ALARIS Medical Systems Reports Second Quarter Results Sales Grow 18%; Income from Operations Increases 39%; Recapitalization Highlighted.Business Editors/Health/Medical Writers SAN DIEGO--(BUSINESS WIRE)--July 30, 2003 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. (AMEX AMEX See: American Stock Exchange :AMI) today reported that sales for the quarter ended June June: see month. 30, 2003 increased 18% to $127.8 million compared with $108.5 million for the same period in 2002. The increase in sales was at the high end of the company's increased guidance of 16% to 18% issued on June 30, 2003. Income from operations increased 39% to $22.3 million compared with $16.0 million for the second quarter of 2002. The company's previously announced 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 $66.2 million of charges ($40.5 million net of tax, or $.67 per share) in the quarter. As a result, ALARIS reported a net loss of $35.9 million, or $.59 per share for the second quarter of 2003. Excluding the recapitalization expenses, earnings per share would have been $.07 for the quarter, compared with $.02 per share for the second quarter of 2002. The company had previously forecasted second quarter earnings to be $.03 to $.05 per share, also exclusive of recapitalization charges. At the April 30, 2003 annual shareholders meeting, shareholders approved authorizing an additional 10,000,000 shares of common stock. The public sale of these additional 10,000,000 shares at $12.50 per share enabled the company to accomplish a complete recapitalization that also included the sale of $175 million aggregate principal amount of 7 1/4% senior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes due 2011, and tender offers to retire retire v. 1) to stop working at one's occupation. 2) to pay off a promissory note, and thus "retire" the loan. 3) for a jury to go into the jury room to decide on a verdict after all evidence, argument and jury instructions have been completed. all of the company's prior outstanding debt. The company also established a new credit facility providing for a six-year $245 million bank term loan and a five-year $30 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. Total net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the sales and the credit facility were $522.5 million and were used, in addition to $51 million of existing cash, to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. the existing debt of the company and pay related fees and expenses. The recapitalization, along with repurchases of debt during 2003, reduced the company's debt by $107 million, to $420 million, and reduces the company's projected annual interest expense by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $33 million when compared with its full year 2002 interest expense. The pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge of $66.2 million ($40.5 million net of tax) related primarily to the expenses to retire the previous debt and 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. 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, assuming the recapitalization had occurred on January January: see month. 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 we recorded in the second quarter of 2003, net income for the second quarter of 2003 would have been $9.5 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 $.13. Net income for the first half of 2003 would have been $17.9 million and net income per common share, on a fully diluted basis, would have been $.24. (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 income and net income 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.) David L. Schlotterbeck, president and chief executive officer, said, "I couldn't could·n't Contraction of could not. couldn't could not be more pleased with the second quarter results delivered by the ALARIS organization. While half of our senior team focused on delivering our operating results, the other half executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. our recapitalization. This group continues to demonstrate its versatility Versatility Franklin, Benjamin (1706–1790) American statesman, inventor, printer, author, scientist. [Am. Hist.: Benét, 366] George and breadth Breadth The percentage of assets or stocks advancing relative to those unchanged or declining. Also the number of independent forecasts available per year. A stock picker forecasting returns to 100 stocks every quarter exhibits a breadth of 400, assuming each forecast is ." Schlotterbeck continued, "I would like to thank the holders of ALARIS's debt and equity for making possible such a dramatic improvement in our business. As we fuel our continued growth through a stream of new products, our new capital structure allows us to steadily improve our credit characteristics by paying down our debt. ALARIS has entered a new chapter in its performance." Second Quarter 2003 Results Sales: For the three months ended June 30, 2003, sales were $127.8 million, an increase of $19.2 million, or 18%, over the same period in the prior year. If currency exchange rates for the second quarter of 2003 had prevailed during the second quarter of 2002, sales would have been $114.3 million for the second quarter of 2002. Thus, excluding the effects of currency changes, the increase in sales for the second quarter of 2003 was $13.5 million, or 12%, over the second quarter of 2002. Higher volumes of both drug 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. 