EXHIBIT 99.1
For Immediate Release Contact: Carl G. Anderson, Jr. Frederick J. Hirt
January 10, 2005 610-478-3171 610-478-3117
ARROW INTERNATIONAL, INC. ANNOUNCES ACCELERATION OF TIMING FOR NEOCARE(R)
INTEGRATION AND REPORTS MINOR ADJUSTMENTS TO FIRST QUARTER FISCAL YEAR 2005
SALES AND NET INCOME
READING, PA, January 10, 2005 - Arrow International, Inc. announced today that
the Company has decided to accelerate the integration of its NEOCARE(R)
manufacturing operations into its existing manufacturing structure. This is part
oF its previously announced plans to rationalize its global manufacturing and
logistics operations. In order to facilitate this integration of NEOCARE(R),
and to address each of the inspectional observations of the U.S. Food & Drug
Administration (FDA), the Company has also decided to temporarily cease the
manufacture, shipment, and sales of the NEOCARE(R) product line, including all
of its NEOPICC(R) 1.9 FR Peripherally Inserted Central Catheters (the "NeoPICC
Catheters"). Shipments of the NEOCARE(R) line, other than the NeoPICC
Catheters, are expected to resume within the next three to four months and
shipments of the NeoPICC Catheters will resume after receipt of FDA clearance of
a new pre-market notification ("510k") for these catheters. As described below,
the Company estimates this decision will not have a material impact on the
earnings target ranges for fiscal year 2005.
In the Form 10-Q filed today for the first quarter of fiscal 2005 which ended
November 30, 2004, the Company recorded a charge against net sales of $500,000,
or $0.01 per diluted earnings per share, representing its issued sales credits
as of January 7, 2005 and an estimate for those sales credits yet to be issued
relating to returned NeoPICC Catheters. As a result of today's $500,000
adjustment for estimated sales credits relating to returned NeoPICC Catheters,
previously reported net sales of $113.2 million for the fiscal quarter ended
November 30, 2004, were reduced to $112.7 million, an increase of 9.3%, or $9.6
million, versus its prior fiscal year first quarter. Net income for the quarter
was adjusted from the previously reported $13.6 million to $13.3 million,
compared to $14.4 million in the first quarter of fiscal year 2004. Previously
reported diluted earnings per share of $0.31 were adjusted to $0.30 compared to
$0.33 in the first fiscal quarter of 2004.
On December 3, 2004, the Company announced that, after consulting with the FDA,
it was voluntarily initiating a nationwide recall of its NeoPICC Catheters as a
result of having received several reports of adverse events involving the
utilization of the NeoPICC Catheters. The NeoPICC Catheter is part of the
Company's NEOCARE product line of catheters and related procedure kits for
neonatal intensive care that it acquired from Klein Baker Medical, Inc. in March
2003. The Company is cooperating with the FDA in conducting the voluntary
recall. Following the recall, the FDA inspected the Company's corporate
headquarters and the facility where the NeoPICC Catheters were manufactured and
provided the Company with a list of inspectional observations. The Company is
reviewing these observations and how best to address them.
The Company has sent recall notices to approximately 800 hospitals and 16
dealers, but is unable at the present time to determine the precise number of
NeoPICC Catheters that will be returned by customers in response to this
voluntary recall or the potential effect the recall may have on its business or
future results of operations. The Company's fiscal 2004 NEOCARE(R) product line
sales were $7,646,000. Inventories of NeoPICC Catheters at November 30, 2004
amounted to $172,000 which the Company had fully reserved for in the first
quarter results of fiscal 2005, previously reported on December 20, 2004.
Inventories of other NEOCARE(R) products, for which manufacture and sale has
been temporarily ceased today, were approximately $1,509,000 at November 30,
2004.
Adjusting for certain special items, as described below, net income was $15.2
million compared to $14.4 million in the prior fiscal year quarter, an increase
of 5.6%, and diluted earnings per share were $0.34 compared to $0.33 diluted
earnings per share in the prior fiscal year period when adjusted for the special
items.
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Attached to this release is reconciliation to Generally Accepted Accounting
Principles, or GAAP, that presents the components of the items excluded in
determining the Company's income before tax, net income and diluted earnings per
share amounts. The following three paragraphs discuss these excluded items.
