Healthcare revenues increase 8%; total revenues increase 5.3% to
$141.6 million ALPHARETTA, Ga., March 6 /PRNewswire-FirstCall/ --
Microtek Medical Holdings, Inc. (NASDAQ:MTMD), a leading
manufacturer and marketer of infection control products, fluid
control products and safety products to healthcare professionals,
today announced results for the fourth quarter and year ended
December 31, 2006. Highlights include: - Fourth quarter and full
year 2006 healthcare revenues increased by 13.6 percent and 8.0
percent, respectively, led by substantial increases in
international and domestic branded revenues; - Income from
operations for the full year of 2006 increased 12 percent over the
full year of 2005; - Operating income margin for the full year of
2006 was 8.0 percent, a 50 basis point improvement over the full
year of 2005; - Income before income taxes for the full year of
2006 improved by $2.3 million, or 23 percent, over 2005; - Cash
flows from operations for 2006 improved by 50 percent over 2005 to
$14.5 million; - Completion of the Europlak acquisition in October
2006 extends Microtek's market presence to France and enhances its
European product offerings; and - At December 31, 2006, cash
balances totaled approximately $17.1 million, net working capital
neared $58.9 million, and credit facility borrowing capacity
exceeded $17.3 million. Fourth Quarter and Full Year Results The
Company's reported earnings for the fourth quarter and full year of
2006 were $0.04 and $0.18 per diluted share, respectively, as
compared to reported earnings for the fourth quarter and full year
of 2005 of $0.05 and $0.33 per diluted share, respectively.
Included in reported earnings for the full year of 2005 were net
income tax benefits of approximately $0.11 per diluted share
related primarily to the elimination of the Company's valuation
allowance for deferred tax assets in September 2005. Excluding
these significant non-cash deferred income tax benefits and
adjusting for an effective income tax rate of 36 percent, pro-forma
(non-GAAP) earnings for the full year of 2005 were $0.14 per
diluted share. (See reconciliation provided in the Appendix to this
release.) Consolidated net revenues for the fourth quarter and full
year of 2006 totaled $36.7 million and $141.6 million,
respectively, versus $32.7 million and $134.5 million in the same
2005 periods. The Company's fourth quarter 2006 healthcare revenues
totaled $36.5 million, an increase of $4.4 million, or 13.6
percent, over the fourth quarter of 2005. For the full year of
2006, healthcare revenues grew 8.0 percent, or $10.4 million, over
2005 to $140.3 million. For the 2006 quarter and full year,
domestic branded and international revenues demonstrated strong
gains over the same 2005 periods. The increases in healthcare
revenues for the 2006 fourth quarter and full year periods were
offset by planned decreases in OTI division revenues of
approximately $400 thousand and $3.3 million, respectively. "We are
pleased with our overall business accomplishments this year,"
commented Dan R. Lee, the Company's President and CEO. "Improving
revenues, strategic cost cutting, selective investment, and
facility rationalization resulted in significant improvements in
our operating performance in 2006. As a result, in 2006, we
maintained a strong gross margin, significantly improved our income
before income taxes by 23 percent over 2005, and generated an
operating margin of 8.0 percent. The strength of our performance in
2006 is reflected in the 50 percent improvement in our operating
cash flow. More than $14.5 million in operating cash flow enabled
the debt-free financing of three key acquisitions, elimination of
our credit facility borrowings, and approximately $2.2 million in
stock repurchases. Even with these investments and stock
repurchases, we ended the year with approximately $17.1 million in
cash." Mr. Lee stated, "A strong fourth quarter of 2005 laid the
foundation for our successes in 2006. That strength continued
throughout the year and has positioned us well for 2007 and beyond.
Domestic branded revenues have shown significant improvement over
the last three quarters, and our gross margins and overall
profitability are strong. As a result of the improvement realized
in our domestic branded business, our recent acquisitions in Europe
and our efforts to strengthen our OEM partner base, our total
business is well balanced between our higher margin domestic
branded business and our OEM and international businesses." Mr. Lee
continued, "During the fourth quarter of 2006, we continued to
invest in our European operations to improve our long-term
operating performance. For example, we transitioned certain of our
Netherlands manufacturing operations to capitalize on some
significantly lower cost alternatives in Malta and China. While
transitions such as these result in higher expenses in the short
run, they better position us for the future and will improve our
overall cost structure going forward. Additionally, in early
December, we relocated to our new European distribution facility in
Zutphen which will efficiently accommodate our expanded
international operations. We believe that we have made the
necessary investments in our operations to ensure that these
improvements are in place as we begin 2007." With respect to the
Company's guidance for 2007, Mr. Lee stated, "Based on our
initiatives for 2007, we believe that our revenues for 2007 will be
in the range of $155 million to $160 million. We also believe our
earnings will be in the range of $0.20 and $0.22 per diluted share.
In 2007, we are looking for additional operating income improvement
as we begin to realize the benefits of recent investments in our
European infrastructure and other of our 2006 operational
initiatives." Mr. Lee concluded, "During 2007, we will work to
continue to grow our core domestic branded business, to enhance our
OEM partner relationships and to further extend our international
presence. At the same time, we will work to manage the risks
associated with the often volatile buying patterns of our OEM
partners and the seasonality of our international businesses. We
will also continue to seek attractive acquisition candidates which
expand our existing healthcare platform and further strengthen our
position as a leading international supplier of high quality
surgical products. With our worldwide infrastructure, our strong
balance sheet and our solid operating cash flow, we are well
positioned for sustained healthcare revenue growth and improved
operating income." To aid in evaluating the comparability of the
Company's operating results for 2006 versus 2005, the Company has
provided pro forma, non-GAAP results related to fully taxed net
income and fully diluted, fully taxed net income per share for the
full year of 2006 and 2005 in the Appendix to this press release.
Conference Call: The Company invites its shareholders and other
interested parties to join its conference call which will be
conducted by Dan R. Lee, President and Chief Executive Officer, and
Jerry Wilson, Chief Financial Officer, at 4:30 p.m. Eastern Time on
Tuesday, March 6, 2007. This conference call will be accessible to
the public by calling 1-877-407-9210 (U.S.), Reference: Microtek
Medical. International callers dial 1-201-689- 8049. Callers should
dial in approximately 10 minutes before the call begins. To access
the live broadcast of the call over the Internet, go to Investor
Relations page at http://www.microtekmed.com/. A conference call
replay will be available through 11:59 p.m. Eastern Time on March
13, 2007 and can be accessed by calling 1-877-660-6853 (U.S.) or
1-201-612-7415 (international); for both reference conference call
account #286, Conference ID # 230503. Actual Results Could Differ
From Forward-Looking Statements: This Press Release contains
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements include, but are not limited to, the Company's
belief that the strength of its performance in 2006 has
appropriately positioned the Company for 2007 and beyond; the
Company's belief that investments in its European operations in
2006 will result in improved long-term operating performance; the
Company's belief that transitions of certain of its manufacturing
from the Netherlands to its lower cost alternatives in Malta and
China will better position the Company for the future and will
improve the Company's overall cost structure going forward; the
Company's expectation that its new distribution facility in Zutphen
will efficiently accommodate its expanded international operations;
the Company's belief that it has made the necessary investments in
operations to ensure that these improvements are in place; the
Company's forecasted revenues and earnings per diluted share for
2007; the Company's ability to generate additional operating income
improvement in 2007 by realizing the benefits of investments in its
European infrastructure and other of its 2006 operational
initiatives; the Company's intentions to continue to grow its core
domestic branded business, to enhance its OEM partner relationships
and to further extend its international presence in 2007; the
Company's ability to manage the risks associated with the often
volatile buying patterns of its OEM partners and the seasonality of
its international businesses; the Company's ability to seek and
attract acquisition candidates to expand its existing healthcare
platform and further strengthen its position as a leading
international supplier of high quality surgical products; and the
Company's belief that its worldwide infrastructure, its strong
balance sheet and its solid operating cash flow position the
Company for sustained healthcare revenue growth and improved
operating income. Such statements are subject to certain factors,
risks and uncertainties that may cause actual results, events and
performance to differ from those referred to in such statements.