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 $10.4 million, or 13%, over the prior year. The increase in infusion instruments was primarily due to sales of the 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 and our proprietary Guardrails(R) Safety Software. We believe the increase in sales of 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 increase in other disposables and service was due to approximately $2.2 million in additional sales of SmartSite(R) Needle-Free systems over the second quarter 2002. 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 second quarter of 2003 increased $8.9 million, or 29%, compared with the same period in the prior year. Excluding the effects of currency changes, International sales for the second quarter of 2003 increased 9% over the second quarter of 2002. This increase was due to higher volumes of, and revenues from, large volume pumps, syringe syringe /sy·ringe/ (si-rinj´) (sir´inj) an instrument for injecting liquids into or withdrawing them from any vessel or cavity. pumps, dedicated disposable administration sets, SmartSite(R) Needle-Free systems and service. For the six months ended June 30, 2003, sales were $248.9 million, an increase of $36.0 million, or 17%, over the same period in the prior year. If currency exchange rates for the six months ended June 30, 2003 had prevailed during the same period in 2002, sales would have been $224.4 million for the six months ended June 30, 2002. Thus, excluding the effects of currency changes, the increase in sales for the six months ended June 30, 2003 was $24.5 million, or 11%, over the same period in 2002. Gross Profit: Gross profit increased $14.5 million, or 27%, for the quarter ended June 30, 2003, compared with the same quarter in the prior year. The gross margin percentage increased to 53.7% for the second quarter of 2003, from 49.9% for the second quarter of 2002. Excluding the effects of currency changes, gross profit for the second quarter of 2003 would have increased $10.4 million from the second quarter of 2002 and the gross margin percentage for the second quarter of 2002 would have been 50.9%. In both North America and International, the improved margin percentage was due to increased volume of products manufactured and sold, an increased percentage of revenues from sales of software products that carry a higher margin than equipment and disposables, and generally lower product costs resulting from improved manufacturing efficiencies. Selling and Marketing Expenses: Selling and marketing expenses increased $4.5 million, or 21%, for the quarter ended June 30, 2003, compared with the same period in 2002, primarily due to increased selling costs associated with higher sales volume in the second quarter of 2003 compared with the second quarter of 2002 and to higher sales and marketing costs related to increased personnel, consulting and related activities supporting the continued deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of our medication safety strategy. As a percentage of sales, selling and marketing expenses increased to 20.0% for the second quarter of 2003 from 19.4% for the second quarter of 2002. Excluding the effects of currency changes, the increase in selling and marketing expenses for the second quarter of 2003 would have been $3.3 million, or 15%, compared with the second quarter of 2002. General and Administrative Expenses: General and administrative expenses increased $1.6 million, or 16%, for the quarter ended June 30, 2003, compared with the same period in the prior year. As a percentage of sales, general and administrative expenses decreased to 9.5% for the second quarter of 2003, from 9.7% for the second quarter of 2002. Excluding the effects of currency changes, the increase in general and administrative expenses for the second quarter of 2003 would have been $1.2 million, or 11%, compared with the second quarter of 2002. Increases in administrative expenses were largely due to higher depreciation, legal and other professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. , and medical insurance expense over the same period in the prior year. Research and Development Expenses: Research and development expenses increased approximately $1.9 million, or 25%, for the quarter ended June 30, 2003, compared with the same period in the prior year. 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 the international market. This higher spending was primarily in the form of increased salaries and benefits and outside consulting. Research and development expenses increased to 7.4% of sales for the second quarter of 2003, compared with 7.0% of sales for the second quarter of 2002. 