ALARIS Medical Systems Reports Full Year and Fourth Quarter 2003 Results.Business Editors/Health/Medical Writers SAN DIEGO--(BUSINESS WIRE)--March 4, 2004 Sales for 2003 Grow 16%; Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. Increases 38%; Fourth Quarter Earnings Per Share of $.20 Exceed Expectations ALARIS Alaris is the brand name of the regional rail network run by the Spanish national rail company RENFE that connects the major cities of Madrid and Valencia. Alaris services currently use ETR 490 trainsets. Medical Systems, Inc. (NYSE NYSE See: New York Stock Exchange :AMI), developer of products for the safe delivery of intravenous intravenous /in·tra·ve·nous/ (-ve´nus) within a vein or veins.intrave´nously in·tra·ve·nous adj. Abbr. IV Within or administered into a vein. (IV) medications, today reported that sales for the year ended December December: see month. 31, 2003 increased 16% to $533.9 million, compared with $460.3 million for 2002. Income from operations increased 38% to $98.8 million, compared with $71.7 million for the year ended December 31, 2002. In addition, the Company reported that fourth quarter sales increased 15% to $154.5 million, compared with $134.4 million for the fourth quarter of 2002. For the quarter, the Company reported net income of $14.9 million, or $.20 per share, compared with net income of $4.2 million, or $.07 per share, for the fourth quarter of 2002. The Company's mid-year 2003 recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. resulted in $67.7 million of charges ($41.4 million net of tax) in the first half of the year. As a result, the Company reported a net loss of $7.5 million, or $.11 per share, for 2003. Excluding the recapitalization expenses, earnings per share would have been $.48 for the year ended December 31, 2003, compared with $.13 per share for the previous year. As has been previously reported, the recapitalization lowered the Company's total debt by more than 20%, lowered its average annual interest rate from over 11% to under 6% and lowered its interest expense from $57 million to $24 million per year. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, had the recapitalization occurred on January January: see month. 1, 2003, and excluding the recapitalization expenses, net income for the year ended December 31, 2003 would have been $43.8 million and net income per common share, on a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, would have been $.58. (See "Supplemental Schedule Reconciling GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Data to Pro Forma Non-GAAP Data" at the end of this release for the reconciliation of net loss and net loss per common share to this pro forma data, which are non-GAAP financial measures, as well as a discussion of the reasons that management believes such information as presented above is useful for investors.) David L. Schlotterbeck, president and chief executive officer, said, "The final results of our strong finish for 2003 were somewhat better than we indicated in our press release on January 14, 2004. I am pleased that our positive momentum is continuing." Schlotterbeck also commented, "The FDA's final bar code rule for unit dose packaging, released last week, dovetails perfectly with the capabilities of our market-leading Medley med·ley n. pl. med·leys 1. An often jumbled assortment; a mixture: "That night he dreamed he was traveling in a foreign country, only it seemed to be a medley of all the countries he'd ever been to and (TM) Medication medication /med·i·ca·tion/ (med?i-ka´shun) 1. medicine (1). 2. impregnation with a medicine. 3. administration of a medicine or other remedy. Safety System, recognized as the preferred solution for reducing intravenous medication delivery errors. The Medley(TM) System's ability to use bar code technology in the ALARIS Medical Systems/McKesson joint product is already operational in a hospital setting. As more pharmaceutical companies update their medication packaging with bar codes in response to the FDA's recent action, ALARIS Medical Systems' suite of medication safety products will be at the bedside to read this information. We see the integration of bar code technology and our `smart' infusion INFUSION, med. jur. A pharmaceutical operation, which consists in pouring a hot or cold fluid upon a substance, whose medical properties it is desired to extract. Infusion is also used for the product of this operation. Although infusion differs from decoction, (q.v. systems as the opportunity to build a completely integrated system to help prevent harm from medication errors medication error Malpractice An error in the type of medication administered or dosage. See Adverse effect, Error. . This holds the potential to save hospitals, patients and health care insurers billions of dollars annually. Additionally, we expect that our own integrated bar The process of organizing the attorneys of a state into an association, membership in which is a condition precedent to the right to practice law. Integration is usually attained by enactment of a statute that grants authority to the highest court of the state to integrate code reader for our Medley(TM) System that reads all types of bar codes will be in the market well ahead of the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. rule implementation." Schlotterbeck added, "Once again, ALARIS Medical Systems has delivered products that anticipate new medication safety requirements. In the area of IV medication safety, our products continue to be recognized as the `gold standard' against which competitive product offerings are compared." Full Year 2003 Results Sales. For the year ended December 31, 2003, sales were $533.9 million, an increase of $73.5 million, or 16%, over the prior year. If currency exchange rates for the year ended December 31, 2003 had prevailed during 2002, sales would have been $482.8 million for the year ended December 31, 2002. Thus, the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. effect of currency changes on revenues in 2003 was $22.5 million. Higher volumes of both drug infusion instruments and disposable disposable Nursing adjective Referring to that which is discarded or disposed of noun An item used in health care-related Pt contact which is discarded after use–eg masks, gloves, gowns, needles, paper products, syringes, wipes. See Biohazardous waste. administration sets were the primary factors leading to the increase in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. sales of $46.8 million, or 15%, over the prior year. The increase in infusion instruments was primarily due to sales of the Medley(TM) Medication Safety System and our proprietary Guardrails(R) Safety Software. Revenues from professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. , most frequently sold with our safety products, increased $2.5 million over the prior year as a result of the growth in sales of Medley(TM) Systems and Guardrails(R) Software. We believe that the increase in dedicated disposables was due to an increase in our installed base of infusion devices infusion device Therapeutics A device used to administer therapeutics–eg, analgesics, antimicrobials, blood products, chemotherapy, nutrients. See Elastomeric infusion device, Electronic syringe infusion device, Mechanical infusion pump, Minibag. . The growth in other disposables was due to an increase of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $10.7 million in sales of SmartSite(R) Needle-Free Systems. The increase in sales of drug infusion products in North America was partially offset by lower volumes of patient monitoring instruments and associated disposables compared with the prior year. International sales for the year ended December 31, 2003 increased $26.7 million, or 19%, compared with the prior year. This increase was due to strong growth in dedicated disposable administration sets, as well as higher volumes of large volume pumps, SmartSite(R) Needle-Free Systems and services compared with the same period in the prior year. If currency exchange rates for the year ended December 31, 2003 had prevailed during 2002, International sales would have been $163.5 million for the year ended December 31, 2002. Thus, the favorable effect of currency changes on International sales for the year ended December 31, 2003 was $20.9 million. Gross Profit. Gross profit increased $57.7 million, or 25%, for the year ended December 31, 2003, compared with 2002. The gross margin percentage increased to 53.4% for 2003, from 49.4% for 2002. If currency exchange rates for the year ended December 31, 2003 had prevailed during 2002, the gross margin percentage for the year ended December 31, 2002 would have been 50.3%. Our increased gross margin is primarily due to our sales growth and mix which included higher margin sales than in the prior year. The sales growth of our Medley(TM) Medication Safety System and Guardrails(R) Safety Software have greatly contributed to the increase in gross profit in 2003 over 2002, as software and its related post-contract support carry higher margins than equipment. Disposables also carry a higher margin than instruments, and our disposables growth during 2003 has had a positive impact on gross margin. Our sales performance of the International business in the current year is another contributing factor to our profit margin increase, as international products generally have higher gross margins than North America products. Product quality and manufacturing efficiencies have been a primary focus for us, and we see the results of our quality and manufacturing improvements in lower warranty An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party. Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. repair rates and overall lower warranty cost. Additionally, increased volumes have resulted in lower per-unit product costs. Inventory obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. costs were also lower in the current year than in 2002 as a result of improved inventory management and lower overall inventory levels. Selling and Marketing Expenses. Selling and marketing expenses increased $13.7 million, or 15%, for the year ended December 31, 2003, compared with 2002, primarily due to increased selling costs associated with higher sales volume in 2003 compared with the prior year and due to the launch of our international medication safety strategy in Fall 2003. In order to implement our safety strategy in markets outside of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , we made significant investments in developing our international selling and marketing functions during 2003. Both our North America and International business units experienced higher sales and marketing costs related to increased personnel, bonus expense, consulting and related activities supporting the continued deployment of our medication safety strategy which included the international market introduction of the Asena Asena is the name of a female wolf in Turkic mythology. It is associated with a Göktürk ethnogenic myth "full of shamanic symbolism".[1] The legend runs as follows. (TM) CC Syringe syringe /sy·ringe/ (si-rinj´) (sir´inj) an instrument for injecting liquids into or withdrawing them from any vessel or cavity. Pump with its proprietary Guardrails(R) Safety Software during the fourth quarter of 2003. As a percentage of sales, selling and marketing expenses remained constant at 19.2%. The unfavorable effect of currency changes on selling and marketing expenses was $4.3 million. General and Administrative Expenses. General and administrative expenses increased $7.1 million, or 17%, for the year ended December 31, 2003, compared with the same period in 2002. As a percentage of sales, general and administrative expenses increased to 9.1% for the year ended December 31, 2003 compared with 9.0% for 2002. The unfavorable effect of currency changes on general and administrative expenses was $1.6 million. Increases in administrative expenses were largely due to higher depreciation, legal and other professional services, insurance, intellectual property, and bonus expense over the prior year. Research and Development Expenses. Research and development expenses increased approximately $8.1 million, or 27%, for the year ended December 31, 2003, compared with the same period in 2002. The increase was due to spending associated with new product development primarily related to our medication safety strategy, including increased spending on new products for international markets. This higher spending was primarily in the form of additional personnel, bonus, benefits and outside consulting. The unfavorable effect of currency changes on research and development expenses was $.6 million. Research and development expenses increased to 7.2% of sales for the year ended December 31, 2003, compared with 6.6% of sales for 2002. We anticipate research and development expenses for the full year 2004 to be approximately 7% of sales. Restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and Other Non-Recurring Items. We recorded a non-recurring benefit of $1.1 million during the first quarter of 2002 for an insurance settlement. The settlement related to damages and losses incurred at one of our disposable products Disposable products are items that are not intended by the manufacturer to be reused more than once or a few times as compared to more permanent serviceable and reusable items. Some products that have disposable versions are:
Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. in 1993 as a result of flooding. The contingency contingency n. an event that might not occur. related to the insurance settlement was resolved in the first quarter of 2002, when we received proceeds of $1.0 million and notification of an additional payment due of $.1 million, which we received during April 2002. During the first quarter of 2002, we initiated a plan to restructure our Central European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. technical services. In connection with this plan, we recorded a charge of $.5 million which included $.4 million for severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs for 21 positions affected by the relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of our German operations and $.1 million related to lease termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. payments. As of December 31, 2003, all severance payments had been made to the identified employees and all lease termination payments had been made. Interest Income from Sales-Type Capital Leases. Interest income from sales-type capital leases decreased $1.1 million, or 26%, during 2003, compared with 2002 due to a decrease in the contract portfolio as more customers continue to utilize third party financing. Interest Income. Interest income decreased $.3 million, or 25%, due to lower interest rates earned and lower cash balances invested during 2003 compared with 2002. Interest Expense. Interest expense decreased $16.8 million, or 29%, for the year ended December 31, 2003, compared with 2002. Included in interest expense in the second half of 2003 is $1.5 million of debt-issue cost write-offs related to $60 million in prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. made under our new credit facility. The decrease in interest expense resulted from the recapitalization in the second quarter of 2003, which reduced the principal amount of outstanding debt, and lowered interest rates on debt under our new credit facility and our new 7-1/4% senior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes compared with the interest rates on the debt which was refinanced. Recapitalization Expenses. In connection with the recapitalization, we recorded a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge of $67.7 million ($41.4 million, net of tax) through June June: see month. of 2003. This charge includes premiums (representing the excess of tender offer purchase prices over principal amounts of purchased indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. ) and consent payments in connection with the tender offers and consent solicitations Consent Solicitation A solicitation by one party to the stakeholders of a particular security for the consent of a material change. Notes: Should the majority of stakeholders provide valid consent prior to the consent expiry date, the issuer may then follow through with of $55.4 million, the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of related unamortized debt issuance costs of $10.3 million and other related costs of $2.0 million. No recapitalization charges were recorded in the second half of 2003. Excluding this charge, for the year ended December 31, 2003, net income would have been $33.9 million and net income per common share, on a fully diluted basis, would have been $.48. On a pro forma basis, assuming the recapitalization had occurred on January 1, 2003, and excluding the charge relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc recapitalization expenses that we recorded in the first half of 2003, net income for the year ended December 31, 2003 would have been $43.8 million and net income per common share, on a fully diluted basis, would have been $.58. (We refer the reader to "Supplemental Schedule Reconciling GAAP Data to Pro Forma Non-GAAP Data" which follows the financial statements in this release for a reconciliation of net loss and net loss per common share to this pro forma data, which are non-GAAP financial measures, as well as a discussion of the reasons that management believes the presentation of such information is useful for investors.) Other, Net. Other, net expenses increased $1.1 million for the year ended December 31, 2003, compared with 2002 primarily due to higher costs incurred to settle hedges for which offsetting gains were reflected in operating income and costs to adjust foreign currency contracts for changes in hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. forecasted cash flows. Financial Position At December 31, 2003, ALARIS Medical Systems reported total debt of $358.8 million. This represents a $168.7 million reduction in total debt since December 31, 2002. Through the mid-year recapitalization of the Company, we raised $125 million by issuing 10 million shares of common stock, borrowed $420 million and used these proceeds and a majority of our cash on hand to completely retire our previous debt. In doing so, we lowered our annual average interest rate from over 11% to under 6%. In addition, during the second half of the year, we made six principal prepayments under our new credit facility of $10 million each and two scheduled quarterly principal payments of $0.6 million each. We also made a subsequent principal prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. of $10 million in January 2004. In February February: see month. 2004, Moody's Investors Service Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. upgraded our corporate bank debt which resulted in a reduction of our interest rate on the term loan B facility of 25 basis points, which will further reduce our interest payments in 2004 by approximately $0.4 million. Cash provided by operations was $142.0 million for the year ended December 31, 2003 compared with $51.6 million for 2002. The Company had a $30 million undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely credit line and $45.9 million in cash at December 31, 2003, compared with no credit line and $69.7 million in cash at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2002, with the decrease primarily the result of using cash on hand to complete the recapitalization and make subsequent principal reductions in the new term loan. Recent Key Developments: -- In February 2004, ALARIS signed a four-year mandatory Blanket blanket, sheet, usually of heavy woolen, or partly woolen, cloth, for use as a shawl, bed covering, or horse covering. The blanketmaking of primitive people is one of the finest remaining examples of early domestic artwork. Purchase Agreement (BPA BPA British Paediatric Association. ) with the Department of Veterans Affairs (VA) to provide the SmartSite(R) Needle-Free System to 50 states, the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). and Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. . The contract extends through Feb. 15, 2008. This contract continues the relationship between ALARIS Medical Systems and the VA for the SmartSite(R) Needle-Free products, which began in January 2000. -- In February 2004, we announced that our corporate bank debt was upgraded by Moody's Investors Service. As a result of the Moody's Moody's Corporation (NYSE: MCO) is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. upgrade and a December 2003 amendment to our credit agreement, the interest rate we pay on the Term Loan B facility was reduced by 25 basis points to LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). plus 2.25%. -- In December 2003, we announced that our enterprise-wide networked solution for the Medley(TM) Medication Safety System was going live on its first site at the Hospital of the University of Pennsylvania (body, education) University of Pennsylvania - The home of ENIAC and Machiavelli. http://upenn.edu/. Address: Philadelphia, PA, USA. (HUP HUP Hangup (Unix command) HUP Hospital of the University of Pennsylvania HUP Hungarian Unix Portal HUP Home Use Program HUP Heisenberg Uncertainty Principle HUP Hot Uniaxial Pressing HUP Heavy Utility Personnel ). The ALARIS(R) network links to an entire suite of products to create a new level of functionality