April 17, 2003

FOR: ZOLL Medical Corporation

INVESTOR CONTACT: A. Ernest Whiton
Chief Financial Officer
ZOLL Medical Corporation
(978) 421-9655
PRESS CONTACT: Robert Minicucci
Corporate Communications Manager
ZOLL Medical Corporation
+1 (978) 421-9832
rminicucci@zoll.com



FOR IMMEDIATE RELEASE

ZOLL Medical Corporation Announces Record Second Quarter Earnings

Burlington, MA  Thursday, April 17, 2003 – ZOLL Medical Corporation (Nasdaq: ZOLL), a manufacturer of non-invasive cardiac resuscitation devices which provide pacing and defibrillation, today announced record second quarter revenues of $46,589,000, an increase of 34% as compared to revenues of $34,713,000 in the second quarter of last year. Net income for the quarter was $2,755,000, or $0.30 per diluted share, compared to $1,897,000, or $0.21 for the comparable prior year quarter, an increase of 43%.

The Company experienced growth in all major business segments during the second quarter. Total North American shipments increased 31% as compared to the previous year. Equipment sales to the North American hospital market increased 57% to $18.1 million, as compared to the second quarter of 2002. North American pre-hospital equipment sales increased 19% to $13.1 million over the same period a year ago. International sales increased 48% to $10.4 million as compared to the prior year quarter. Total sales of the new AED Plus product, which was not available at this time last year, accounted for $4.9 million of revenue.

Gross margins for the second quarter decreased from 56% to 55% as compared to the prior year. The high rate of growth of International shipments and the shipment of a large U.S. Military order both contributed to this decline.

Commenting on the second quarter results, Richard A. Packer, President and Chief Executive Officer of ZOLL, observed, “During the quarter, ZOLL shipped approximately $6.8 million to the United States Military under the previously announced $8.9 million sole source award from the Patient Movement Item program. This award represented the single largest order in our Company’s history. This shipment was a hallmark of the quarter and contributed significantly to North American Hospital growth. Our International businesses also had another outstanding quarter. All of our direct operations grew, with particular strength in the United Kingdom, Germany and Australia. We also saw good growth in certain distributor businesses, particularly China, where we shipped additional M-Series to the Chinese military. We have added significant selling and marketing resources in International operations over the past two years and this investment continues to pay off.”

Reviewing ZOLL’s progress in the AED market, Mr. Packer stated, “Sales of our new public access defibrillator, the AED Plus, have continued to gain good traction. During the second quarter, we increased sales by 26% sequentially as compared to the first quarter. We are seeing significant growth in both North American and International sales. We have gained nearly 10% of the market within less than one full year of shipping the product and we are still in the process of building our distribution channels. Our highly differentiated product is meeting with good acceptance and we hope to accelerate growth as we further strengthen our distribution channels and our distributors gain experience selling the product’s unique features. Toward this goal, during the quarter we added an additional six sales people to our North American Alternative Distribution team. The AED business is now profitable for us and we will continue to prudently add selling resources as we build the business.”

Commenting on the short-term outlook, Mr. Packer said, “Strong themes drive our businesses. The need for early defibrillation and the technology transition to biphasic, provide reasons for customers to buy our equipment. The competitive environment for our products has remained stable. During the second half of fiscal 2003, we see continued strong International sales growth and steady progress in the growth of our AED business. However, our outlook is more cautious in the North American EMS and Hospital markets. The pressure on state and municipal budgets persists which will constrain capital spending in the EMS market. General economic uncertainty may result in a more difficult Hospital market. Therefore, our outlook is now slightly more conservative than it would be in a more favorable economic environment. However, we still anticipate record second half results, in terms of both sales and earnings.”

Mr. Packer concluded his comments, “With strength in some segments, but with a cautious outlook in other segments, we expect to exit fiscal 2003 with solid global momentum and a record year. We will continue to invest significant sales and marketing resources to expand our global market presence. We believe we can gain significant market share in the rapidly growing public access market. The longer term outlook remains unchanged as the need for improved resuscitation is as pressing as ever, and our company is well positioned to benefit from the long term growth drivers of early defibrillation and biphasic technology.”

Additionally, in March, ZOLL finalized negotiations and executed a long-term lease on a new facility in nearby Chelmsford, MA. ZOLL will be relocating all operations currently in Burlington, MA to this new facility in the month of July. The current facility can no longer sustain the company’s growth and its lease terminates at the end of July. The company does not anticipate any significant effect on its business as a result of this move.