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: In the first quarter of 2002, we recorded a non-recurring benefit of $1.1 million 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 Refers to various denial-of-service techniques that saturate a critical resource, leading either to system failure or to the exclusion of legitimate access. See e-mail bombing, Fraggle attack, smurf attack and SYN-flood attack. . 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 June 30, 2003, all severance payments had been made to the identified employees. Interest Income from Sales-Type Capital Leases: Interest income from sales-type capital leases decreased $.2 million, or 22%, for the quarter ended June 30, 2003, compared with the same quarter in 2002 due to a decrease in the contract portfolio as more customers have utilized third party financing. Interest Income: Interest income was constant for the quarter ended June 30, 2003, compared with the same quarter in 2002. While the average cash balance was higher than the same period in 2002, the yield earned on such balances was lower due to lower interest rates during the second quarter of 2003. Interest Expense: Interest expense decreased $.4 million, or 2%, for the quarter ended June 30, 2003, compared with the same period in the prior year, primarily as a result of the repurchase in February February: see month. 2003 of $25 million of Senior Discount Notes. Recapitalization Expenses: In connection with the recapitalization, we recorded a pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charge of $66.2 million ($40.5 million, net of tax, or $.67 per share) for the quarter ended June 30, 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 $54.3 million, the write-off of related unamortized debt issuance costs of $9.9 million and other related costs of $2.0 million. Excluding this charge, net income for the quarter would have been $4.6 million and net income per common share, on a fully diluted basis, would have been $.07. On a pro forma basis, assuming the recapitalization had occurred on January 1, 2003, and excluding the charge relating to recapitalization expenses that we recorded in the second quarter of 2003, net income for the three months ended June 30, 2003 would have been $9.5 million and net income per common share, on a fully diluted basis, would have been $.13. Net income for the first half of 2003 would have been $17.9 million and net income per common share, on a fully diluted basis, would have been $.24. (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 income and net income 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 $.9 million for the quarter ended June 30, 2003, compared with the same quarter in 2002 primarily due to higher charges incurred to settle foreign currency contracts and premium costs for currency option contracts. Financial Position At June 30, 2003, ALARIS Medical Systems reported long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. of $420.0 million (including current portion) and cash of $30.7 million. This represents a $107.4 million reduction in total since December December: see month. 31, 2002. In July July: see month. 2003, the company further reduced its total debt by making a $10 million 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 principal under its new term loan with the net proceeds received from the sale of the final 900,000 shares of common stock in the equity offering. Cash provided by operations was $57.1 million for the first half of 2003 compared with $17.5 million for the same period in 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 $30.7 million in cash on the balance sheet at June 30, 2003, compared with no credit line and $69.7 million 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 primary decrease a result of the on-hand cash used to complete our recapitalization. Recent Key Developments: -- The company announced the launch of its syringe module for the Medley(TM) Medication Safety System with its proprietary Guardrails(R) Safety Software. The Medley(TM) Syringe Module release is part of the third major enhancement to the expanding "smart" modular platform, which additionally includes software upgrades to the current system. These enhancements are available to current and new customers. The lightweight Use in English The word lightweight is conserderd one of the most insulting words in the English language. Is is the only word in the English language is every part of speech at the same time. One lightweight of note is Jason. Medley(TM) Syringe Module provides precision for the delivery of concentrated drugs and easily attaches to the Medley(TM) System, a modular point-of-care computer system that incorporates the Guardrails(R) Safety Software for safer medication delivery. With the addition of the Medley(TM) Syringe Module, ALARIS Medical Systems is the only provider of error-prevention software in a modular system that