for enterprise-wide IV medication safety solutions and provides real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. visibility into what is occurring at the point of care to users throughout the hospital. -- In December 2003, ALARIS Medical Systems and McKesson McKesson Corporation (NYSE: MCK) is a large United States-based corporation specializing in the distribution of health care systems, medical supplies and pharmaceutical products. Automation Inc. announced the first live beta site An organization or group that is beta testing hardware and/or software. See beta test. of their joint bar-coding solution for intravenous (IV) medication administrations at Ohio Valley General Hospital in Pittsburgh Pittsburgh (pĭts`bərg), city (1990 pop. 369,879), seat of Allegheny co., SW Pa., at the confluence of the Allegheny and the Monongahela rivers, which there form the Ohio River; inc. 1816. . The joint solution combines our Medley(TM) Medication Safety System and Guardrails(R) Safety Software with McKesson's Admin-Rx(TM) bar-code scanning scanning /scan·ning/ (skan´ing) 1. the act of examining by passing over an area or organ with a sensing device. 2. scanning speech. and communications technology Noun 1. communications technology - the activity of designing and constructing and maintaining communication systems engineering, technology - the practical application of science to commerce or industry , to enable caregivers to confirm medication orders and verify (1) To prove the correctness of data. (2) In data entry operations, to compare the keystrokes of a second operator with the data entered by the first operator to ensure that the data were typed in accurately. See validate. infusion parameters electronically. A handheld handheld: see personal digital assistant. device is used to scan bar codes from the caregiver care·giv·er n. 1. An individual, such as a physician, nurse, or social worker, who assists in the identification, prevention, or treatment of an illness or disability. 2. , patient, medication and infusion channel, all of which are captured instantly and compared with the physician's order. If there is an error in matching any of the information, the IV pump is designed to halt operation and signal the caregiver to review the data. -- In December 2003, ALARIS Medical Systems, Inc. received the Institute for Safe Medication Practices' (ISMP ISMP Institute for Safe Medication Practices ISMP InstallShield MultiPlatform ISMP International Society of Meeting Planners ISMP ISF (Information Strike Force) Service Management Plan ISMP Integrated Systems Management Processor ) award for its pioneering infusion pump infusion pump A device designed to deliver drugs and/or 'biologicals', at low doses and at a constant or controllable rate; ↑ rates of delivery in such devices may be associated with local hemolysis, compromising the potential benefits of a calibrated delivery technology which reduces the risk of errors associated with the administration of intravenous medications. These ISMP Awards honor As a verb, to accept a bill of exchange, or to pay a note, check, or accepted bill, at maturity. To pay or to accept and pay, or, where a credit so engages, to purchase or discount a draft complying with the terms of the draft. individuals, organizations, and companies that have set a superlative standard of excellence for others to follow in the prevention of medication errors. ISMP is a nonprofit organization Nonprofit Organization An association that is given tax-free status. Donations to a non-profit organization are often tax deductible as well. Notes: Examples of non-profit organizations are charities, hospitals and schools. well known around the world as the premier educational resource for the prevention of medication errors. ISMP provides independent, multidisciplinary mul·ti·dis·ci·pli·nar·y adj. Of, relating to, or making use of several disciplines at once: a multidisciplinary approach to teaching. , expert review of errors reported through the U.S. Pharmacopeia-ISMP Medication Errors Reporting Program. -- We signed a three-year agreement in December 2003 with one of the nation's leading healthcare group purchasing organizations, MAGNET, to provide the Medley(TM) Medication Safety System with its proprietary Guardrails(R) Safety Software suite of applications, also known as a "smart pump," to MAGNET's more than 775 acute care members. The contract extends through December 31, 2006. -- In November November: see month. 2003, ALARIS Medical Systems announced the Company-sponsored IV Medication Harm Index during its third invited conference held in San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. . The meeting, "Addressing Harm with High-Risk high-risk adjective Referring to an ↑ risk of suffering from a particular condition Infectious disease Referring to an ↑ risk for exposure to blood-borne pathogens, which occurs with blood bank technicians, dental professionals, dialysis unit Drug Administration," gathered a distinguished group of experts in medication safety to discuss IV medication errors, which pose a significant risk of patient harm. Developed by an industry-wide, multidisciplinary workgroup Two or more individuals who share files and databases. Local networks (LANs) are designed to provide electronic sharing of data within workgroups. In general, products designed for workgroups support approximately 50 