These risks include, without limitation, the following: low
barriers to entry for competitive products could cause the Company
to reduce the prices for its products or lose customers; large
purchasers of the Company's products regularly negotiate for
reductions in prices for the Company's products, which may reduce
the Company's profits; because a few distributors control much of
the delivery of hospital supplies to hospitals, the Company relies
significantly on these distributors in connection with the sale of
the Company's branded products; the Company's relatively small
sales and marketing force may place the Company at a competitive
disadvantage to its competition; the Company's contract
manufacturing division relies upon a small number of customers, the
loss of any of which could have a material adverse impact on the
Company; the inability of the Company to complete acquisitions of
businesses at an attractive cost could adversely affect the
Company's growth; if the Company is successful in acquiring
businesses, the failure to successfully integrate those businesses
could adversely affect the Company; the Company's growing
international operations subject the Company's operating results to
numerous additional risks; markets in which the Company competes
are highly competitive, which may adversely affect the Company's
growth and operating results; the Company's products are subject to
extensive governmental regulations, compliance or non-compliance
with which could adversely affect the Company; the Company's
strategies to protect its proprietary assets may be ineffective,
allowing increased competition with the Company; fluctuations in
the value of the dollar against foreign currencies have in the past
and may in the future adversely affect the Company's operating
results; and the Company's expenses for raw materials and product
distribution are adversely affected by increases in the price for
petroleum. The foregoing risks are intended to identify some of the
principal factors that could cause actual results to differ
materially from those described in the forward-looking statements
included herein. These factors should be read in conjunction with
the more detailed risk factors included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2005 filed with
the Securities and Exchange Commission. The Company does not
undertake to update its forward-looking statements to reflect
future events or circumstances. About Microtek Medical: Microtek
Medical is a leading manufacturer and supplier of innovative
product solutions for patient care, occupational safety and
management of infectious and hazardous waste for the healthcare
industry. Headquartered near Atlanta, Georgia, the Company offers
an extensive line of infection control, fluid control and safety
products, such as disposable equipment and patient drapes, which
are marketed to healthcare professionals through multiple channels,
including direct sales, original equipment manufacturers ("OEM's")
and private label arrangements. Microtek Medical's goal is to
provide healthcare professionals with innovative product solutions
that encompass a high-level of patient care and prevention of cross
infection in operating rooms and ambulatory surgical centers
worldwide. For further information, visit
http://www.microtekmed.com/. -Tables Follow - MICROTEK MEDICAL
HOLDINGS, INC. Unaudited Financial Highlights (in thousands, except
for per share data) Three months ended Twelve months ended December
31, December 31, 2006 2005 2006 2005 Net revenues $ 36,728 $32,722
$141,577 $134,458 Gross profit 14,532 13,363 55,982 52,526
Operating expenses: Selling, general and administrative 11,397
9,579 42,721 40,526 Research and development 425 167 873 810
Amortization of intangibles 387 235 1,109 961 Total operating
expenses 12,209 9,981 44,703 42,297 Loss on dispositions - - -
(139) Income from operations 2,323 3,382 11,279 10,090 Interest
income (expense), net 75 49 366 (38) Foreign currency exchange gain
(loss) 236 8 236 (408) Other income, net 46 3 249 202 Income before
income taxes 2,680 3,442 12,130 9,846 Income taxes: Current tax
expense (9) (34) (313) (598) Deferred tax (expense) benefit (809)
(1,061) (3,902) 5,256 Total income tax (expense) benefit (818)
(1,095) (4,215) 4,658 Net income $1,862 $2,347 $7,915 $14,504 Net
income per share - basic $0.04 $0.05 $0.18 $0.33 Net income per
share - diluted $0.04 $0.05 $0.18 $0.33 Weighted average shares
outstanding - basic 43,254 43,471 43,498 43,347 Weighted average
shares outstanding - diluted 44,333 44,162 44,506 44,050 December
31, December 31, Balance Sheet Data: 2006 2005 Cash and cash
equivalents $17,059 $ 14,765 Other current assets 60,747 56,968
Total current assets 77,806 71,733 Total assets $156,166 $140,758
Current liabilities $18,933 $ 12,579 Long-term debt 721 1,249 Other
liabilities 4,276 2,864 Total liabilities 23,930 16,692
Shareholders' equity 132,236 124,066 Total liabilities and
shareholders' equity $156,166 $140,758 APPENDIX Pro Forma Results
Pro forma results are provided on a non-GAAP basis as a complement
to results provided in accordance with accounting principles
generally accepted in the United States ("GAAP"). Pro forma results
are not a substitute for measures computed in accordance with GAAP.