includes syringe delivery, large volume infusion therapy and monitoring in a single platform. The company is now providing the Guardrails(R) Software safety net to an expansive range of IV infusions covering Anesthesia anesthesia (ănĭsthē`zhə) [Gr.,=insensibility], loss of sensation, especially that of pain, induced by drugs, especially as a means of facilitating safe surgical procedures. , Pediatric pediatric /pe·di·at·ric/ (pe?de-at´rik) pertaining to the health of children. pe·di·at·ric adj. Of or relating to pediatrics. and Neonatal neonatal /neo·na·tal/ (ne?o-nat´'l) pertaining to the first four weeks after birth. ne·o·na·tal adj. Of or relating to the first 28 days of an infant's life. ICU ICU intensive care unit. ICU abbr. intensive care unit ICU see intensive care unit. ICU areas that rely heavily on syringe pump technology. -- The company announced that its SmartSite(R) Plus Needle-Free Valve valve, device for controlling the flow of fluids (liquids and gases). Valves vary in construction and size depending upon their function. Some are classified according to their method of operation or design, e.g. won the Gold Medical Design Excellence Award (MDEA MDEA 3,4-Methylenedioxy-N-Ethylamphetamine (empathogenic/psychedelic drug closely related to MDMA) MDEA Master Data Exchange Agreement MDEA Methyl Di-Ethyl Amine ). The Gold Award was announced during the Medical Design & Manufacturing Conference and Exposition exposition or exhibition, term frequently applied to an organized public fair or display of industrial and artistic productions, designed usually to promote trade and to reflect cultural progress. at the Jacob K. Javits Jacob Koppel "Jack" Javits (May 18, 1904 – March 7, 1986) was a liberal Republican New York politician originally allied with Governor Nelson A. Rockefeller, fellow U.S. Senators Irving Ives and Kenneth Keating, and Mayor John V. Lindsay. Convention Center in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . The SmartSite(R) Plus Needle-Free Valve, released in 2002, is the latest addition to the ALARIS(R) SmartSite(R) Needle-Free System line of products. The SmartSite(R) Plus Needle-Free Valve is designed to enhance the safety of patients and caregivers by providing passive, needle-free access to 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) systems, thereby helping to reduce the danger of accidental accidental /ac·ci·den·tal/ (ak?si-den´t'l) 1. occurring by chance, unexpectedly, or unintentionally. 2. nonessential; not innate or intrinsic. needlesticks. The SmartSite(R) Plus Needle-Free Valve is currently used in all professional health care environments including hospitals, home health care, critical care and emergency medicine for the delivery of fluids, medications, blood and blood products. -- On April 25, 2003, the ALARIS(R) Center for Medication Safety and Clinical Improvement hosted a one-day conference in San Diego Diego is a Spanish male name, derived from the Hebrew Yaʿqob (Jacob), the name of Saint James the Great, via Sant Yago, re-analysed as Santiago and SanDiego. to explore the various aspects of bar code medication administration. The invitation-only meeting gathered top experts and thought leaders in bar coding from around the nation to discuss the implementation of this new technology and its likely impact. -- At the BioFUSION 03 award ceremony on June 16, 2003, ALARIS Medical Systems was named the Medical Device Company of the Year. Sponsored jointly by the T Sector Publication and BIOCOM/San Diego, these annual awards recognize outstanding achievements for the 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. biotech bi·o·tech n. Informal Biotechnology. biotech Noun short for biotechnology Noun 1. community in a number of categories. -- During the second quarter, the company issued three joint press releases highlighting recent Medley(TM) Medication Safety System purchases by major institutions. Featured in the releases were Brigham and Women's Hospital Brigham and Women's Hospital (BWH) is a hospital in the Longwood Area of the Boston, Massachusetts neighborhood of Mission Hill. With Massachusetts General Hospital, it is one of the two founding members of Partners HealthCare. in Boston Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. , San Diego Children's Hospital A children's hospital is a hospital which offers its services exclusively to children. The number of children's hospitals proliferated in the 20th century, as pediatric medical and surgical specialties separated from internal medicine and adult surgical specialties. , and SHARP HealthCare Sharp HealthCare is a not-for-profit integrated regional health care delivery system located in San Diego. Sharp includes four acute care hospitals, three specialty hospitals, three affiliated medical groups and a health plan. of San Diego. Each has completed a "whole-house" implementation of this safety technology. Outlook We are delighted with the results of our recapitalization and look forward to continued improvements in our operating results as we continue