Electromed, Inc. Reports FY2013 Second Quarter Results

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Electromed, Inc. Reports FY2013 Second Quarter Results

NEW PRAGUE, Minn.--(BUSINESS WIRE)-- Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for the three-month period ended December 31, 2012. Net revenues for the three months ended December 31, 2012, were approximately $3,856,000, a 19.5% decrease compared to net revenues of approximately $4,790,000 for the same period last year. The Company also announced net loss of approximately $411,000, or $0.05 per basic and diluted share, for the three months ended December 31, 2012, compared to net income of approximately $25,000, or $0.00 per basic and diluted share, for the same period last year. Net revenues decreased as a result of downward pressure on pricing and added administrative steps implemented by third party payers in the insurance claims process which has lengthened the approval process compared to the prior year. Net loss results were attributable to lower net revenues, offset by decreased expenses and operating efficiencies designed to better align expenses with demand.

Kathleen Skarvan, CEO, said, "While our results this quarter are disappointing, we are gaining momentum and positioning ourselves for sales growth going into fiscal year 2014. Our positive momentum is attributable to our re-branding strategy, hiring a veteran International sales manager focused on broadening our footprint in Latin America and the Middle East, our U.S. sales force being fully staffed in all strategic regions and realigning our reimbursement function to create a stronger focus on payer contracts and greater efficiencies. Additionally, it is important to highlight the strength of our balance sheet, which is strong enough to support us while we work through our current challenges."


Gross profit decreased to approximately $2,514,000, or 65.2% of net revenues, for the three months ended December 31, 2012, compared to approximately $3,481,000, or 72.7% for the same period in fiscal 2012. The decrease in gross profit percentage was primarily the result of reduced leverage of manufacturing costs on lower revenue levels. The Company believes that as it grows sales, it will be able to leverage manufacturing costs more effectively and the gross profit percentage will return to more historical levels above 70%.

Operating expenses, which consist of selling, general, and administrative expenses and research and development expenses, were approximately $3,110,000 for the three months ended December 31, 2012, a decrease of approximately 8.0% over operating expenses for the same period last year. These decreases resulted from lower sales volume and lower associated selling costs; decreased payroll as a result of lower overall management compensation; and a reduction in marketing fees.

Total cash was approximately $1,006,000 as of December 31, 2012. For the three months ended December 31, 2012, net cash provided by operating activities was approximately $1,088,000, composed primarily of a decrease in the Company's accounts receivables and inventory, which decreased approximately $690,000 and $406,000, respectively. Prepaid expenses and accounts payable and accrued liabilities increased approximately $85,000 and $272,000, respectively, during the three months ended December 31, 2012. An aggregate of $286,000 was used for investing activities during the three months ended December 31, 2012, for purchases of property and equipment. Cash used in financing activities was approximately $1,279,000, consisting primarily of $111,000 in payments of long-term debt and capital lease obligations, as well as payments on our revolving line of credit of $1,168,000.

"During my first two months with the company, since joining Electromed in December, I am even more confident we have the framework for growth, and plan to accelerate our strategies through the remainder of fiscal 2013," added Skarvan. "The multi-pronged approach is on: increasing revenues, advancing our technology and aggressively managing our cost structure, while enhancing productivity by throughout the organization."

About Electromed, Inc.
Electromed, Inc. 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 momentum, sales growth, gross profit percentage, profitability, margins, and cost control.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
 
  December 31,  June 30,
20122012
Assets(Unaudited)
Current Assets
Cash and cash equivalents$1,005,616$1,702,435
Accounts receivable (net of allowances for doubtful accounts of $45,000)9,725,14210,850,859
Inventories1,899,0282,392,416
Prepaid expenses and other current assets358,935359,583
Income taxes receivable605,744340,744
Deferred income taxes 656,000 656,000
Total current assets14,250,46516,302,037
Property and equipment, net3,481,3733,170,014
Finite-life intangible assets, net1,135,8911,174,033
Other assets 276,582 274,940
Total assets$19,144,311$20,921,024
 
Liabilities and Equity
Current Liabilities
Revolving line of credit$600,000$1,768,128
Current maturities of long-term debt66,191254,020
Accounts payable753,098749,985
Accrued compensation615,566636,995
Warranty reserve661,000610,000
Other accrued liabilities 127,077 151,558
Total current liabilities2,822,9324,170,686
Long-term debt, less current maturities1,356,9611,390,003
Deferred income taxes 280,000 280,000
Total liabilities 4,459,893 5,840,689
 
Commitments and Contingencies
 
Equity

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

81,14381,143
Additional paid-in capital13,045,51812,959,136
Retained earnings 1,557,757 2,040,056
Total equity 14,684,418 15,080,335
Total liabilities and equity$19,144,311$20,921,024
 
 
Electromed, Inc. and Subsidiary
Condensed Consolidated Statements of Income

(Unaudited)

    

 

For the Three Months EndedFor the Six Months Ended
December 31,December 31,
2012  20112012  2011
 
Net revenues$3,856,370$4,790,344$7,887,656$10,169,262
Cost of revenues 1,342,002  1,309,064  2,552,455  2,618,631 
Gross profit 2,514,368  3,481,280  5,335,201  7,550,631 
 
Operating expenses
Selling, general and administrative3,000,5323,130,7995,816,5446,530,602
Research and development 109,250  250,339  210,440  467,425 
Total operating expenses 3,109,782  3,381,138  6,026,984  6,998,027 
Operating income (loss)(595,414)100,142(691,783)552,604
Interest expense, net of interest income of $10,975, $1,634, $15,322, and $3,662 respectively 25,777  43,588  62,516  87,511 
Net income (loss) before income taxes(621,191)56,554(754,299)465,093
 
Income tax benefit (expense) 210,000  (32,000) 272,000  (195,000)
 
Net income (loss)$(411,191)$24,554 $(482,299)$270,093 
 
Earnings (loss) per share:
 
Basic and diluted$(0.05)$0.00 $(0.06)$0.03 
 
Weighted-average common shares outstanding:
Basic 8,114,252  8,101,745  8,114,252  8,101,330 
Diluted 8,114,252  8,125,458  8,114,252  8,121,971 
 
 
Electromed, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows

(Unaudited)

  
For the Six Months Ended
December 31,
2012  2011
Cash Flows From Operating Activities
Net income (loss)$(482,299)$270,093
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation231,918193,790
Amortization of finite-life intangible assets66,23460,199
Amortization of debt issuance costs6,3776,066
Share-based compensation expense86,38262,108
Loss on disposal of property and equipment22,0209,865
Changes in operating assets and liabilities:
Accounts receivable1,125,717(1,111,600)
Inventories493,388(541,677)
Prepaid expenses and other assets(272,371)(138,627)
Accounts payable and accrued liabilities (74,972) (343,091)
Net cash provided by (used in) operating activities 1,202,394  (1,532,874)
 
Cash Flows From Investing Activities
Expenditures for property and equipment(482,122)(618,966)
Expenditures for finite-life intangible assets (28,092) (22,650)
Net cash used in investing activities (510,214) (641,616)
 
Cash Flows From Financing Activities
Net payments on revolving line of credit(1,168,128)-
Principal payments on long-term debt including capital lease obligations(220,871)(189,056)
Payments of deferred financing fees-(10,526)
Proceeds from warrant exercises-5,301
Proceeds from subscription notes receivable -  22,500 
Net cash used in financing activities (1,388,999) (171,781)
Net decrease in cash and cash equivalents(696,819)(2,346,271)
Cash and cash equivalents
Beginning of period 1,702,435  4,091,739 
End of period$1,005,616 $1,745,468 
 



Electromed, Inc.
Kathleen Skarvan, 952-758-9299
Chief Executive Officer
kskarvan@electromed.com

KEYWORDS:   United States  North America  Minnesota

INDUSTRY KEYWORDS:

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