Electromed, Inc. Reports Fiscal Year 2013 Third Quarter Results
Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for
the three-month period ended March 31, 2013. Net revenues for the three
months ended March 31, 2013, were approximately $3,199,000, a 33.0%
decrease compared to net revenues of approximately $4,774,000 for the
same period last year. The Company also announced net loss of
approximately $431,000, or $(0.05) per basic and diluted share, for the
three months ended March 31, 2013, compared to net income of
approximately $95,000 or $0.01 per basic and diluted share, for the same
period last year. The decrease in net income primarily resulted from a
decrease in homecare revenue partially offset by decreases in expenses.
The decrease in homecare revenue was caused by downward pressure on
pricing and added administrative procedures implemented by third party
payers in the insurance claims process which has lengthened the approval
process. Although total revenue was down, the Company experienced growth
in international revenue of $50,000 to $215,000 for the three months
ended March 31, 2013, as well as increases in government/institutional
revenue of $124,000 to $373,000 compared to the same period last year.
Chief Executive Officer, Kathleen Skarvan said, “We believe we’ve hit
the low watermark in terms of revenues and we are slowly seeing upward
progress. While the beginning of calendar year 2013 continued to be a
challenging selling and reimbursement environment, we achieved record
referrals in the third quarter and approvals trended positively in the
latter half of the quarter which speaks to the strength of our sales
force and reimbursement teams. We see the positive momentum continuing
into the fiscal fourth quarter and believe that the trend will continue
into fiscal 2014.”
Gross profit decreased to approximately $2,442,000 for the three months
ended March 31, 2013, compared to $3,369,000 or the same period in
fiscal 2012. Gross profit as a percentage of revenue, however, increased
to 76.3% for the three months ended March 31, 2013, from approximately
70.6% in the same period of 2012. The increase in gross profit
percentage was the result of higher than average reimbursement from the
mix of referrals during the three month period. Factors such as
diagnoses that are not assured of reimbursement, insurance programs with
lower allowable reimbursement amounts (for example, state Medicaid
programs), and whether the patient meets prerequisite medical criteria
for reimbursement, affect average reimbursement received on a short-term
basis. These factors tend to fluctuate on a quarterly basis. During the
quarter ended March 31, 2013, the Company continued to focus on cost
efficiencies, which also contributed to the increase in gross profit
percentage.
Operating expenses, which consist of selling, general, and
administrative expenses and research and development expenses, were
approximately $3,136,000 for the three months ended March 31, 2013.
Operating expenses remained relatively flat even with increases in
staffing within the sales and reimbursement departments, as well as
incurring additional professional fees. The Company was able to offset
these increased costs by reducing certain operating expenses such as
travel, meals and entertainment, marketing, advertising, and research
and development.
Total cash and cash equivalents was approximately $505,000 as of March
31, 2013. For the three months ended March 31, 2013, net cash used in
operating activities was approximately $212,000, composed primarily of a
decrease in the Company’s accounts receivable, which was offset by
increases in inventory, prepaid expenses and other assets and accounts
payable and accrued liabilities. An aggregate of $233,000 was used for
investing activities during the three months ended March 31, 2013 for
purchases of property and equipment and payment of trademark and patent
costs. Cash used in financing activities was approximately $56,000,
consisting of payments of line of credit, long-term debt and capital
lease obligations. The Company believes it will be out of compliance
with its existing debt covenants at June 30, 2013, and therefore has
classified the term note, with a December 2014 maturity date as a
current liability. The bank has waived all existing covenant violations
as of May 13, 2013. The Company is working with the bank and believes it
will be able to successfully modify the covenants in the current debt
agreement in order to be in compliance as of June 30, 2013.
“Our focus is on controlling costs more aggressively in the short term
while implementing key strategies for growth both domestically and
internationally,” noted Skarvan. “We are adapting quickly to the current
economic and reimbursement environment by revising our processes and
selling our product based on features and benefits that best serve our
customers, with an emphasis on securing additional third-party payer
contracts. By shifting to this strategy, we believe we will ultimately
increase profitability.”
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.