to implement our medication safety strategy. For the third quarter of 2003, we are forecasting sales growth of approximately 16% over the $113.1 million reported for the same quarter last year. In constant currency the sales growth is forecasted at approximately 11%. Earnings per share for the third quarter are forecasted to be approximately $.10 to $.12. For the fourth quarter of 2003, we are forecasting sales growth of 13% to 14% over the $134.4 million (which was 20% over the fourth quarter of 2001) reported for the same quarter last year. In constant currency the sales growth is forecasted at 9% to 10%. Earnings per share for the fourth quarter are forecasted to be approximately $.17 to $.19. We have historically experienced seasonality in our sales with fourth quarter sales being greater than earlier quarters. This is primarily due to seasonal characteristics of the industry including hospital capital equipment purchasing patterns. We are forecasting that the fourth quarter of 2003 will continue to experience similar seasonality. For full year 2003, we are forecasting sales growth of approximately 15% to 16% (approximately 10% to 11% in constant currency) over 2002. Income from operations is currently forecasted to be 28% to 31% higher than the $71.7 million reported for full year 2002. Due to the large loss from the recapitalization activities during the second quarter, we are currently forecasting a net loss for the year, with a net loss per share of approximately $.16 to $.18. Excluding recapitalization expenses, full year 2003 earnings per share are forecasted to be $.42 to $.44. The actual loss per share for the six months ended June 30, 2003 was $.55. After excluding the recapitalization expenses, earnings per share would have been $.13 for such period. Adding the third and fourth quarter 2003 earnings per share guidance contained herein to the $.55 actual loss per share for the first half of 2003 will not equal the full year loss per share guidance. This is a result of a GAAP requirement to exclude common stock equivalents (such as stock options) from the weighted average shares during loss periods but to include such common stock equivalents during income periods. Since we are forecasting a net loss for full year 2003, common stock equivalents have not been included in computing computing - computer the forecasted loss per share. Looking beyond 2003, we continue to target sales growth of 10% - 13% per year in constant currency. Our objective is to grow 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. faster than sales and net income faster than operating income. We plan to continue to reduce our leverage, with a target of about $300 million of debt outstanding at year-end 2005. About ALARIS Medical Systems Inc. ALARIS Medical Systems Inc. develops practical solutions for medication safety. The company designs, manufactures and markets intravenous (IV) medication delivery and infusion therapy devices, needle-free disposables and related monitoring equipment in 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. and internationally. ALARIS Medical Systems' proprietary Guardrails(R) Safety Software, its other "smart" technologies and its "smart" services help to reduce the risks and costs of medication errors medication error Malpractice An error in the type of medication administered or dosage. See Adverse effect, Error. , help to safeguard patients and clinicians and also gather and record clinical information for review, analysis and transcription transcription /trans·crip·tion/ (-krip´shun) the synthesis of RNA using a DNA template catalyzed by RNA polymerase; the base sequences of the RNA and DNA are complementary. tran·scrip·tion n. . The company provides its products, professional and technical support and training services to over 5,000 hospital and health care systems, as well as alternative care sites, in more than 120 countries through its direct sales force and distributors. With headquarters in San Diego, ALARIS Medical Systems employs approximately 2,900 people worldwide. Additional information on the company 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 the significant leverage to which the company is subject. Such risk factors are detailed 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, 2002, 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.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(Dollar and share amounts in thousands, except per share data)
Three Months Six Months Ended
Ended June 30, June 30,
------------------------------------
2003 2002 2003 2002
------------------------------------
Sales $127,765 $108,520 $248,939 $212,920
Cost of sales 59,160 54,390 117,160 107,078
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Gross profit 68,605 54,130 131,779 105,842
------------------------------------
Selling and marketing expenses 25,535 21,077 49,777 42,513
General and administrative
expenses 12,185 10,548 23,327 20,264
Research and development expenses 9,501 7,580 18,299 13,782
Restructuring and other non-
