Compex Technologies Reports Fiscal 2003 Second Quarter Results; Announces Licensing Agreement with Bio-Medical Research

Business Wire, Feb 12, 2003

Business Editors

NEW BRIGHTON, Minn.--(BUSINESS WIRE)--Feb. 12, 2003

Compex Technologies, Inc. (Nasdaq:CMPX) today reported results of operations for the fiscal second quarter ended December 31, 2002.

Consolidated net sales and rental revenue for the second quarter was $18.7 million, an increase of 5% over the prior year's second quarter revenue of $17.8 million. U.S. revenue was $12.4 million, up 8% from $11.5 million in the same period last year. International revenue was $6.3 million compared with $6.2 million in the prior year's second quarter.

The gross profit margin for the quarter was 69.2%, compared with 65.5% last year. Selling, general and administrative expenses were $10.8 million, or 57% of revenue, compared with $8.7 million in the fiscal 2002 quarter. This amount includes a $233,000 one-time charge for accrued executive compensation for a former officer of the Company.

Net income was $942,000, or $0.08 per diluted share, compared with $1.4 million, or $0.12 per diluted share in the same period last year. Excluding the one-time charge for accrued compensation, EPS would have been $0.10 per share in the quarter.

For the six months ended December 31, 2002, net revenue was $36.5 million, an increase of 6% compared with total revenue of $34.3 million for the six months ended December 31, 2001. Net income for the first half of fiscal 2003 was $1.9 million, or $0.17 per diluted share, compared with net income of $2.6 million, or $0.23 per diluted share in the comparable prior-year period.

"Through the first six months of the year, every product line we have is up over the same period last year," said Dan W. Gladney, President and CEO. "Revenue is up in the U.S. and in every country internationally, with the exception of Italy. Gross margins are also significantly higher thanks to our strategy of introducing new, higher-priced products into the market."

Gladney noted, however, that "because we invested heavily in growth in European markets and in our direct sales force, our administrative expenses increased disproportionately during the six months ended December 31, 2002. Our sales in Italy of consumer products, affected by the global economy as well as a buildup of inventory by the Italian distributor, were disappointing and did not offset these investments as we had anticipated. Nevertheless, we expect these investments to generate favorable returns in the future as our sales force becomes fully engaged and Italian sales recover."

Noting that the Company expects to maintain its investment in research and development as a percentage of revenue, Gladney also explained that "we continue to invest in new product development and in expanding our distribution of electrical stimulation products."

As part of the expansion of its distribution and product line, Compex announced that it has acquired the U.S. licensing rights for the Slendertone FLEX Abs Belt product from Bio Medical Research Ltd. (BMR), a company formed under the laws of Ireland.

"BMR has over 30 years of experience with muscle stimulation exercisers," Mr. Gladney commented. "They have more than 540 employees in over 15 countries worldwide, and they recently received FDA marketing clearance to sell the Abs Belt product in the United States. BMR chose to partner with Compex because of our expertise with muscle stimulation in the United States and our own recent FDA marketing clearance for the Compex Sport."

"The introduction of this product will further strengthen our move into the over-the-counter consumer market," Mr. Gladney continued. "We will continue to search for additional business development and strategic opportunities where possible."

Compex Technologies has scheduled an investor conference at 1:00 p.m. Eastern Time today to discuss these developments as well as:

-- revenue and earnings expectations for the remainder of fiscal 2003,

-- progress in the US product launch and distribution relationships for the Compex Sport, and

-- steps that will be taken to better align SG&A expenses with growth.

To participate in the live call, please dial (800) 451-7724 and reference Conference ID Compex. International callers please dial (785) 830-1957 and use the same Conference ID. A telephone replay will be available until 11:00 p.m. Eastern Time on February 14th by dialing (800) 839-3735 domestically and (402) 220-2977 internationally.

Compex Technologies, Inc. is a leading designer, manufacturer and provider of electromedical products used for pain management, rehabilitation and sports training in clinical, home health care, sports and occupational medicine settings.

Cautionary Statement: All statements other than historical facts included in this release regarding future operations, and particularly on the outlook for 2003, are subject to the risks inherent in predictions and "forward looking statements." These statements are based on the beliefs and assumptions of management of Compex Technologies and on information currently available to management. Nevertheless, these forward-looking statements should not be construed as guarantees of future performance. They involve risks, uncertainties, and assumptions identified in Compex Technologies filings with the SEC, including: