Full Press Release Details
Chief Executive Officer
ELECTROMED, INC. REPORTS FY2013 SECOND QUARTER
New Prague, Minnesota -
February 13, 2013 - 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.
Results for the Three-Months Ended December 31, 2012
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.
Financial Tables Follow:
Electromed, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
| December 31, 2012 | June 30, 2012 | |||||||
| 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) | 9,725,142 | 10,850,859 | ||||||
| Inventories | 1,899,028 | 2,392,416 | ||||||
| Prepaid expenses and other current assets | 358,935 | 359,583 | ||||||
| Income taxes receivable | 605,744 | 340,744 | ||||||
| Deferred income taxes | 656,000 | 656,000 | ||||||
| Total current assets | 14,250,465 | 16,302,037 | ||||||
| Property and equipment, net | 3,481,373 | 3,170,014 | ||||||
| Finite-life intangible assets, net | 1,135,891 | 1,174,033 | ||||||
| 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 debt | 66,191 | 254,020 | ||||||
| Accounts payable | 753,098 | 749,985 | ||||||
| Accrued compensation | 615,566 | 636,995 | ||||||
| Warranty reserve | 661,000 | 610,000 | ||||||
| Other accrued liabilities | 127,077 | 151,558 | ||||||
| Total current liabilities | 2,822,932 | 4,170,686 | ||||||
| Long-term debt, less current maturities | 1,356,961 | 1,390,003 | ||||||
| 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 | 81,143 | 81,143 | ||||||
| Additional paid-in capital | 13,045,518 | 12,959,136 | ||||||
| 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 Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
| 2012 | 2011 | 2012 | 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 administrative | 3,000,532 | 3,130,799 | 5,816,544 | 6,530,602 | ||||||||||||
| 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: | ||||||||
| Depreciation | 231,918 | 193,790 | ||||||
| Amortization of finite-life intangible assets | 66,234 | 60,199 | ||||||
| Amortization of debt issuance costs | 6,377 | 6,066 | ||||||
| Share-based compensation expense | 86,382 | 62,108 | ||||||
| Loss on disposal of property and equipment | 22,020 | 9,865 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 1,125,717 | (1,111,600 | ) | |||||
| Inventories | 493,388 | (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 |