For Immediate Release:

Contact: Allen & Caron Inc   CLOSURE Medical Corp
  Joe Allen (investors) Len Hall (media) Daniel Pelak, CEO
  (212) 691-8087 (949) 474-4300 Benny Ward, CFO
  joe@allencaron.com len@allencaron.com (919) 876-7800

CLOSURE MEDICAL REPORTS RECORD EARNINGS AND DOUBLE-DIGIT REVENUE GROWTH FOR ITS FOURTH QUARTER AND FULL YEAR 2002

RALEIGH, NC (February 14, 2003) … CLOSURE Medical Corporation (Nasdaq:CLSR), a medical tissue adhesive products company, today announced record earnings for the fourth quarter and year ended 2002. Fourth-quarter 2002 earnings were $0.13 per share, excluding a $0.43 per share non-recurring credit. Full-year 2002 earnings were $0.36 per share, excluding non-recurring items that resulted in a net credit of $0.37 per share. Earnings, including non-recurring items, were $0.56 and $0.73 per share for the three- and twelve-month periods ended December 31, 2002, respectively.

The full-year earnings benefited from a non-recurring fourth-quarter credit of $0.43 per share related to the recognition of deferred tax assets. Partially offsetting this credit was a previously recognized third-quarter charge of $0.06 per share related to recruitment and transition services for the Company’s new CEO.

Daniel A. Pelak, President and CEO, commented, “We believe that our performance over the last two years has validated our business model and platform technology. We are now embarking on new initiatives that will, we believe, inaugurate a new phase in the growth of CLOSURE Medical. With more than a quarter of our estimated 2003 revenues invested in R&D, we are developing line extensions and enhancements of our current major product lines such as the new High-Viscosity DERMABOND. We also are committed to the development and introduction of new products based on our core cyanoacrylate technology. Our management team is energized by our recent momentum, and we look forward to reporting these new initiatives as the quarters progress.”

CLOSURE experienced double-digit revenue growth for the fourth quarter and year ended 2002, largely due to increased sales of DERMABOND adhesive as well as sales of BAND-AID® Brand Liquid Bandage, which was launched in April 2002. Fourth-quarter revenues increased by 13 percent to approximately $6.8 million compared with $6.0 million in the prior year. Full-year 2002 revenues increased by 23 percent to approximately $23.7 million from $19.2 million during 2001.

“The continued revenue growth during 2002 is attributable to the increased awareness of our products and technology as a result of our marketing partners’ committed focus and efforts coupled with our commitment to provide product enhancements, such as the anti-microbial barrier claim and the recent approval of High-Viscosity DERMABOND. In order to increase awareness of DERMABOND, Johnson & Johnson’s Ethicon Division conducted a direct-to-consumer advertising campaign for DERMABOND, which we believe was successful. The launch of BAND-AID® Brand Liquid Bandage by Johnson & Johnson Consumer Products exceeded our expectations as a result of the well executed and extensive television and print media campaign. The 2002 launch included domestic sales only, so we are eager to see the acceptance of the product outside the U.S. in 2003,” said Pelak.

Gross margins for the fourth quarter and year ended December 31, 2002, were 74 percent and 73 percent, respectively. Margins improved over the prior year due to higher production volumes and cost containment combined with a product mix that continues to be heavily weighted toward DERMABOND products. Excluding non-recurring items, our annual operating margins also improved to 20 percent for the twelve-month period ended December 31, 2002, compared to 14 percent for the corresponding 2001 period.

Prior to the fourth quarter 2002, the Company had not reported significant income tax expense because of available deferred tax assets, primarily consisting of net operating loss (NOL) and tax credit carryforwards. For financial reporting purposes, these deferred tax assets had been fully reserved by a valuation allowance due to uncertainty surrounding the likelihood of their realization. Due to the Company’s continued profitability and a determination that realization of its deferred tax assets was now more likely than not, deferred tax assets of approximately $7.3 million were recognized during the fourth quarter of 2002. In conjunction with the recording of these assets, a corresponding one-time increase to earnings of approximately $6.0 million, or $0.43 per share, was recorded with the balance of $1.3 million credited to shareholders’ equity. Although the Company will report fully-taxed earnings going forward, it will not be required to pay federal income taxes until such time as the NOL and tax credit carryforwards are exhausted.