Definitions of such pro forma measurements are provided below.
These definitions are provided to allow the reader to reconcile pro
forma data and GAAP. The Company's pro forma results may be
different from the presentation of financial information by other
companies. The Company believes that fully taxed net income and
fully taxed earnings per diluted share are important pro forma
measures as they provide useful information for purposes of
evaluating the Company's performance to that of companies of
comparable size, industry and scope of operations and evaluating
the comparability of the Company's operating results in different
periods. The Company has significant net operating loss
carryforwards ("NOL's") for Federal tax purposes. Prior to the
fourth quarter of 2005, the Company had recorded a valuation
allowance for its Federal NOL's. Consequently, the Company's tax
provision in periods prior to the fourth quarter of 2005 reflected
only the state and foreign income taxes and Federal alternative
minimum taxes for which the Company was currently liable.
Additionally, from 2001 to September 2005, the Company had
recognized significant net deferred income tax benefits as a result
of decreases in the valuation allowance for its deferred tax
assets, primarily these Federal NOL's. As of September 30, 2005,
the Company's valuation allowance for its Federal deferred tax
assets was eliminated. Beginning in the fourth quarter of 2005, the
Company's tax provision reflects Federal, state and foreign income
tax expense at appropriate statutory rates in effect for the
jurisdictions in which the Company operates. Until the Company's
Federal NOL's are fully utilized, the Company's future payments of
income taxes will include only the state and foreign income taxes
and Federal alternative minimum taxes for which it is liable. The
Company's results of operations for the full year of 2006 reflect a
fully-taxed provision of approximately $4.2 million. The Company's
results of operations for the full year of 2005 reflected a net
income tax benefit of $4.7 million resulting primarily from the
decrease in the valuation allowance for deferred tax assets as of
September 30, 2005. The Company's net income and earnings per
diluted share, the most directly comparable GAAP measures, may be
reconciled to pro forma fully taxed net income and pro forma fully
taxed earnings per diluted share as follows: Twelve months ended
December 31 2006 2005 Net income, as reported under GAAP $7,915
$14,504 Reversal of reported total income tax expense (benefit)
4,215 (4,658) Income before income taxes, as reported 12,130 9,846
Pro forma total income tax expense (reported amount for 2006 and
approximately 36% for 2005) (4,215) (3,545) Pro forma fully taxed
net income $7,915 $6,301 Earnings per diluted share, as reported
$0.18 $0.33 Reversal of reported total income tax expense (benefit)
0.09 (0.11) Income before income taxes, as reported 0.27 0.22 Pro
forma total income tax expense (0.09) (0.08) Pro forma fully taxed
earnings per diluted share $0.18 $0.14 DATASOURCE: Microtek Medical
Holdings, Inc. CONTACT: Dan R. Lee, President & CEO, or Jerry
Wilson, CFO, or John Mills, Investor Relations, , all of Microtek
Medical Holdings, Inc., 1-800-476-5973 Web site:
http://www.microtekmed.com/
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