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Electromed, Inc. and Subsidiary
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Condensed Consolidated Balance Sheets
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March 31,
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June 30,
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2013
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2012
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Assets
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(Unaudited)
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Current Assets
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Cash and cash equivalents
|
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$
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504,950
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$
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1,702,435
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Accounts receivable (net of allowances for doubtful accounts of
$45,000)
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9,198,044
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10,850,859
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Inventories
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2,141,445
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2,392,416
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Prepaid expenses and other current assets
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464,965
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359,583
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Income taxes receivable
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841,978
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340,744
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Deferred income taxes
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656,000
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656,000
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Total current assets
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13,807,382
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16,302,037
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Property and equipment, net
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3,633,916
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3,170,014
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Finite-life intangible assets, net
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1,111,606
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1,174,033
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Other assets
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291,830
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274,940
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Total assets
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$
|
18,844,734
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$
|
20,921,024
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Liabilities and Equity
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Current Liabilities
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Revolving line of credit
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$
|
560,000
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$
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1,768,128
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Current maturities of long-term debt
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1,388,935
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254,020
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Accounts payable
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835,715
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749,985
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Accrued compensation
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602,678
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636,995
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Warranty reserve
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680,000
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610,000
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Other accrued liabilities
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179,831
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151,558
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Total current liabilities
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4,247,159
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4,170,686
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Long-term debt, less current maturities
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18,326
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1,390,003
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Deferred income taxes
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280,000
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280,000
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Total liabilities
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4,545,485
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5,840,689
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Commitments and Contingencies
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Equity
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Common stock, $0.01 par value; authorized: 13,000,000; shares
issued and outstanding: 8,114,252
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81,143
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81,143
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Additional paid-in capital
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13,091,315
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|
12,959,136
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Retained earnings
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1,126,791
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2,040,056
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Total equity
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14,299,249
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15,080,335
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Total liabilities and equity
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$
|
18,844,734
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$
|
20,921,024
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Electromed, Inc. and Subsidiary
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Condensed Consolidated Statements of Operations
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(Unaudited)
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For the Three Months Ended
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For the Nine Months Ended
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March 31,
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March 31,
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2013
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2012
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2013
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2012
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Net revenues
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$
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3,198,534
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$
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4,774,347
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$
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11,086,190
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$
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14,943,612
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Cost of revenues
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|
756,693
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|
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1,405,804
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3,309,148
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4,024,577
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Gross profit
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2,441,841
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3,368,543
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|
7,777,042
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|
|
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|
10,919,035
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Operating expenses
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Selling, general and administrative
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3,034,189
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2,904,534
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8,850,735
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9,434,995
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Research and development
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101,460
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238,230
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311,899
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|
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|
705,655
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Total operating expenses
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|
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3,135,649
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|
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3,142,764
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9,162,634
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10,140,650
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Operating income (loss)
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(693,808
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)
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225,779
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(1,385,592
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)
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778,385
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Interest expense, net of interest income
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29,158
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42,684
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|
91,673
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|
|
|
|
130,194
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Net income (loss) before income taxes
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(722,966
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)
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|
183,095
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(1,477,265
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)
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|
648,191
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Income tax benefit (expense)
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|
292,000
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(88,000
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)
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564,000
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(283,000
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)
|
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Net income (loss)
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|
$
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(430,966
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)
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|
$
|
95,095
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$
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(913,265
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)
|
|
|
$
|
365,191
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Earnings (loss) per share:
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Basic
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$
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(0.05
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)
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$
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0.01
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$
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(0.11
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)
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$
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0.05
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Diluted
|
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$
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(0.05
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)
|
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$
|
0.01
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|
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$
|
(0.11
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)
|
|
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$
|
0.04
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Weighted-average common shares outstanding:
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Basic
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8,114,252
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8,114,120
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8,114,252
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8,105,562
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Diluted
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8,114,252
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8,116,759
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8,114,252
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|
|
8,116,977
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Electromed, Inc. and Subsidiary
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Condensed Consolidated Statements of Cash Flows
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(Unaudited)
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For the Nine Months Ended
|
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March 31,
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2013
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2012
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Cash Flows From Operating Activities
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Net income (loss)
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$
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(913,265
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)
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$
|
365,191
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Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
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Depreciation
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344,695
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300,248
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Amortization of finite-life intangible assets
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|
98,069
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|
|
|
|
91,032
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Amortization of debt issuance costs
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|
8,691
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|
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|
9,461
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Share-based compensation expense
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|
132,179
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|
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|
97,044
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Loss on disposal of property and equipment
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|
43,143
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|
23,009
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Changes in operating assets and liabilities:
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Accounts receivable
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1,652,815
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|
|
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(1,498,457
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)
|
Inventories
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|
250,971
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|
|
|
|
(555,980
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)
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Prepaid expenses and other assets
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|
|
|
(632,197
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)
|
|
|
|
(214,709
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)
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Accounts payable and accrued liabilities
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|
5,086
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|
|
|
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(296,198
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)
|
Net cash provided by (used in) operating activities
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|
990,187
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(1,679,359
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)
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Cash Flows From Investing Activities
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Expenditures for property and equipment
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(707,140
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)
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|
(736,197
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)
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Expenditures for finite-life intangible assets
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(35,642
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)
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|
(25,146
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)
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Net cash used in investing activities
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|
(742,782
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)
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|
(761,343
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)
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|
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Cash Flows From Financing Activities
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|
|
|
|
|
|
|
|
|
Net payments on revolving line of credit
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|
(1,208,128
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)
|
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|
|
-
|
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Principal payments on long-term debt including capital lease
obligations
|
|
|
|
(236,762
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)
|
|
|
|
(298,590
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)
|
Payments of deferred financing fees
|
|
|
|
-
|
|
|
|
|
(11,313
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)
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Proceeds from warrant exercises
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|
|
|
-
|
|
|
|
|
29,301
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Proceeds from subscription notes receivable
|
|
|
|
-
|
|
|
|
|
22,500
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Net cash used in financing activities
|
|
|
|
(1,444,890
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)
|
|
|
|
(258,102
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)
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Net decrease in cash and cash equivalents
|
|
|
|
(1,197,485
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)
|
|
|
|
(2,698,804
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Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
|
1,702,435
|
|
|
|
|
4,091,739
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End of period
|
|
|
$
|
504,950
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|
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$
|
1,392,935
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<div class="copyright">
Copyright Business Wire 2013
</div>