recurring items - - - (585)
------------------------------------
Total operating expenses 47,221 39,205 91,403 75,974
------------------------------------
Interest income from sales-type
capital leases 877 1,122 1,750 2,311
------------------------------------
Income from operations 22,261 16,047 42,126 32,179
------------------------------------
Other income (expenses):
Interest income 291 269 513 482
Interest expense (14,103) (14,464) (28,659) (28,891)
Recapitalization expenses (66,150) - (67,695) -
Other, net (711) 193 (522) (301)
------------------------------------
Total other expense (80,673) (14,002) (96,363) (28,710)
------------------------------------
(Loss) income before income taxes (58,412) 2,045 (54,237) 3,469
(Benefit from) provision for
income taxes (22,536) 818 (20,908) 1,388
------------------------------------
Net (loss) income $(35,876) $1,227 $(33,329) $2,081
====================================
Net (loss) income per common
share, basic $(.59) $.02 $(.55) $.03
====================================
Net (loss) income per common
share, diluted $(.59) $.02 $(.55) $.03
====================================
Weighted average common shares
outstanding, basic 60,543 59,347 60,160 59,270
====================================
Weighted average common shares
outstanding, diluted 60,543 62,320 60,160 61,519
====================================
ALARIS MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar and share amounts in thousands, except per share data)
ASSETS
June December
30, 31,
2003 2002
--------------------
(Unaudited)
Current assets:
Cash and cash equivalents $30,746 $69,739
Receivables, net 83,350 90,050
Inventories 61,092 56,924
Deferred tax assets, net, current 40,683 18,063
Prepaid expenses and other current assets 7,992 8,703
--------------------
Total current assets 223,863 243,479
Net investment in sales-type capital leases, less
current portion 12,420 16,050
Property, plant and equipment, net 60,047 56,448
Other non-current assets 42,391 35,666
Goodwill 143,984 143,984
Intangible assets, net 88,973 90,074
--------------------
$571,678 $585,701
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $2,450 $-
Accounts payable 25,855 19,187
Accrued expenses and other current liabilities 51,734 51,157
------------------
Total current liabilities 80,039 70,344
------------------
Long-term debt 417,575 527,468
Other non-current liabilities 26,882 20,038
------------------
Total non-current liabilities 444,457 547,506
------------------
Contingent liabilities and commitments
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 69,727 and 60,045 shares at June 30, 2003
and December 31, 2002, respectively 697 600
Capital in excess of par value 260,834 151,423
Accumulated deficit (210,736)(177,407)
Treasury stock, at cost, 453 shares issued at June
30, 2003
and December 31, 2002 (2,027) (2,027)
Accumulated other comprehensive loss (1,586) (4,738)
------------------
Total stockholders' equity 47,182 (32,149)
------------------
$571,678 $585,701
==================
ALARIS MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
-----------------
2003 2002
-----------------
Cash flows from operating activities:
Net (loss) income $(33,329) $2,081
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,743 11,365
Stock options granted to non-employees for
service - 100
Net loss on disposal of property, plant and
equipment 357 129
Debt discount and issue costs amortization 1,323 1,324
Accretion of bond interest 8,921 8,859
Recapitalization expenses 67,695 -
(Increase) decrease in assets:
Receivables, net 7,690 (3,905)
Inventories (3,967) 4,511
Prepaid expenses and other current assets 1,317 (509)
Deferred tax assets, current (22,729) (118)
Net investment in sales-type capital leases,
non-current portion 3,630 4,084
Other non-current assets 614 (123)
Increase (decrease) in liabilities:
Accounts payable 7,165 (2,906)
Accrued expenses and other current liabilities (1,160) (9,362)
Other non-current liabilities 6,844 2,012
-----------------
Net cash provided by operating activities 57,114 17,542
-----------------
Cash flows from investing activities:
Capital expenditures (13,727) (6,435)
Patents, trademarks and other (7,837) (647)
-----------------
Net cash used in investing activities (21,564) (7,082)
-----------------
Cash flows from financing activities:
Repurchase of debt and related costs (591,814) -
Principal payments on long-term debt - (15,969)
Proceeds from term loan borrowing 245,000 -
Proceeds from issuance of long-term debt 175,000 -
Proceeds from exercise of stock options 2,154 1,547
Proceeds from sale of common stock 113,750 -
Equity issuance costs (6,868) -
Debt issuance costs (12,230) -
-----------------
Net cash used in financing activities (75,008)(14,422)
-----------------
Effect of exchange rate changes on cash 465 416
-----------------
Net decrease in cash (38,993) (3,546)
Cash and cash equivalents at beginning of period 69,739 51,200
-----------------
Cash and cash equivalents at end of period $30,746 $47,654
=================
ALARIS MEDICAL SYSTEMS, INC.
