04 per share
($0.03 from continuing operations and $0.01 from discontinued operations).
Cross Medical Products is a world-wide supplier of spinal
implant devices used to treat degenerative conditions and deformities of the
spine.
Certain statements in this release are forward-looking and may
involve risk and uncertainties, including, but not limited to: risks that the
proposed merger will not be completed timely or at all; risks that anticipated
synergies will not be realized; risks that the two companies cannot be
successfully integrated; product demand and market acceptance risks; the
development of future products; successful completion of clinical studies;
regulatory approval of new products; and the impact of competitive products.
Additional information on factors that could affect the Company's financial
results and growth prospects is disclosed in the Company's reports filed from
time to time with the Securities and Exchange Commission.
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FINANCIAL HIGHLIGHTS
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
------------------------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
Net Sales $3,421,000 $2,957,000 $12,918,000 $8,572,000
Gross Profit 1,245,000 1,500,000 6,995,000 4,718,000
Operating Expense 2,289,000 1,349,000 7,915,000 5,017,000
Net Income (Loss) from
continuing operations $ (728,000) $ 456,000 $ (862,000) $ 50,000
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Net Income (Loss) from
discontinued operations* $ (127,000) $ 351,000 $ 2,470,000 $1,231,000
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Net Income (Loss) $ (855,000) $ 807,000 $ 1,608,000 $1,281,000
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Basic earnings per share:
Net Income (Loss) Per Share
from continuing operations $(0.14) $0.09 $(0.17) $0.01
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Net Income (Loss) Per Share
from discontinued operations $(0.02) $0.08 $0.49 $0.26
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Net Income (Loss) Per Share $(0.16) $0.17 $0.32 $0.27
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Weighted Average Common
Shares Outstanding 5,221,542 4,870,683 5,065,294 4,772,082
Diluted earnings per share:
Net Income (Loss) Per Share
from continuing operations $(0.14) $0.09 $(0.17) $0.01
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Net Income (Loss) Per Share
from discontinued operations $(0.02) $0.06 $0.49 $0.26
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Net Income (Loss) Per Share $(0.16) $0.15 $0.32 $0.27
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Weighted Average Common
Shares Outstanding 5,221,542 5,714,512 5,065,294 4,772,082
December 31, 1997 December 31, 1996
----------------- -----------------
Current Assets $16,941,000 $14,205,000
Property & Equipment - net 970,000 784,000
Other Assets 851,000 4,601,000
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Total Assets $18,762,000 $19,590,000
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Current Liabilities $ 3,585,000 $ 5,964,000
Long Term Liabilities 5,179,000 7,978,000
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Total Liabilities $ 8,764,000 $13,942,000
Shareholders' Equity $ 9,998,000 $ 5,648,000
Total Liabilities &
Shareholders' Equity $18,762,000 $19,590,000
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* Included in twelve months ended 1997 is a gain on sale of discontinued
operations of $2,180,000 or $0.43 per share.