Electromed, Inc. Reports 2012 Third Quarter Results

NEW PRAGUE, Minn.--()--Electromed, Inc. (NYSE Amex: ELMD) today announced financial results for the three-month period ended March 31, 2012. Management indicated that, while the Company’s Sales Team provided an increase in the number of prescriptions for the SmartVest® System versus the prior year quarter, actual revenue has been negatively impacted by certain reimbursement factors. Among these factors are diagnoses that are not assured of reimbursement and insurance programs with lower allowable reimbursement amounts.

Net Revenues for the three months ended March 31, 2012, were approximately $4,774,000, an 8.2% decrease compared to Net Revenues of approximately $5,199,000 for the same period last year. The Company also announced Net Income of approximately $95,000, or $0.01 per basic and diluted share, for the three months ended March 31, 2012, compared to Net Income of approximately $487,000, or $0.06 per basic and diluted share, for the same period last year. Management continues to believe that planned increases in the Company’s sales force and reimbursement staff, coupled with the expansion of marketing and research and development efforts, will provide strong impetus for continued annual sales growth.

Jim Cassidy, Interim CEO, commented on the Company, saying,

“This past quarter’s revenue was adversely impacted by referral source and payer mix. We are encouraged by the effectiveness of our high quality tenured sales representatives and by the early performance of our newly hired representatives.”

Gross Profit decreased to approximately $3,369,000, or 70.6% of Net Revenues, for the three months ended March 31, 2012, compared to $3,703,000, or 71.2% of Net Revenue, for the same period in Fiscal 2011. The decrease in gross profit percentage was primarily the result of a change in average reimbursement from the mix of referrals during the three month period. Factors such as diagnoses that are not assured of reimbursement and insurance programs with lower allowable reimbursement amounts (for example, state Medicaid programs) affect average reimbursement received on a short-term basis. These factors tend to fluctuate on a quarterly basis. However, management does not believe the results of the quarter ended March 31, 2012, are indicative of a long-term trend in decreasing margins.

Operating Expenses, which consist of Selling, General, and Administrative Expenses and Research and Development expenses, were approximately $3,143,000 for the three months ended March 31, 2012, an increase of approximately 3.7% over Operating Expenses for the same period last year. This increase primarily resulted from a 14.3% increase in employees in our reimbursement, sales, administrative, and patient services departments.

Total cash and cash equivalents was approximately $1,393,000 as of March 31, 2012. For the three months ended March 31, 2012, cash used in financing activities was approximately $86,000, consisting of payments of long-term debt, capital lease obligations, and deferred financing fees. An aggregate of $120,000 was used for investing activities during the three months ended March 31, 2012, for purchases of property and equipment. The Company used approximately $146,000 in operating activities composed primarily of an increase in the Company’s accounts receivable, inventory, and other assets. Accounts receivable increased to approximately $11,092,000, or 3.6% compared to December 31, 2011. In addition to existing cash and cash equivalents the Company had unused availability of $3,435,000 under its line of credit as of March 31, 2012.

About Electromed, Inc.
Electromed, Inc., founded in 1992 and headquartered in New Prague, Minnesota, manufactures, markets, and sells products that provide airway clearance therapy, including the SmartVest® Airway Clearance System and related products, to patients with compromised pulmonary function. Further information about the Company can be found at www.electromed.com.

Cautionary Statements
Certain statements found in this release may constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the speaker’s current views with respect to future events and financial performance and include any statement that does not directly relate to a current or historical fact. Forward-looking statements can generally be identified by the words “believe,” “expect,” “anticipate” or “intend” or similar words. Forward-looking statements made in this release include the Company’s plans and expectations regarding sales growth, long-term trends involving margins, planned increases in sales force, reimbursement and production personnel, and expansion of marketing and research and development. Forward-looking statements cannot be guaranteed and actual results may vary materially due to the uncertainties and risks, known and unknown, associated with such statements. Examples of risks and uncertainties for Electromed include, but are not limited to, the impact of emerging and existing competitors, the effectiveness of our sales and marketing initiatives, changes to reimbursement programs, as well as other factors described from time to time in our reports to the Securities and Exchange Commission (including our Annual Report on Form 10-K). Investors should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions investors should take into account when making investment decisions. Shareholders and other readers should not place undue reliance on “forward-looking statements,” as such statements speak only as of the date of this release.

