Electromed, Inc. Reports 2011 Third Quarter Results

Electromed, Inc. (NASDAQ:ELMD) today announced financial results for the three and nine months ended March 31, 2011. Net revenues for the three months ended March 31, 2011 were approximately $5,199,000, a 22.9% increase compared to net revenues of approximately $4,229,000 for the same period last year. Net revenues for the nine months ended March 31, 2011 were approximately $14,050,000, a 31.6% increase compared to net revenues of approximately $10,680,000 for the same period last year.

The Company also announced net income of approximately $487,000, or $0.06 per basic and diluted share, for the three months ended March 31, 2011, compared to net income of approximately $475,000, or $0.08 per basic and diluted share, for the same three-month period last year. For the nine-month period ended March 31, 2011, net income was $891,000, or $0.12 per basic and diluted share, compared to net income of approximately $846,000, or $0.14 per basic and diluted share, for the same nine-month period last year. Net revenues increased primarily due to an expansion of our sales force. Net income results were attributable to higher net revenues, offset by expenses related to increases in sales force, support and production personnel, and an expansion of marketing and research and development activities. In addition, earnings per share was affected by an increase to the number of outstanding shares of Company common stock as compared to the prior-year periods, which was attributable to the Company’s completion of its initial public offering in August 2010. Including the underwriter’s over-allotment option, a total of 1,900,000 shares of Company common stock were registered and sold in the initial public offering.

Robert Hansen, Chairman and CEO, commented on the Company, saying,

“Electromed, Inc. is a rapidly growing Company. It is using a portion of the capital received from its IPO to grow its sales force and supporting infrastructure. While these actions reduce the magnitude of net income growth in the short-term, they are essential investments in driving longer-term profitable results. We have also continued to make important investments in research and development. We believe that new innovations are the surest path to sustainable growth and higher profits. We have pursued these investments while maintaining solid profitability and a strong balance sheet.”

Gross profit increased to approximately $3,703,000, or 71.2% of net revenues, for the three months ended March 31, 2011, and $10,177,000, or 72.4% of net revenues, for the nine months ended March 31, 2011. For the three and nine months ended March 31, 2010, gross profit was approximately $2,983,000, or 70.5% of net revenues, and $7,681,000 or 71.9% of net revenues, respectively. The increase in gross profit dollars resulted primarily from the increase in sales volume. The increase in gross profit percentage was primarily the result of higher reimbursement from the mix of referrals during the three- and nine-month periods. Factors such as diagnoses that are not assured of reimbursement, along with insurance programs which present lower allowable reimbursement amounts (for example, state Medicaid programs) affect average reimbursement received on a short-term basis and tend to fluctuate margins slightly on a quarterly basis.

Operating expenses, which consist of selling, general, and administrative expenses and research and development expenses, were approximately $3,032,000 and $8,715,000, respectively, for the three and nine-month periods ended March 31, 2011, an increase of approximately 36.7% over total operating expenses for the three-month period last year and an increase of approximately 42.3% over total operating expenses for the nine-month period last year. These planned increases resulted from higher payroll and marketing expenses related to increasing the size of our sales team, patient training costs related to a higher sales volume, increased expenses relating to being a newly public Company, and increased research and development expenses.

Total cash was approximately $3,952,000 as of March 31, 2011. For the nine months ended March 31, 2011, cash provided by financing activities was approximately $5,581,000, consisting of approximately $6,364,000 net proceeds from the issuance of common stock in the Company’s initial public offering during the nine-month period, offset by payments on the Company’s revolving credit line of $500,000 and principal payments on long-term debt of approximately $327,000. An aggregate of $964,000 was used for investing activities during the first nine months of the 2011 fiscal year, including $649,000 relating to defense of the SmartVest ® trademark and $315,000 for the purchase of property and equipment.

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. The forward-looking statements in this release include those relating to the Company’s two-year annual sales goal, the Company’s business strategy and intent to maximize long-term growth and profits. Forward-looking statements and the Company’s expectations regarding gross margins, and can generally otherwise be identified by the words “believe,” “expect,” “anticipate” or “intend” or similar words. 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
   
March 31 June 30
2011 2010

 
(Unaudited)

Assets
Current Assets
Cash and cash equivalents $ 3,952,032 $ 610,727

Accounts receivable (net of allowances for doubtful accounts of $45,000)
9,232,544 6,577,002
Inventories 1,664,965 1,470,775
Prepaid expenses and other current assets 324,519 269,193
Deferred income taxes   514,000     514,000  
Total current assets 15,688,060 9,441,697
Property and equipment, net 2,770,695 2,688,941
Finite-life intangible assets, net 1,255,235 1,055,776
Deferred common stock offering costs - 828,034

