EXHIBIT 99.1
For Immediate Release Contact: Carl G. Anderson, Jr. Frederick J. Hirt
December 22, 2003 610-478-3171 610-478-3117
ARROW INTERNATIONAL REPORTS
FIRST QUARTER FISCAL YEAR 2004 SALES AND NET INCOME
READING, PA, December 22, 2003 - Arrow International, Inc. reported today that
net sales for the first quarter of fiscal 2004 increased to $103.1 million from
$88.8 million in the first quarter of fiscal year 2003, an increase of 16.1%.
Net income increased 26.3% to $14.4 million in the first quarter of fiscal year
2004 compared to $11.4 million in the same prior year period. Diluted earnings
per share in the quarter ended November 30, 2003 were $0.33 compared to $0.26 in
the first quarter of fiscal 2003 period, an increase of 26.9%.
The comparison of the first quarter of fiscal 2004 to first quarter fiscal 2003
gross profit, operating income, income before income taxes, net income and
earnings per share, reflected a return to more normal levels in contrast to the
prior year period which included the sale of lower-margin Arrow inventories
purchased as part of the Company's acquisition of the net assets of Stepic
Medical, the Company's former New York City distributor, on September 3, 2002.
The estimated impact of these lower-margin sales in the first quarter of fiscal
year 2003 reduced gross profit by approximately $1.6 million or $0.02 per
diluted share. Excluding this impact, net income and diluted earnings per share
in the first quarter of fiscal year 2004 would have increased by 15.2% and
17.9%, respectively. (See calculation below)
Sales of critical care products in the first quarter of fiscal 2004 increased
16.8% to $89.0 million from $76.2 million in the same period of fiscal 2003.
Sales of cardiac care products for the first quarter of fiscal 2004 increased
11.9% to $14.1 million from $12.6 million in the same period of last year.
SALES BY PRODUCT PLATFORMS Q1 04 Q1 03 %
(DOLLARS IN MILLIONS) ACTUAL ACTUAL GROWTH
Central Venous Catheters* $53.6 $42.7 26%
Specialty Catheters 32.3 30.4 6%
Stepic distributed products 3.1 3.1 0
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Subtotal Critical Care 89.0 76.2 17%
Cardiac Care 14.1 12.6 12%
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TOTAL $103.1 $88.8 16%
*Includes sales of Diatek and NEOCARE products of $3.3 million in the first
quarter of fiscal year 2004.
International sales (critical care and cardiac care) in the first quarter of
fiscal 2004 were $35.9 million compared to $29.3 million in the first quarter of
fiscal 2003 and represented 34.8% of total net sales. The relative weakness of
the U.S. dollar increased sales by $3.2 million in the first quarter of fiscal
2004.
Commenting on the Company's financial results for the first quarter of fiscal
year 2004, Carl G. Anderson, Jr., Arrow International's Chairman and Chief
Executive Officer, stated that "we are encouraged by the growth in central
venous catheter sales as we are focusing sales and marketing efforts on
continuing to build market share in our core businesses". The results exceeded
earlier projections for the quarter due to the favorable impact of foreign
exchange on sales and earnings. The core growth in sales for the quarter
compared to the prior year quarter was $7.8 million or 8.8%, which excludes the
impact of $3.2 million in foreign exchange and $3.3 million of sales of Diatek
and NEOCARE, companies acquired subsequent to November 2003. The core growth
rate was helped by the move from distributor to direct sales in Florida and
several southeastern states.
The Company is maintaining its previous projections for the balance of fiscal
year 2004 as shown in the following table. Sales are currently projected to
increase by 9% and earnings per share are projected at $1.35-$1.45, an increase
of 12% to 21% over fiscal year 2003, excluding the special charge, the charge to
research, development and engineering expense, and the interest income relating
to amended federal tax returns in the fourth quarter of fiscal year 2003.
Below are the Company's sales and earning targets for the second quarter and
full fiscal year 2004 along with some of the key assumptions underlying these
targets:
Q204E FY04E
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Net Sales $102-105M $410-420M
E.P.S. $0.31-.33 $1.35-1.45
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Assumptions:
1) Gross margin of 52% of sales for the year. Gross margin in Q2 of 52%.
2) Operating expenses of 29.5-30.5% of sales for the year.
3) Operating income averaging 21-22% of sales for the year, and 20% to 21%
of sales in Q2.
4) Effective tax rate of 32.5%.
5) E.P.S. using 44,000,000 shares of common stock outstanding.
6) R&D expenses of approximately 6.3% to 6.5% of sales for the year.
7) E = Estimate; M = Millions
Note: Q1 estimate was as follows:
Net Sales $97-101M
E.P.S. $0.30-.32
The Company has completed the settlement in two related patent infringement
lawsuits which, as previously disclosed, pertained to certain of the Company's
hemodialysis catheter products and will pay $8 million in settlement of these
claims, which was previously reserved in the fourth quarter of fiscal 2003, in
January 2004.
As previously announced, the Company received approval to CE mark the Arrow
LionHeart(TM) Left Ventricular Assist System (LVAS) on November 7, 2003 clearing
the way to market the device in Europe. In addition to expanding the base of
centers qualified to implant the device beyond those which participated in the
clinical trial, the near-term focus of the LionHeart(TM) program will be on
obtaining optimal clinical results and the evaluation of several product
enhancements currently under development. These enhancements, once completed,
are expected to increase the patient population for whom the device is suitable
and provide improved quality of life for recipients. Revenue generated from
initial sales of the Arrow LionHeart(TM) is expected to be offset by expanded
marketing and clinical support costs and will not contribute to earnings during
fiscal year 2004.
The tenth patient enrolled in the US LionHeart(TM) clinical trial continues to
recover as expected. The Jewish Hospital/University of Louisville team, led by
surgeons Laman Gray, M.D., Rob Dowling, M.D., and Steven Etoch, M.D., implanted
the LionHeart(TM) LVAS in a three-hour surgery on October 28, 2003. This patient
was implanted as part of a US Phase I human study of the LionHeart(TM), which
the Company expects to complete this fiscal year.
As previously reported, the Company is evaluating modifications to the
CorAide(TM) continuous flow ventricular assist device to resolve the causes for
the elevated level of hemolysis (plasma-free hemoglobin) experienced in the
first implant of the device. While there can be no assurance that these
modifications will resolve the problem, the Company believes that clinical
trials of the CorAide(TM) device should resume later this fiscal year.
The Company continued the limited sales release of the AutoCAT(R)2 WAVETM
intra-aortic balloon pump and associated LightWAVETM catheter system during its
first fiscal quarter. Full market release of this new technology in the US and
Europe is planned for the second fiscal quarter. The Company also released the
UltraFlexTM 7.5 Fr intra-aortic balloon catheter during its first fiscal
quarter. This catheter, the smallest intra-aortic balloon catheter on the
market, incorporates Arrow's proprietary tubing reinforcement technology to
prevent kinking. The Company expects the introduction of these new products to
help it increase its share of the worldwide balloon pumping market.
In March 1999, the Company began open market purchases of its common stock
pursuant to its previously announced program to repurchase up to 2 million
shares, after giving effect to its August 2003 two-for-one stock split, of its
common stock. In April 2000, the Company announced that it would repurchase up
to another 2 million post-split shares of its stock. As of November 30, 2003,
the Company had purchased a total of 3,603,600 shares under this program, which
remains in effect.
RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(In millions, except per share amounts)
Diluted Earnings
Net Income Per Share
------------- ----------------
Quarter ended November 30, 2002
As reported $11.4 $0.26
Estimated impact on gross profit
of inventories purchased as part
of Company's acquisition of the
net Assets of Stepic Medical,
net of related tax effects 1.1 0.02
----- -----
$12.5 $0.28
Quarter ended November 30, 2003:
As reported $14.4 $0.33
Percent increase 15.2% 17.9%
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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 NUMERICAL 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, WHICH ARE
DISCUSSED, IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
AUGUST 31, 2003 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 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
November 30,
CONSOLIDATED STATEMENTS OF OPERATIONS: 2003 2002
-------------- -------------
Net sales $ 103,101 $ 88,839
Cost of sales 48,903 45,395
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Gross profit 54,198 43,444
Operating expenses:
Research, development and engineering 6,844 6,072
Selling, general and administration 25,738 20,186
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Total operating expenses 32,582 26,258
Operating income 21,616 17,186
Interest, net 109 (53)
Other (income) expenses, net 139 330
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Income before income taxes 21,368 16,909
Provision for income taxes 6,944 5,495
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Net income $ 14,424 $ 11,414
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Basic earnings per common share $ 0.33 $ 0.26
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Diluted earnings per common share $ 0.33 $ 0.26
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Weighted average shares used in
computing basic earnings
per common share 43,344 43,722
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Weighted average shares used in
computing diluted earnings
per common share 43,983 43,879
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CONSOLIDATED CONDENSED BALANCE SHEET: November 30,
2003
--------------
ASSETS
Cash $ 62,948
Receivables (net) 87,218
Inventories 91,653
Prepaid expenses and other 26,245
--------------
Total current assets 268,064
Property, plant and equipment (net) 131,151
Other assets 120,531
--------------
Total assets $ 519,746
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LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 28,479
Other current liabilities 57,119
Current maturities of long-term debt 1,724
Long-term debt 2,000
Other liabilities 22,163
--------------
Total liabilities 111,485
Total shareholders' equity 408,261
--------------
Total liabilities and shareholders' equity $ 519,746
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