people, whereas departmental devices support several hundred, and sponsored by ALARIS Medical Systems, the IV Medication Harm Index will help clinicians, researchers, and hospital administrators, for the first time, measure harm from averted a·vert tr.v. a·vert·ed, a·vert·ing, a·verts 1. To turn away: avert one's eyes. 2. IV medication errors, or "near misses." The innovative IV Medication Harm Index will be used to evaluate the averted harm using Smart pumps that are equipped with IV medication error-prevention software that helps to reduce medication errors by alerting clinicians when a dosage dosage /dos·age/ (do´saj) the determination and regulation of the size, frequency, and number of doses. dos·age n. 1. Administration of a therapeutic agent in prescribed amounts. calculation is wrong and is designed to intercept intercept in mathematical terms the points at which a curve cuts the two axes of a graph. serious human error in programming. Smart pumps also incorporate continuous quality improvement (CQI CQI Continuous Quality Improvement CQI Chartered Quality Institute (UK) CQI Clinical Quality Improvement CQI Channel Quality Indicator CQI Constant Quality Improvement CQI Canonical Query Language CQI Cost of Quality Improvement ) data to log all alerts, which allows a hospital to track programming errors, or "near misses," that have been averted and could have resulted in patient harm. Outlook For the full year 2004, we continue to forecast sales growth of 14% to 16% over the $533.9 million reported for the full year 2003. Our earnings per share forecast for 2004 remains approximately $.67 to $.71. For the first quarter of 2004, we continue to forecast sales growth of approximately 13% to 14% over the $121.2 million reported for the first quarter of 2003. The earnings per share forecast for the quarter remains $.13 to $.15 compared with earnings per share of $.04 for the first quarter of the prior year. About ALARIS Medical Systems, Inc. ALARIS Medical Systems, Inc. (NYSE:AMI) develops and markets products for the safe delivery of intravenous (IV) medications. Our IV medication and infusion therapy delivery systems, software applications, needle-free disposables and related monitoring equipment are marketed in the United States and internationally. Our "smart" pumps, with the proprietary Guardrails(R) Safety Software, help to reduce the risks and costs of medication errors, help to safeguard patients and clinicians and gather and record clinical information for review, analysis and interpretation. We provide our products, professional and technical support and training services to over 5,000 hospital and health care systems, as well as alternative care sites, in over 100 countries through our direct sales force and distributors. Headquartered in San Diego, California “San Diego” redirects here. For other uses, see San Diego (disambiguation). San Diego is a coastal Southern California city located in the southwestern corner of the continental United States. As of 2006, the city has a population of 1,256,951. , we employ approximately 3,000 people worldwide. Additional information on ALARIS Medical Systems can be found at http://www.alarismed.com. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as defined in the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Persons reading this release are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, the effect of legislative and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. changes affecting the health care industry, the historic seasonality of the Company's sales, the long sales cycle on large capital equipment sales in North America, the difficulty to precisely predict when hospital capital budgets will permit investment in capital equipment, the potential of increased levels of competition, technological changes, the dependence of ALARIS Medical Systems upon the success of new products (including its proprietary Guardrails(R) Safety Software, the Medley(TM) Medication Safety System and the Asena(TM) infusion platform) and ongoing research and development efforts including obtaining regulatory approvals, restrictions contained in the instruments governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the Company's indebtedness, and the significant leverage to which the Company is subject. These and other risk factors are described in the Securities and Exchange Commission filings of ALARIS Medical Systems, Inc., formerly known as ALARIS Medical, Inc., including Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Dec. 31, 2003, and other filings. On June 30, 2003, the two companies were merged. Subsequent SEC filings are available only for ALARIS Medical Systems, Inc. The Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments.
ALARIS MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollar and share amounts in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
(unaudited)
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2003 2002 2003 2002
--------- --------- --------- ---------
Sales $154,485 $134,350 $533,878 $460,333
Cost of sales 71,612 70,392 248,807 232,989
--------- --------- --------- ---------
Gross profit 82,873 63,958 285,071 227,344
--------- --------- --------- ---------
Selling and marketing expenses 27,196 23,537 102,257 88,562
General and administrative
expenses 13,529 11,288 48,758 41,660
Research and development
expenses 10,497 8,532 38,431 30,378