(1) In the first quarter of fiscal year 2005, the Company incurred
research and development expenses of $1.0 million, or $0.01 diluted
earnings per share, for development of the second generation power
system and controller for the Arrow LionHeart(TM), the Company's fully
implantable Left Ventricular Assist System (LVAS). The Company's
remaining investment in the LionHeart(TM) includes $3.0 million of
components and open purchase commitments usable with either the first or
second generation electronics and $2.3 million in manufacturing
equipment.
(2) In August 2004, the Company initiated the consolidation of its
operations at its Winston-Salem, NC and San Antonio, TX facilities into
existing manufacturing facilities. In November 2004, the Company decided
to move its European Distribution Center. These steps are part of the
overall manufacturing realignment and capacity increases announced in
June 2004. As a result, the Company has accrued $0.4 million, or $0.01
per diluted earnings per share, which primarily consists of severance
payments in the first quarter of fiscal year 2005.
(3) Excludes $1.5 million, or $0.02 diluted earnings per share, for the
step-up of inventory purchased from AB Medica S.p.A., which was
recognized in the first quarter of fiscal year 2005 as additional cost
of sales.
FISCAL YEAR 2005 TARGETS:
The Company today is reconfirming its previously announced sales and earnings
targets for the second fiscal quarter 2005 and full fiscal year 2005. The
Company fully expects to offset the reduction in sales from the NeoPICC returns
and the temporary cessation of manufacture and sales of the NeoPICC product line
with additional sales of other products and through cost saving initiatives,
such as the voluntary early retirement program.
COMPANY INFORMATION:
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:
"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, among others, the factors below,
which are discussed in the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 2004 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.
RESULTS OF OPERATIONS
RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
NOVEMBER 30, 2004
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
QUARTER ENDED 11/30/04
SECOND
INVENTORY GENERATION
AS REPORTED STEP-UP R&D RESTRUCTURING AS ADJUSTED
Gross Profit $56,420 $1,467 - - $57,887
Income Before Taxes $19,679 $1,467 $994 $391 $22,531
Net Income $13,283 $990 $671 $264 $15,208
Diluted Earnings Per
Share $0.30 $0.02 $0.01 $0.01 $0.34
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ARROW INTERNATIONAL, INC.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
November 30,
CONSOLIDATED STATEMENTS OF OPERATIONS: 2004 2003
------------ -----------
Net sales $ 112,725 $ 103,101
Cost of goods sold 56,305 48,903
------------ -----------
Gross profit 56,420 54,198
Operating expenses:
Research and development 7,919 6,844
Selling, general and administration 28,722 25,738
Restructuring Charges 391 -
------------ -----------
Total operating expenses 37,032 32,582
Operating income 19,388 21,616
Interest, net (125) 109
Other (income) expenses, net (166) 139
------------ -----------
Income before income taxes 19,679 21,368
Provision for income taxes 6,396 6,944
------------ -----------
Net income $ 13,283 $ 14,424
============ ===========
Basic earnings per common share $0.30 $0.33
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Diluted earnings per common share $0.30 $0.33
===== =====
Weighted average shares used in
computing basic earnings
per common share 43,836 43,344
Weighted average shares used in
computing diluted earnings
per common share 44,526 43,983
CONSOLIDATED CONDENSED BALANCE SHEET: November 30, August 31,
2004 2004
------------ -----------
ASSETS
Cash $ 95,255 $ 94,176
Receivables (net) 88,981 83,918
Inventories 101,133 96,084
Prepaid expenses and other 19,027 15,898
------------ -----------
Total current assets 304,396 290,076
Property, plant and equipment (net) 142,071 136,978
Other assets 130,109 122,154
------------ -----------
Total assets $ 576,576 $ 549,208
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LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 27,873 $ 26,020
Other current liabilities 58,282 51,418
Current maturities of long-term debt 3,027 3,036
Other liabilities 22,524 22,403
------------ -----------
Total liabilities 111,706 102,877
Total shareholder's equity 464,870 446,331
------------ -----------
Total liabilities and shareholders' equity $ 576,576 $ 549,208
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