Full Press Release Details
James J. Cassidy, Ph.D.
Interim Chief Executive Officer
ELECTROMED, INC. REPORTS FY2013 FIRST
New Prague, Minnesota - November 13, 2012 -
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
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.
Results for the Three Months Ended September 30, 2012
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.
Financial Tables Follow:
Results for the Three Months Ended September 30, 2012
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 |
Results for the Three Months Ended September 30, 2012
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 |
Results for the Three Months Ended September 30, 2012
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 |