EXHIBIT 99.1
For Immediate Release Contact: Marlin Miller, Jr. Frederick J. Hirt
June 24, 2003 610-478-3114 610-478-3117
ARROW INTERNATIONAL, INC. REPORTS THIRD QUARTER
AND NINE MONTHS FISCAL YEAR 2003 RESULTS AND
INVESTOR MEETING JUNE 24, 2003
READING, PA, June 24, 2003 - Arrow International, Inc. announced today that net
sales for its third quarter of fiscal 2003 ended May 31, 2003 were $96.9 million
compared to $86.7 million in the same prior year period, an increase of 11.8%.
Net income for the quarter increased 27.2% to $14.5 million compared to $11.4
million in the same prior year period. Diluted earnings per share in the quarter
ended May 31, 2003 were $0.66 compared to $0.51 in the same fiscal 2002 period,
an increase of 29.4%.
For the nine months ended May 31, 2003, compared to the same period of last
year, the Company's net sales increased 8.5% to $278.5 million from $256.7
million. Net income was $37.8 million during the period, compared to $36.0
million in the comparable period of fiscal 2002, and diluted earnings per share
were $1.73 for the nine month period of fiscal 2003 compared to $1.63 in the
same prior year period, an increase of 5.0% and 6.1%, respectively.
Results of Operations
Period Ended May 31, 2003 Period Ended May 31, 2002
- ----------------------------------------------------- -------------------------------- --------------- --------------
$ in Mil, except per share 3 Months 9 Months 3 Months 9 Months
- ------------------------------------------------------ --------------- --------------- --------------- --------------
- ------------------------------------------------------ --------------- --------------- --------------- --------------
Net sales $96.9 $278.5 $86.7 $256.7
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- ------------------------------------------------------ --------------- --------------- --------------- --------------
Income before tax $21.3 $55.9 $16.9 $53.4
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Net income $14.5 $37.8 $11.4 $36.0
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Diluted earnings per share $0.66 $1.73 $0.51 $1.63
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International sales in the third quarter of fiscal 2003 were $34.0 million,
compared to $29.7 million in the third quarter of fiscal 2002, and represented
35.1% of total net sales. The weakness of the U.S. dollar in the quarter,
compared to the same period of last year, increased sales by $3.2 million or
3.7%. For the nine months ended May 31, 2003, compared to the same period of
last year, international sales were $93.8 million, a 9.6% increase from $85.6
million in the same period of fiscal 2002, and represented 33.7% of total net
sales. The weaker U.S. dollar during the period, compared to the same period of
last year, increased sales by $5.8 million or 2.3%.
Sales of critical care products in the third quarter of fiscal 2003 increased
14.0% to $82.4 million from $72.3 million in the same period of fiscal 2002.
Sales of cardiac care products increased 0.7% to $14.5 million from $14.4
million in the same period of last year. For the first nine months of fiscal
2003, sales of critical care
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products were $237.1 million, up 10.0% from $215.5 million in the same period of
last year. Sales of cardiac care products were $41.4 million, compared to $41.2
million in the comparable prior fiscal year period, and represented an increase
of 0.5%.
Sales of critical care products in the third quarter of fiscal 2003 were strong
in the U.S. as an increasing number of hospitals continued purchasing the
Company's recently introduced procedure kits featuring its safety devices. This
trend is expected to continue as momentum grows to protect hospital personnel
from inadvertent blood exposure due to needle sticks and other sharp-related
injuries.
Sales of critical care product platforms and cardiac care products for the third
quarter and nine months ended May 31, 2003 are shown in the table below.
Sales by Product Platforms Third Quarter Nine Months
------------- -----------
(Dollars in millions) FY03 FY02 % Growth FY03 FY02 % Growth
Central Venous Catheters* $47.6 $42.1 13% $135.6 $124.5 9%
Specialty Catheters 31.5 29.4 7% 91.8 86.3 6%
Stepic distributed products 3.3 - N/A 9.7 - N/A
----- ----- ------ ------
Subtotal 82.4 71.5 15% 237.1 210.8 13%
Drug Infusion Pumps** - 0.8 N/A - 4.7 N/A
----- ----- ------ ------
Subtotal Critical Care 82.4 72.3 14% 237.1 215.5 10%
Cardiac Care 14.5 14.4 1% 41.4 41.2 1%
---- ---- ------ ------
TOTAL $96.9 $86.7 12% $278.5 $256.7 9%
*Includes Diatek and NeoCare(R) product sales of $2.3 million and $3.2
million for the third quarter and nine months of fiscal year 2003,
respectively.
**The Company divested its implantable drug infusion pump business on
April 1, 2002
Commenting on third quarter fiscal year 2003 financial results, Marlin Miller,
Jr., the Company's Chairman and Chief Executive Officer, stated that he was
pleased to be able to report a record quarter for the Company in terms of both
sales and earnings, with significant increases over the prior year. Reported
earnings per share were in the low end of the projected range of $0.66-.68 per
share due to higher operating expenses associated with plans to expand the
Company's recently acquired Diatek and NeoCare(R) businesses, margin reductions
associated with the Company's acquisition of NeoCare(R) inventory and reduced
shipments to its Florida area distributor pending Arrow's purchase of the
business from IMA, Inc. which is discussed in more detail below. Although Diatek
and NeoCare(R) did not contribute to the third quarter's operating profit and
the reduced shipments decreased gross profit by $1 million compared to the
second quarter of fiscal year 2003, these acquisitions are expected to benefit
the Company's fiscal year 2004 results.
Looking ahead to the fourth quarter of fiscal 2003, the Company believes sales
will be near the upper end of the projected range with earnings per share
between $0.66-.68 per share. The fourth quarter assumptions are detailed below.
The reductions from the previous estimate are due to higher estimated operating
expenses which are in line with expenses for the third quarter. Detailed
planning for fiscal year 2004 is currently in progress and specific quarterly
targets for fiscal year 2004 will be provided with the Company's year-end press
release presently scheduled for September 30, 2003.
Below are the Company's quarterly sales and earnings targets for the balance of
fiscal year 2003 along with some of the key assumptions underlying these
targets:
Q1A Q2A Q3A Q4E FY03E
--- --- --- --- -----
Net Sales $89M $93M $97M $95-97M $374-376M
E.P.S. $0.52 $0.55 $0.66 $0.66-.68 $2.39-2.41
Assumptions:
1) Average gross margin for the year of approximately 50.5% of sales. Gross
margins in Q1 and Q2 were approximately 49% due to sales of inventory
purchased from Stepic Medical at reduced dealer margins, less allocation of
some of the purchase price to inventory, as
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well as continued manufacturing variances due to past inventory reductions.
Gross margin in Q4 of approximately 52% of sales.
2) Operating expenses approximately the same in Q3 and Q4.
3) Operating income averaging approximately 20% of sales for the year.
4) Non operating income of approximately $1 million for the year.
5) Effective tax rate of 30% in Q4 and 31.8% for the year due to favorable tax
settlement expected in Q4 related to R&D tax credits.
6) E.P.S. using 22,000,000 shares of common stock outstanding
7) R&D expenses of 6.7% of sales
8) A = Actual; E = Estimate; M = Millions
Note: The Company's previous estimates were as follows:
Q3E Q4E FY03E
--- --- -----
Net Sales $93-95M $95-97M $370-374M
E.P.S. $0.66-.68 $0.73-.75 $2.46-2.50
Speaking at a meeting with investors and financial analysts sponsored by the
Company in New York City held today, Mr. Miller also announced his intention to
retire as Chairman and Chief Executive Officer of the Company at the end of its
2003 fiscal year on August 31, 2003. In announcing his retirement plans, Mr.
Miller stated that "it has been a wonderful experience to work with a talented
group of associates in building a Company that today enjoys a strong market and
financial base, a global presence, and a promising outlook".
The Company's Board of Directors has selected Carl G. Anderson, Jr., currently a
director and Vice Chairman and General Manager, Critical Care Business of the
Company, as Chairman Elect to succeed Mr. Miller as Chairman and Chief Executive
Officer effective on September 1, 2003. Mr. Miller will continue his association
with the Company as Chairman Emeritus and a Director.