Other assets
 

191,895
   

128,789
 
Total assets $ 19,905,885   $ 14,143,237  
 
Liabilities and Stockholders’ Equity
Current Liabilities
Revolving line of credit $ 1,268,128 $ 1,768,128
Current maturities of long-term debt 435,793 397,886
Accounts payable 603,483 1,239,827
Accrued compensation 814,579 665,083
Warranty reserve 427,764 363,277
Other accrued liabilities   37,162     68,097  
Total current liabilities 3,586,909 4,502,298
Long-term debt, less current maturities 1,693,431 2,033,325
Deferred income taxes   145,000     145,000  
Total liabilities   5,425,340     6,680,623  
Commitments and Contingencies (Note 8)
 
Stockholders’ Equity
Electromed, Inc. stockholders’ equity:

Common stock, $0.01 par value; authorized: 13,000,000 shares; issued and outstanding: 8,099,885 and 6,187,885 shares, respectively
80,999 61,879
Additional paid-in capital 12,765,802 6,685,362
Retained earnings 1,689,244 797,873

Common stock subscriptions receivable for shares outstanding of 35,000 and 48,500 respectively
  (55,500 )   (82,500 )
Total stockholders’ equity   14,480,545     7,462,614  
Total liabilities and stockholders’ equity $ 19,905,885   $ 14,143,237  
 
 
 

Electromed, Inc. and Subsidiary

Condensed Consolidated Statements of Income

(Unaudited)
   

 

For the Three Months EndedMarch 31,

For the Nine Months EndedMarch 31,
2011   2010 2011   2010
 
Net revenues $ 5,198,828 $ 4,228,577 $ 14,049,803 $ 10,679,711
Cost of revenues   1,495,509   1,245,884     3,872,565   2,999,149
Gross profit   3,703,319   2,982,693     10,177,238   7,680,562
 
Operating expenses
Selling, general and administrative 2,759,543 2,024,006 8,025,578 5,679,494
Research and development   272,270   194,421     689,360   445,463
Total operating expenses   3,031,813   2,218,427     8,714,938   6,124,957
Operating income 671,506 764,266 1,462,300 1,555,605
Interest expense, net of interest income of $2,822, $758, $8,810, and $4,976 respectively   38,077   58,138     150,929   205,677
Net income before income taxes 633,429 706,128 1,311,371 1,349,928
 
Income tax expense   (146,000 )   (227,000 )   (420,000 )   (487,000 )
Net income 487,429 479,128 891,371 862,928
Less: Net income attributable to non-controlling interest   -   (4,470 )   -   (17,238

)
Net income attributable to Electromed, Inc. $ 487,429 $ 474,658     891,371 $ 845,690
 
Earnings per share attributable to Electromed, Inc. common shareholders:
Basic and Diluted $ 0.06 $ 0.08 $ 0.12 $ 0.14
 
Weighted-average Electromed, Inc. common shares outstanding:
Basic   8,099,752   6,079,522   7,722,075   6,072,256
Diluted   8,112,696   6,125,772   7,750,956   6,113,717
 
 
 

Electromed, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)
 

 

For the Nine Months EndedMarch 31,
2011   2010
Cash Flows From Operating Activities
Net income $ 891,371 $ 862,888
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation 246,426 223,107
Amortization of finite-life intangible assets 83,848 34,323
Amortization of debt issuance costs 27,778 40,384
Share-based compensation expense 129,396 125,846
Deferred income taxes - (153,000 )
Loss on disposal of property and equipment 15,758 3,728
Issuance of common stock for payment of services - 22,500
Changes in operating assets and liabilities:
Accounts receivable (2,655,542 ) (553,884 )
Inventories (194,190 ) (74,612 )
Prepaid expenses and other assets (149,566 ) (67,072 )
Accounts payable and accrued liabilities   329,215     629,158  
Net cash provided by (used in) operating activities   (1,275,506 )   1,093,366  
 
Cash Flows From Investing Activities
Expenditures for property and equipment (315,456 ) (189,828 )
Purchase of noncontrolling interest in Electromed Financial, LLC - (125,000 )
Expenditures for finite-life intangible assets   (648,616 )   (509,162 )
Net cash used in investing activities   (964,072 )   (823,990 )
 
Cash Flows From Financing Activities
Net borrowings (payments) on revolving line of credit (500,000 ) 1,268,128
Proceeds from long-term debt - 2,520,000
Principal payments on long-term debt including capital lease obligations (327,113 ) (3,543,933 )
Payments of deferred financing fees (6,717 ) (75,780 )
Proceeds from warrant exercises 24,000 73,332
Proceeds from sales of 1.9 million shares of common stock, net of offering costs of $1,236,287 6,363,713 -
Expenditures for IPO costs - (328,768 )
Repurchase of common stock - (18,418 )
Proceeds from subscription notes receivable   27,000     9,000  
Net cash provided by (used in) financing activities   5,580,883     (96,438 )
Net increase in cash and cash equivalents 3,341,305 172,938
Cash and cash equivalents
Beginning of period   610,727     361,916  
End of period $ 3,952,032   $ 534,854  

Copyright Business Wire 2010

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