Electromed, Inc. Reports FY2013 First Quarter Results

Electromed, Inc. Reports FY2013 First Quarter Results

NEW PRAGUE, Minn.--(BUSINESS WIRE)-- Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for the three-month period ended September 30, 2012. Net revenues for the three months ended September 30, 2012 were approximately $4,031,000, a 25.1% decrease compared to net revenues of approximately $5,379,000 for the same period last year. The Company also announced a net loss of approximately $71,000, or $0.01 per basic and diluted share, for the three months ended September 30, 2012, compared to net income of approximately $246,000, or $0.03 per basic and diluted share, for the same period last year. Net revenues decreased in correlation with turnover in the sales force and a decrease in the number of Clinical Area Managers (CAMs) with over one year of experience, as well as lower referral counts. Net loss results were attributable to lower net revenues, offset by decreased expenses related to decreases in sales force and operating efficiencies designed to better align expenses with demand.

Gross profit decreased to approximately $2,821,000, or 70.0% of net revenues, for the three months ended September 30, 2012, compared to $4,069,000, or 75.6% of net revenues, for the same period in Fiscal 2012. The decrease in gross profit dollars resulted primarily from the decrease in sales volume. The change in gross profit percentage for the three-month period ended September 30, 2012 was primarily the result of lower than average reimbursement from the Company's mix of referrals compared to the three-month period ended September 30, 2011. 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 cause margins to fluctuate on a quarterly basis. However, management does not believe the results of the quarter ended September 30, 2012 are indicative of a long-term decrease in margins.


Operating expenses, which consist of selling, general, and administrative expenses and research and development expenses, were approximately $2,917,000 for the three months ended September 30, 2012, a decrease of approximately 17.2% over total operating expenses for the same period last year. The decrease primarily resulted from lower sales volume and lower associated selling and patient training costs; decreased payroll as a result of lower commissions and lower overall management compensation; and a reduction in marketing fees. Lower research and development expenses were due primarily to discontinuing the use of a certain outside vendor.

Total cash and cash equivalents were approximately $1,483,000 as of September 30, 2012. For the three months ended September 30, 2012, cash used in financing activities was approximately $110,000, consisting of payments on long-term debt and capital lease obligations. An aggregate of $224,000 was used for investing activities during the three months ended September 30, 2012, including $27,000 in payments for patent-related costs and $197,000 in expenditures for property and equipment. Net cash provided by operating activities was approximately $114,000, composed primarily of a decrease in the Company's receivable position of approximately $435,000, or 4.0%, to approximately $10,400,000 during the three months ended September 30, 2012. The change in total cash position was a decrease of approximately $220,000, as compared to a decrease of $1,146,000 during the same period in calendar year 2011.

Jim Cassidy, Ph.D., Electromed's Interim CEO, said "We continued to experience turnover in our sales force during the first quarter. Midway through the quarter we added to the strength of our management team by hiring a new Director of Sales. Subsequent to the end of the quarter, we realigned sales territories and instituted a new compensation plan designed to drive future sales growth. We saw significant improvement in sales performance in October that we attribute to those changes. We also brought marketing functions in-house at considerable savings and sought operating efficiencies throughout our organization to bring expenses in line with demand. These efforts are ongoing and are expected to contribute to improvements in profitability in the future."

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 long-term margins, future sales growth and profitability. 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

September 30,

June 30,

2012

2012

Assets

(Unaudited)

Current Assets

Cash and cash equivalents

$

1,482,555

$

1,702,435

Accounts receivable (net of allowances for doubtful accounts of $45,000)

10,415,488

10,850,859

Inventories

2,305,276

2,392,416

Prepaid expenses and other current assets

463,426

359,583

Income tax receivable

405,494

340,744

Deferred income taxes

656,000

656,000

Total current assets

15,728,239

16,302,037

Property and equipment, net

3,254,872

3,170,014

Finite-life intangible assets, net assets, net

1,167,136

1,174,033

Other assets

290,689

274,940

Total assets

$

20,440,936

$

20,921,024

Liabilities and Equity

Current Liabilities

Revolving line of credit

$

1,768,128

$

1,768,128

Current maturities of long-term debt

159,869

254,020

Accounts payable

554,086

749,985

Accrued compensation

484,812

636,995

Warranty reserve

604,000

610,000

Other accrued liabilities

165,144

151,558

Total current liabilities

3,736,039

4,170,686

Long-term debt, less current maturities

1,374,353

1,390,003

Deferred income taxes

280,000

280,000

Total liabilities

5,390,392

5,840,689

Commitments and Contingencies

Shareholders' Equity

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

81,143

81,143

Additional paid-in capital

13,000,453

12,959,136

Retained earnings

1,968,948

2,040,056

Total equity

15,050,544

15,080,335

Total liabilities and equity

$

20,440,936

$

20,921,024

Electromed, Inc. and Subsidiary

Condensed Consolidated Statements of Income

(Unaudited)

For the Three Months Ended

September 30,

2012

2011

Net revenues

$

4,031,286

$

5,378,918

Cost of revenues

1,210,452

1,309,565

Gross profit

2,820,834

4,069,353

Operating expenses

Selling, general and administrative

2,816,015

3,399,806

Research and development

101,189

217,085

Total operating expenses

2,917,204

3,616, 891

Operating income (loss)

(96,370)

452,462

Interest expense, net of interest income of $4,348 and $2,027 respectively

36,738

43,923

Net income (loss) before income taxes

(133,108)

408,539

Income tax benefit (expense)

62,000

(163,000

)

Net income (loss)

$

(71,108)

$

245,539

Earnings (loss) per share:

Basic and diluted

$

(0.01)

$

0.03

Weighted-average common shares outstanding:

Basic

8,114,252

8,100,915

Diluted

8,114,252

8,119,190

Electromed, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the Three Months Ended

September 30,

2012

2011

Cash Flows From Operating Activities

Net income (loss)

$

(71,108

)

$

245,539

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation

114,979

90,552

Amortization of finite-life intangible assets

33,969

30,006

Amortization of debt issuance costs

3,363

3,297

Share-based compensation expense

41,317

31,053

Loss on disposal of property and equipment

3,915

9,864

Changes in operating assets and liabilities:

Accounts receivable

435,371

(807,361

)

Inventories

87,140

(307,845

Prepaid expenses and other assets

(187,706

)

(77,186

)

Accounts payable and accrued liabilities

(347,226

)

(40,754

Net cash provided by (used in) operating activities

114,014

(822,835

)

Cash Flows From Investing Activities

Expenditures for property and equipment

(197,020

)

(215,311

)

Expenditures for finite-life intangible assets

(27,073

)

(21,750

)

Net cash used in investing activities

(224,093

)

(237,061

)

Cash Flows From Financing Activities

Principal payments on long-term debt including capital lease obligations

(109,801

)

(109,970

)

Proceeds from options/warrants exercises

-

1,800

Proceeds from subscription notes receivable

-

22,500

Net cash used in financing activities

(109,801

)

(85,670

)

Net decrease in cash and cash equivalents

(219,880

)

(1,145,566

)

Cash and cash equivalents

Beginning of period

1,702,435

4,091,739

End of period

$

1,482,555

$

2,946,173



Electromed, Inc.
James J. Cassidy, Ph.D.
Interim Chief Executive Officer
952-758-9299
jcassidy@electromed.com

KEYWORDS: United States North America Minnesota

INDUSTRY KEYWORDS:

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