 
Electromed, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
 
    March 31,     June 30,
2012 2011
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 1,392,935 $ 4,091,739
Accounts receivable (net of allowances for doubtful accounts of $45,000) 11,091,562 9,593,105
Inventories 2,411,937 1,855,957
Prepaid expenses and other current assets 515,021 371,257
Deferred income taxes   722,000     722,000  
Total current assets 16,133,455 16,634,058
Property and equipment, net 3,252,940 2,807,082
Finite-life intangible assets, net 1,169,942 1,235,828
Other assets ……………………………………………………………… assets   264,761     191,964  
Total assets $ 20,821,098   $ 20,868,932  
 
Liabilities and Shareholders’ Equity
Current Liabilities
Revolving line of credit $ 1,768,128 $ 1,768,128
Current maturities of long-term debt 351,477 438,267
Accounts payable 724,505 733,621
Accrued compensation 632,870 868,229

 

Warranty reserve 464,559 444,096
Other accrued liabilities ……………………………………………….. liabilities   88,980     161,166  
Total current liabilities 4,030,519 4,413,507
Long-term debt, less current maturities 1,403,220 1,582,102
Deferred income taxes   167,000     167,000  
Total liabilities 5,600,739 6,162,609
Commitments and Contingencies (Note 8)
 
Shareholders’ Equity

Common stock, $0.01 par value; authorized: 13,000,000; shares issued and outstanding: 8,114,252 and 8,100,485 shares, respectively

81,143 81,005
Additional paid-in capital 12,920,575 12,794,368
Retained earnings 2,218,641 1,853,450
Common stock subscriptions receivable for 15,000 shares outstanding as of June 30, 2011   -     (22,500 )
Total shareholders’ equity   15,220,359     14,706,323
Total liabilities and shareholders’ equity $ 20,821,098   $ 20,868,932  
 
 
Electromed, Inc. and Subsidiary
Condensed Consolidated Statements of Income
(Unaudited)    

 

   

For the Three Months Ended

For the Nine Months Ended
March 31, March 31,
2012     2011 2012   2011
 
Net revenues $ 4,774,347 $ 5,198,828 $ 14,943,612 $ 14,049,803
Cost of revenues   1,405,804   1,495,509     4,024,577   3,872,565  
Gross profit   3,368,543   3,703,319     10,919,035   10,177,238  
 
Operating expenses
Selling, general and administrative 2,904,534 2,759,543 9,434,995 8,025,578
Research and development   238,230   272,270     705,655   689,360  
Total operating expenses   3,142,764   3,031,813     10,140,650   8,714,938  
Operating income 225,779 671,506 778,385 1,462,300
Interest expense, net of interest income   42,684   38,077     130,194   150,929  
Net income before income taxes 183,095 633,429 648,191 1,311,371
 
Income tax expense   (88,000 )   (146,000 )   (283,000 )   (420,000 )
Net income $ 95,095 $ 487,429   $ 365,191 $ 891,371
 
Earnings per share attributable to Electromed, Inc. common shareholders:
Basic $ 0.01 $ 0.06 $ 0.05 $ 0.12
Diluted $ 0.01 $ 0.06 $ 0.04 $ 0.12
 
Weighted-average Electromed, Inc. common shares outstanding:
Basic   8,114,120   8,099,752   8,105,562   7,722,075
Diluted   8,116,759   8,112,696   8,116,977   7,750,956
 
 
Electromed, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)     For the Nine Months Ended
March 31,
2012     2011
Cash Flows From Operating Activities
Net income $ 365,191

$

891,371
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation 300,248 246,426
Amortization of finite-life intangible assets 91,032 83,848
Amortization of debt issuance costs 9,461 27,778
Share-based compensation expense 97,044 129,396
Loss on disposal of property and equipment 23,009 15,758
Changes in operating assets and liabilities:
Accounts receivable (1,498,457 ) (2,655,542 )
Inventories (555,980 ) (194,190)
Prepaid expenses and other assets (214,709 ) (149,566)
Accounts payable and accrued liabilities   (296,198 )   329,215  
Net cash used in operating activities   (1,679,359 )   (1,275,506 )
 
Cash Flows From Investing Activities
Expenditures for property and equipment (736,197 ) (315,456 )
Expenditures for finite-life intangible assets   (25,146 )   (648,616 )
Net cash used in investing activities   (761,343 )   (964,072 )
 
Cash Flows From Financing Activities
Net payments on revolving line of credit - (500,000 )
Principal payments on long-term debt including capital lease obligations (298,590 ) (327,113 )
Payments of deferred financing fees (11,313) (6,717 )
Proceeds from warrant exercises 29,301 24,000
Proceeds from sales of 1,900,000 shares of common stock, net of offering costs of $1,236,287 - 6,363,713
Proceeds from subscription notes receivable   22,500     27,000  
Net cash provided by (used in) financing activities   (258,102)     5,580,883  
Net increase (decrease) in cash and cash equivalents (2,698,804) 3,341,305
Cash and cash equivalents
Beginning of period   4,091,739     610,727  
End of period $ 1,392,935   $ 3,952,032  

Contacts

Electromed, Inc.
James J. Cassidy, Ph.D., 952-758-9299
Interim Chief Executive Officer
jcassidy@electromed.com
or
The Event Group, Incorporated
Pankti Shah, 763-548-1304
Director of Strategic Marketing
pankti.shah@eventshows.com

Contacts

Electromed, Inc.
James J. Cassidy, Ph.D., 952-758-9299
Interim Chief Executive Officer
jcassidy@electromed.com
or
The Event Group, Incorporated
Pankti Shah, 763-548-1304
Director of Strategic Marketing
pankti.shah@eventshows.com