Restructuring and other non-
recurring items - - - (585)
--------- --------- --------- ---------
Total operating expenses 51,222 43,357 189,446 160,015
--------- --------- --------- ---------
Interest income from sales-
type capital leases 674 954 3,204 4,345
--------- --------- --------- ---------
Income from operations 32,325 21,555 98,829 71,674
--------- --------- --------- ---------
Other income (expenses):
Interest income 156 428 788 1,054
Interest expense (6,134) (14,717) (41,405) (58,240)
Recapitalization expenses - - (67,695) -
Other, net (1,412) (415) (2,195) (1,050)
--------- --------- --------- ---------
Total other expense (7,390) (14,704) (110,507) (58,236)
--------- --------- --------- ---------
Income (loss) before income
taxes 24,935 6,851 (11,678) 13,438
Provision for (benefit from)
income taxes 10,008 2,623 (4,205) 5,257
--------- --------- --------- ---------
Net income (loss) $14,927 $4,228 $(7,473) $8,181
========= ========= ========= =========
Net income (loss) per
common share, basic $.21 $.07 $(.11) $.14
========= ========= ========= =========
Net income (loss) per
common share, diluted $.20 $.07 $(.11) $.13
========= ========= ========= =========
Weighted average common shares
outstanding, basic 71,626 59,553 66,024 59,401
========= ========= ========= =========
Weighted average common shares
outstanding, diluted 75,925 62,990 66,024 62,369
========= ========= ========= =========
ALARIS MEDICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
(Dollar and share amounts in thousands, except per share data)
ASSETS
December 31,
-------------------
2003 2002
--------- ---------
Current assets:
Cash and cash equivalents $45,914 $69,739
Receivables, net 92,403 90,050
Inventories 52,149 56,924
Deferred tax assets, net, current 31,420 18,063
Prepaid expenses and other current assets 6,866 8,703
--------- ---------
Total current assets 228,752 243,479
Net investment in sales-type capital leases, less
current portion 9,219 16,050
Property, plant and equipment, net 69,897 56,448
Other non-current assets 37,256 35,666
Goodwill 143,984 143,984
Intangible assets, net 87,877 90,074
--------- ---------
$576,985 $585,701
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $2,450 $-
Accounts payable 22,760 19,187
Accrued expenses and other current liabilities 76,446 51,157
--------- ---------
Total current liabilities 101,656 70,344
--------- ---------
Long-term debt 356,325 527,468
Other non-current liabilities 27,221 20,038
--------- ---------
Total non-current liabilities 383,546 547,506
--------- ---------
Contingencies and litigation
Stockholders' equity:
Non-redeemable preferred stock, authorized 9,000
shares, issued and outstanding: none - -
Common stock, authorized 85,000 shares at $.01 par
value; issued 71,320 and 60,045 shares at December
31, 2003 and December 31, 2002, respectively 713 600
Capital in excess of par value 274,109 151,423
Accumulated deficit (184,880) (177,407)
Treasury stock, at cost, 453 shares issued at
December 31, 2002 - (2,027)
Accumulated other comprehensive income (loss) 1,841 (4,738)
--------- ---------
Total stockholders' equity 91,783 (32,149)
--------- ---------
$576,985 $585,701
========= =========
ALARIS MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year Ended
December 31,
------------------
2003 2002
--------- --------
Cash flows from operating activities:
Net (loss) income $(7,473) $8,181
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,465 23,958
Stock options granted to non-employees for
service - 100
Net loss on disposal/write-off of property,
plant and equipment and intangibles 1,056 709
Debt discount and issue costs amortization and
write-offs 3,672 2,662
Accretion of bond interest 8,921 18,210
Deferred tax (benefit) expense, continuing
operations (7,607) 746
Recapitalization expenses 67,695 -
(Increase) decrease in assets:
Receivables, net (22) (18,011)
Inventories 5,090 13,413
Prepaid expenses and other current assets 1,892 (3,336)
Net investment in sales-type capital leases,
non-current portion 6,831 8,175
Other non-current assets 324 (655)
Increase (decrease) in liabilities:
Accounts payable 4,635 (6,276)
Accrued expenses and other current
liabilities 23,134 (2,770)
Other non-current liabilities 7,183 6,523
--------- --------
Net cash provided by operating activities 141,796 51,629
--------- --------
Cash flows from investing activities:
Capital expenditures (34,160) (18,225)
Patents, trademarks and other (9,348) (1,475)
Proceeds from disposal of property, plant and
equipment 47 86
--------- --------
Net cash used in investing activities (43,461) (19,614)
--------- --------
Cash flows from financing activities:
Repurchase of debt and related costs (591,839) -
Principal payments on long-term debt (61,225) (15,969)
Proceeds from term loan borrowing 245,000 -
Proceeds from issuance of long-term debt 175,000 -
Proceeds from exercise of stock options 4,497 1,863
Proceeds from sale of common stock 125,000 -
Equity issuance costs (7,459) -
Debt issuance costs (12,145) -
--------- --------
Net cash used in financing activities (123,171) (14,106)
--------- --------
Effect of exchange rate changes on cash 1,011 630
--------- --------
Net (decrease) increase in cash (23,825) 18,539
Cash and cash equivalents at beginning of period 69,739 51,200
--------- --------
Cash and cash equivalents at end of period $45,914 $69,739
========= ========
ALARIS MEDICAL SYSTEMS, INC.
SCHEDULE OF SUPPLEMENTAL FINANCIAL DATA
(Dollars in millions)
Sales data:
Three Months Year Ended
Ended Percent December 31, Percent
December 31, Change Change
--------------- ---------------
2003 2002 2003 2002
------- ------- ------- ------- ------- -------
North America
Infusion Instruments $35.5 $30.7 16% $103.8 $79.8 30%
Dedicated Disposables 39.9 35.8 11% 150.5 139.1 8%
Other Disposables 19.1 15.5 23% 68.6 58.2 18%
Service and other 5.0 3.8 32% 16.9 14.4 17%
------- ------- ------- -------
Subtotal 99.5 85.8 16% 339.8 291.5 17%
Patient Monitoring 6.8 7.0 (3%) 24.7 26.2 (6%)
------- ------- ------- -------
North America Total $106.3 $92.8 15% $364.5 $317.7 15%
------- ------- ------- -------
International
Infusion Instruments $13.6 $14.3 (5%) $47.5 $44.1 8%
Dedicated Disposables 25.5 20.2 26% 90.0 73.2 23%
Other Disposables 4.1 3.0 37% 14.7 10.5 40%
Service and other 3.6 2.7 33% 12.1 9.3 30%
------- ------- ------- -------
Subtotal 46.8 40.2 16% 164.3 137.1 20%
Patient Monitoring 1.4 1.4 - 5.1 5.5 (7%)
------- ------- ------- -------
International Total $48.2 $41.6 16% $169.4 $142.6 19%
------- ------- ------- -------
ALARIS Medical Systems
Total $154.5 $134.4 15% $533.9 $460.3 16%
======= ======= ======= =======
ALARIS MEDICAL SYSTEMS, INC.
SUPPLEMENTAL SCHEDULE
RECONCILING GAAP DATA TO PRO FORMA NON-GAAP DATA
(Dollar and share amounts in thousands, except per share data)
The following table sets forth a reconciliation of our reported
net loss and net loss per common share for the year ended December 31,
2003 to our net income and net income per share on a pro forma basis
as if the recapitalization had occurred on January 1, 2003, which pro
forma amounts are non-GAAP financial measures. The pro forma data
exclude the effect of the pre-tax charges of $67.7 million and the
related tax effects we recorded in the first half of 2003.
The pro forma data assume that the following transactions occurred
on January 1, 2003: (i) the sale of 10 million shares of common stock;
(ii) the sale of $175 million aggregate principal amount of our new
7-1/4% senior subordinated notes; (iii) borrowings of a $245 million
term loan under our credit facility at an annual interest rate of
4.05%; (iv) the repurchase of all of our outstanding indebtedness
pursuant to tender offers; and (v) other debt repurchases made in the
first half of 2003.
The pro forma data is being presented to give management and
investors an enhanced understanding of the effect of the
recapitalization on our operating results. Management believes that
the significant reduction in future interest expense resulting from
the recapitalization is material to an understanding of our business
and will have a significant impact on cash flow and earnings. We have
excluded the effect of the recapitalization expenses from the pro
forma data because such expenses will not have a continuing impact on
the Company. The pro forma data are not necessarily indicative of the
results of operations that would have been achieved had the
transactions reflected therein been consummated prior to the period
presented.
Year Ended
December 31, 2003
--------------------
Net loss, as reported $(7,473)
Adjustments to exclude recapitalization expenses:
Recapitalization expenses 67,695
Income tax benefit (26,279)
--------------------
Net income, excluding recapitalization expenses 33,943
Pro forma adjustments:
Interest expense 15,992
Other, net (75)
Provision for taxes (6,020)
--------------------
Net income, pro forma $43,840
====================
Net loss per common share, diluted, as reported $(.11)
====================
Net income per common share, diluted, excluding
recapitalization expenses $.48
====================
Net income per common share, diluted, pro forma $.58
====================
Weighted average common shares outstanding, as
reported 66,024
Dilutive potential common shares 4,375
--------------------
Weighted average common shares outstanding,
diluted, assuming net income for period 70,399
Pro forma adjustment:
Weighted average effect of sale of common stock 4,850
--------------------
Weighted average common shares
outstanding, diluted, pro forma 75,249
====================
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