ZOLL Medical Corporation, headquartered in Burlington, MA, designs, manufactures and markets an integrated line of proprietary, non-invasive resuscitation devices and disposable electrodes. Used by health care professionals to provide both types of cardiac resuscitation – pacing and defibrillation – these products are essential in the emergency treatment of cardiac arrest victims, both inside and outside the hospital. ZOLL also designs and markets software that automates collection and management of both clinical and non-clinical data for emergency medical service providers. ZOLL has operations in the United States, Canada, United Kingdom, Germany, France, the Netherlands, and Australia, and business partners in all of the world’s major markets. For more information about ZOLL and its products, visit the ZOLL web site at www.zoll.com.

Certain statements contained in this press release, including statements regarding the anticipated development of the Company's business, the intent, belief or current expectations of the Company, its directors or its officers, primarily with respect to the Company's business model and future operating performance of the Company, including expectations regarding results in future periods, operating performance our ability to grow AED sales, our ability to increase our International sales, our anticipation regarding second half results, our ability to capture market share and other statements contained herein regarding matters that are not historical facts, are “forward-looking” statements (as defined in the Private Securities Litigation Reform Act of 1995). Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those factors discussed in the section entitled “Risk Factors” in the Company's Quarterly Report on Form 10-Q filed on February 12, 2003, including the future performance of the direct sales operations, as well as uncertainties regarding the market acceptance and profitability of the ZOLL AED Plus, the length and severity of the current economic slowdown and its impact on capital spending budgets, the reduction in overall capital equipment expenditures in the hospital and pre-hospital markets, the impact of governmental budget restraints on the purchase of capital equipment, the impact on the Company’s operations during its planned move to Chelmsford, Massachusetts, the length and severity of the current SARS, or severe acute respiratory syndrome, the continued war in the Middle East, the impact of the war on terrorism, the potential disruption in the transportation industry on the Company’s supply chain and product distribution channels, and the desire or ability of other parties to purchase the Company's products.

(Financial Results to Follow)

 ZOLL MEDICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

   March 30,
           2003

   September 29,
           2002

ASSETS

 

 

Current assets:

 

 

     Cash and cash equivalents

     $    55,049

     $    55,658

     Short-term investments

10,457

10,130

     Accounts receivable, net

43,773

42,927

     Inventory

33,554

29,140

     Prepaid expenses and other current assets

         3,805

         4,049

Total current assets

        146,638

        141,904

Property and equipment, net

          20,124

          19,542

Other assets, net

         7,943

         4,408

 

 

 $  174,705

 $  165,854

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

     Accounts payable

     $      8,944

         $     10,014

     Accrued expenses and other liabilities

        15,752

         12,780

Total current liabilities

24,696

22,794

Deferred income taxes

1,148

1,148

Total stockholders’ equity

    148,861

      141,912

 

$  174,705

$   165,854

 

 

 

 


 

 

ZOLL MEDICAL CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS

(in thousands, except per share and share data)

 

 

 

         Three Months Ended

 

         Six Months Ended

 

 

         March 30,

     2003

   March 31,
2002

        March 30,

      2003

   March 31,
2002

Net sales

$      46,589

$     34,713

$     89,681  

$    68,058  

Cost of goods sold

       21,146

       15,420

41,188     

29,906     

Gross profit

25,443

19,293

48,493

38,152

Expenses:

 

 

 

 

     Selling and marketing

15,168

11,320

29,397

22,432

     General and administrative

3,214

2,512

6,210

5,018

     Research and development

3,644       

2,958      

6,700      

5,650      

     Total expenses

22,026     

16,790      

42,307    

33,100    

Income from operations

3,417

2,503

6,186

5,052

Income before taxes

4,112

2,874

7,516

5,743

Net income

$        2,755

     $      1,897

 $      5,036    

 $      3,791    

Earnings per share:

 

 

 

 

Basic

   $          0.31

 $        0.21

 $        0.56

 $        0.43

Diluted

 $          0.30

 $        0.21

 $        0.55

 $        0.41

Weighted average common shares:

 

 

 

 

Basic

9,034,000

8,914,000

9,001,000

8,904,000

Diluted

9,247,000

9,159,000

9,197,000

9,153,000

             



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