SCHEDULE OF SUPPLEMENTAL FINANCIAL DATA (Unaudited)
(Dollars in millions)
Sales data:
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 incr/ 2003 2002 incr/
(decr) (decr)
North America
Infusion
Instruments $24.8 $18.3 36% $43.8 $30.7 43%
Dedicated
Disposables 36.9 34.6 7% 72.8 68.4 6%
Other Disposables
and Service 19.9 18.0 11% 39.4 35.1 12%
------------------ -------------------
Subtotal 81.6 70.9 15% 156.0 134.2 16%
Patient Monitoring 6.3 6.6 (5%) 11.9 12.7 (6%)
------------------ -------------------
North America
Total $87.9 $77.5 13% $167.9 $146.9 14%
------------------ -------------------
International
Infusion
Instruments $10.1 $7.4 36% $24.1 $19.9 21%
Dedicated
Disposables 21.7 17.5 24% 42.2 34.5 22%
Other Disposables
and Service 6.9 4.5 53% 12.4 8.8 41%
------------------ -------------------
Subtotal 38.7 29.4 32% 78.7 63.2 25%
Patient Monitoring 1.2 1.6 (25%) 2.3 2.8 (18%)
------------------ -------------------
International
Total $39.9 $31.0 29% $81.0 $66.0 23%
------------------ -------------------
ALARIS Medical
Systems Total $127.8 $108.5 18% $248.9 $212.9 17%
================== ===================
ALARIS MEDICAL SYSTEMS, INC.
SUPPLEMENTAL SCHEDULE
RECONCILING GAAP DATA TO PRO FORMA NON-GAAP DATA (Unaudited)
(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 three and six months
ended June 30, 2003 to our net income and net income per share on a
pro forma basis as if the recapitalization and the sale on July 2,
2003 of the additional 900,000 shares of common stock 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 $66.2 million and $67.7 million we recorded for the three and six
months ended June 30, 2003, respectively.
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 ALARIS
Medical Systems' new 7-1/4% senior subordinated notes due 2011; (iii)
borrowings of a $245 million term loan under the 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 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 is 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.
Three Six
Months Months
Ended Ended
June 30, June 30,
2003 2003
----------------------
Net loss, as reported $(35,876) $(33,329)
Adjustments to exclude recapitalization:
Recapitalization expenses 66,150 67,695
Income tax benefit (25,679) (26,279)
----------------------
Net income, excluding recapitalization 4,595 8,087
----------------------
Pro forma adjustments:
Interest expense 7,795 15,920
Other, net (38) (75)
Provision for taxes (2,836) (5,992)
----------------------
Net income, pro forma $9,516 $17,940
======================
Net loss per common share, diluted, as
reported $(.59) $(.55)
======================
Net income per common share, diluted,
excluding recapitalization $.07 $.13
======================
Net income per common share, diluted, pro
forma $.13 $.24
======================
Weighted average common shares outstanding, as
reported 60,543 60,160
Dilutive common stock equivalents 4,405 4,269
----------------------
Weighted average common shares
outstanding, diluted, assuming net income for
period 64,948 64,429
Pro forma adjustment:
Weighted average effect of sale of common
stock 9,500 9,749
----------------------
Weighted average common shares
outstanding diluted, pro forma 74,448 74,178
======================
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