At December 31, 2002, the Company had cash and investments of $17.0 million, a current ratio of 4.1:1, and a quick ratio of 3.2:1. In addition, CLOSURE’s total debt was $336,000 and shareholders’ equity totaled $29.2 million.

“We continued to strengthen our financial position as operations generated positive cash flow again, approximately $5.7 million, during 2002. We expect that the Company will become debt-free later this year providing flexibility for future investments,” said Benny Ward, VP of Finance and CFO.

Looking forward to the first quarter of 2003, the Company estimates total revenues of $7.2 to $8.2 million and earnings of $0.08 to $0.12 per share. These first quarter expectations represent a significant increase over the 2002 period results and reflect both the seasonality of our products, especially the BAND-AID® Brand Liquid Bandage, as well as initial shipments for the U.S. launch of the High-Viscosity DERMABOND product. Although encouraged by these estimates, the Company does not have adequate visibility to provide more detailed guidance beyond the previously provided full-year 2003 revenue and earnings guidance of $30.0 to $32.0 million and $0.28 to $0.32 per share, respectively. The Company expects to provide updated guidance on the remainder of 2003 beginning on our first quarter conference call.

About CLOSURE Medical Corp
CLOSURE Medical Corporation is a global leader in the development, manufacture, and commercialization of medical adhesive brands for wound closure and care based on its proprietary medical grade cyanoacrylate technology. CLOSURE’s proprietary technology has customized the physical and chemical properties of cyanoacrylates to develop medical adhesive formulations to close and seal topical skin wounds and incisions.

For additional information on CLOSURE Medical visit its website at www.closuremed.com or visit the “Clients” section of the Allen & Caron website at www.allencaron.com.

This release contains certain forward-looking statements which involve known and unknown risks, delays, uncertainties or other factors not under the Company’s control which may cause actual results, performance or achievements of the Company to be materially different from the results, performance, or other expectations implied by these forward-looking statements. These factors include, but are not limited to the early stage of commercialization of the Company’s products; the progress of its research and development programs for future products; the need for regulatory approval and effects of governmental regulation; technological uncertainties; the satisfactory conclusion of negotiations with, and dependence on marketing partners, and dependence on patents and trade secrets, as well as those detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission. Although the Company believes that the expectations in the forward-looking statements are reasonable, the Company cannot guarantee such results. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

TABLES FOLLOW

CLOSURE Medical Corporation
Statement of Operations
(Unaudited)
(In thousands, except per share data)

 
THREE MONTHS ENDED
TWELVE MONTHS ENDED
 
December 31
December 31
 
2002
2001
2002
2001
         
Product sales
$ 6,515
$ 5,753
$ 22,711
$ 18,405
License and product development revenues
258
222
1,020
768
Total revenues
6,773
5,975
23,731
19,173
Cost of products sold
1,747
1,652
6,496
5,450
Gross profit
5,026
4,323
17,235
13,723
 
Research, development and regulatory affairs expenses
1,519
1,444
6,436
5,622
General and administrative expenses
1,799
1,384
6,855
5,504
Special charge- voluntary packaging recall
-
430
-
430
Total operating expenses
3,318
3,258
13,291
11,556
 
Income from operations
1,708
1,065
3,944
2,167
Interest income, net
90
75
315
388
Income before income taxes
1,798
1,140
4,259
2,555
Provision (benefit) for income taxes
(5,941)
-
(5,864)
21
 
Net income
$ 7,739
$1,140
$ 10,123
$ 2,534
 
Shares used in computation of net income per common share:  
Basic
13,549
13,494
13,535
13,468
Diluted
13,709
13,845
13,783
13,852
Net income per share:
Basic
$0.57
$ 0.08
$ 0.75
$0.19
Diluted
$ 0.56
$0.08
$0.73
$ 0.18

CLOSURE Medical Corporation
Balance Sheet
(In thousands)

 
December 31, 2002
December 31, 2001
Cash, cash equivalents and investments
$17,042
$ 12,958
Working capital
16,815
9,321
Total assets
36,747
25,340
Total debt obligations
336
1,269
Total stockholders' equity
29,190
17,247
 
Total shares outstanding
13,549
13,508