After discussing the Company's Mission Statement and overall strategy for future
growth, Mr. Miller introduced Carl G. Anderson, Jr., the Company's Chairman
Elect, to discuss the Company's critical care business. Mr. Anderson outlined
the core strengths of the business, key strategies for future growth and
discussed in detail product platforms that are expected to contribute to that
growth. Products featured in the presentation were central venous catheters
designed to reduce infection, catheters for regional anesthesia, chronic
hemodialysis catheters, neonatal catheters and the reintroduction of a
significantly improved HemoSonic(TM) 200 non-invasive hemodynamic monitoring
system.
Mr. Anderson also announced that the Company will purchase on July 1, 2003 the
Arrow International distribution business of its Florida-based distributor, IMA,
Inc. Following this transaction, the Company's direct sales activity will cover
90% of the US market. This consolidation of sales activity in the Florida market
has been in the planning stage for some time and is not expected to have a
material impact on the Company's fourth quarter fiscal year 2003 financial
results.
Philip B. Fleck, the Company's President and Chief Operating Officer, reviewed
the Company's global manufacturing strategy and capability with comments about
the role of each major facility. Mr. Fleck, with overall responsibility for the
Company's cardiac care business, also reviewed the Company's strategy for this
business segment and the current status of its LionHeart(TM) and CorAide(TM)
ventricular assist research programs.
Approval to sell the Arrow LionHeart(TM) in Europe, with the required CE mark,
is expected within the next few weeks. TUV Product Services of Munich (TUV),
Germany, the Company's European Notified Body, appears to have nearly completed
its review of the LionHeart(TM) application and the Company believes TUV is
satisfied with the content of this application. In the US, the Hershey Medical
Center of Pennsylvania State University implanted a LionHeart(TM) on May 14,
2003 in a 35 year-old male patient. This patient has experienced a good recovery
from surgery and is scheduled for discharge to his home this week.
The first human implant of a CorAide(TM) continuous flow ventricular assist
system took place in Germany on May 8, 2003. As previously announced, the
patient experienced unexpected elevated levels of plasma-free hemoglobin and the
device was replaced with another bridge device pending the availability of a
donor heart.
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Subsequent analysis and testing of this device, together with small
modifications to it, have provided insight into the probable causes responsible
for the elevated level of hemolysis (plasma-free hemoglobin). Although there can
be no assurance that said modifications will reduce hemolysis, the Company
believes it should be in a position to resume human tests of the CorAide(TM)
device in the near future.
Carl N. Botterbusch, Vice President and General Manager Cardiac Assist Division,
reviewed the value and theory of intra-aortic balloon pumping therapy and
presented the key attributes of the Company's new technology for balloon
pumping, the AutoCAT(TM) 2 WAVE(TM). This ground-breaking technology, which
utilizes fiber optic pressure sensing and features total automation of the
pumping process, is expected to provide the opportunity for the Company to
expand its share of the worldwide balloon pumping market.
Frederick J. Hirt, the Company's Vice President Finance and Chief Financial
Officer, reviewed the Company's third quarter and nine months fiscal year 2003
financial performance and presented the Company's current projections for the
fourth quarter as set forth above. Mr. Hirt also reviewed the estimated cash
flow for fiscal year 2003 compared with the previous fiscal year and pointed out
the strong cash generating capability of the Company and the opportunity that
this provides for future investment. Net cash provided by operating activities
for the nine months ended May 31, 2003 was estimated to be $63.3 million
compared to $56.1 million for the nine months ended May 31, 2002.
In March 1999, the Company began open market purchases of its common stock
pursuant to its previously announced program to repurchase up to 1 million
shares of its common stock. In April 2000, the Company announced that it would
repurchase up to another 1 million shares of its stock under this program, for a
total of 2 million. As of May 31, 2003, the Company had purchased a total of
1,801,800 shares under this program, which remains in effect.
Arrow International, Inc. develops, manufactures and markets a broad range of
clinically advanced, disposable catheters and related products for critical and
cardiac care. The Company's products are used primarily by anesthesiologists,
critical care specialists, surgeons, emergency and trauma physicians,
cardiologists, interventional radiologists, electrophysiologists, and other
health care providers.
Arrow International's news releases and other company information can be found
on the World Wide Web at HTTP://WWW.ARROWINTL.COM.
The Company's common stock trades on The Nasdaq Stock Market(R) under the symbol
ARRO.
* * * * * * *
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: This news release provides historical information and includes
forward-looking statements (including projections). Although the Company
believes that the expectations in such forward-looking statements are
reasonable, the Company can give no assurance that such expectations will prove
to have been correct. The forward-looking statements are based upon a number of
assumptions and estimates that, while presented with specificity and considered
reasonable by the Company, are inherently subject to significant business,
economic and competitive risks, uncertainties and contingencies which are beyond
the control of the Company, and upon assumptions with respect to future business
decisions which are subject to change. Accordingly, the forward-looking
statements are only an estimate, and actual results will vary from the
forward-looking statements, and these variations may be material. Consequently,
the inclusion of the forward-looking statements should not be regarded as a
representation by the Company of results that actually will be achieved.
Forward-looking statements are necessarily speculative in nature, and it is
usually the case that one or more of the assumptions in the forward-looking
statements do not materialize. Investors are cautioned not to place undue
reliance on the forward-looking statements. In connection with the "Safe Harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the Company
cautions the reader that the factors below and those in Exhibit 99.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2002
and in its other filings with the Securities and Exchange Commission could cause
the Company's results to differ materially from those stated in the
forward-looking
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statements. These factors include: (i) stringent regulation of the Company's
products by the U.S. Food and Drug Administration and, in some jurisdictions, by
state, local and foreign governmental authorities; (ii) the highly competitive
market for medical devices and the rapid pace of product development and
technological change in this market; (iii) pressures imposed by the health care
industry to reduce the cost or usage of medical products and services; (iv)
dependence on patents and proprietary rights to protect the Company's trade
secrets and technology, and the need for litigation to enforce or defend these
rights; (v) risks associated with the Company's international operations; (vi)
potential product liability risks inherent in the design, manufacture and
marketing of medical devices; (vii) risks associated with the Company's use of
derivative financial instruments; and (viii) dependence on the continued service
of key members of the Company's management.
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Arrow International, Inc.
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
May 31, May 31, May 31, May 31,
Consolidated Statements of Income Data: 2003 2002 2003 2002
---------------------- -------------- -------------- --------------
Net sales $ 96,949 $ 86,712 $ 278,545 $ 256,740
Cost of goods sold 47,756 43,378 140,170 125,331
---------------------- -------------- -------------- --------------
Gross profit 49,193 43,334 138,375 131,409
Operating expenses:
Research, development and engineering 6,329 6,854 18,810 19,973
Selling, general and administrative 22,649 19,611 64,570 57,464
---------------------- -------------- -------------- --------------
Total operating expenses 28,978 26,465 83,380 77,437
Operating income 20,215 16,869 54,995 53,972
Interest, net 54 37 109 393
Other (income) expenses, net (1,211) (62) (1,060) 217
---------------------- -------------- -------------- --------------
Income before income taxes 21,372 16,894 55,946 53,362
Provision for income taxes 6,946 5,491 18,182 17,343
---------------------- -------------- -------------- --------------
Net income $ 14,426 $ 11,403 $ 37,764 $ 36,019
====================== ============== ============== ==============
Basic earnings per common share $.67 $.52 $1.74 $1.65
==== ==== ===== =====
Diluted earnings per common share $.66 $.51 $1.73 $1.63
==== ==== ===== =====
Weighted average shares used in computing
basic earnings per common share 21,616 21,928 21,723 21,894
Weighted average shares used in computing
diluted earnings per common share 21,834 22,222 21,881 22,106
May 31,
CONSOLIDATED BALANCE SHEET: 2003
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ASSETS
$ Cash $ 29,605
Receivables (net) 80,184
Inventories 92,962
Prepaid expenses and other 32,806
--------------
Total current assets 235,557
Property, plant and equipment (net) 133,570
Other assets 90,881
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Total assets $ 460,008
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 15,952
Other current liabilities 34,690
Current maturities of long-term debt 300
Long-term debt 4,000
Other liabilities 18,117
--------------
Total liabilities 73,059
Total shareholders' equity 386,949
--------------
Total liabilities and shareholders' equity $ 460,008
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