EX-99.1 2 elmd105706_ex99-1.htm PRESS RELEASE DATED NOVEMBER 15, 2010

Exhibit 99.1


 

ELECTROMED, INC.

Creating superior care through innovation®

 

 

FOR IMMEDIATE RELEASE

 

Contact:

Robert D. Hansen

Chairman and Chief Executive Officer

Electromed, Inc.

952-758-9299

bhansen@electromed.com

 

Pankti Shah

Director of Strategic Marketing

The Event Group, Incorporated

763-548-1304

pankti.shah@eventshows.com

ELECTROMED, INC. REPORTS 2011 FIRST QUARTER RESULTS
29% Increase in First Quarter Revenue Compared to Prior Year

New Prague, Minnesota – November 15, 2010 – Electromed, Inc. (NASDAQ: ELMD) today announced financial results for the three months ended September 30, 2010. Net revenues for the three months ended September 30, 2010 were approximately $4,165,000, a 29% increase compared to net revenues of approximately $3,228,000 for the same period last year. The Company also announced for the three months ended September 30, 2010 net income of approximately $112,000, or $0.02 per basic and diluted share. These results represent a decrease over the reported net income of $335,737, or $0.06 and $0.05 per basic and diluted share, respectively, for the same period last year. The reduction primarily resulted from increases in expenses designed to develop, support, and maintain a higher sales level.

Gross profit increased to approximately $3,003,000, or 72.1% of net revenues, for the three months ended September 30, 2010, from approximately $2,501,000, or 77.5% of net revenues in the three month period ended September 30, 2009. The increase in gross profit dollars resulted primarily from the increase in sales volume. The decrease in gross profit percentage was primarily the result of lower than average reimbursement from the mix of referrals during the three month period. Factors such as diagnoses which 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 and tend to fluctuate on a quarterly basis. The Company’s management does not believe the results of the quarter ended September 30, 2010 are indicative of a long-term decrease in margins.

Electromed, Inc.

Three-Month Results as of September 30, 2010

Page 2


Operating expenses for the three month period ended September 30, 2010 increased by approximately $875,400, to $2,756,000, compared to the same period last year. These planned increases resulted from higher payroll and compensation-related expenses related to adding employees to support sales and marketing initiatives, patient training costs related to a higher sales volume, and trade show expenses related to the Company’s Annual Sales Meeting occurring in the first quarter of fiscal 2011, compared to the second quarter of fiscal 2010. Additionally, the Company continued to focus on research and development efforts, resulting in research and development expenses of approximately $198,000 in the first quarter of fiscal 2011 compared to approximately $115,000 for the same period last year.

Total cash increased to approximately $6,016,000 as of September 30, 2010. For the three months ended September 30, 2010, cash provided by financing activities was approximately $5,760,000, consisting of approximately $7,600,000 gross proceeds from the issuance of common stock in the Company’s initial public offering, offset by approximately $1,230,000 of offering expenses incurred during the fiscal quarter, payments on the Company’s revolving credit line of $500,000, and principal payments on long-term debt of approximately $105,000. An aggregate of $294,000 was used for investing activities during the first fiscal quarter, including $196,000 relating to defense of the SmartVest® trademark and $98,000 for the purchase of property and equipment. On September 30, 2010, the Company reached a confidential settlement in a trademark infringement lawsuit brought against it by Hill-Rom Services, Inc., Advanced Respiratory, Inc., Hill-Rom Company, Inc., and Hill-Rom Services Pte. Ltd. (collectively, “Hill-Rom”), regarding the Company’s use of the term “SmartVest®.” The terms of the settlement agreement are confidential. The Company has no plans to change its marks. The company expects that the settlement will result in a decrease in expenses relating to litigation defense.

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 the company’s expectations relating to gross margins, litigation expense and continued use of the SmartVest® mark, and can generally otherwise be identified by the words “believe,” “expect,”

Electromed, Inc.

Three-Month Results as of September 30, 2010

Page 3

“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, our ability to successfully implement our marketing and sales strategies, the risk that we may be party to infringement actions in the future (although at this time we are not aware of any undisclosed actual or threatened litigation that would have a material adverse effect on our financial condition or results of operations), 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:

-more-


Electromed, Inc. and Subsidiary
Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

September 30
2010

 

June 30
2010

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,015,773

 

$

610,727

 

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

 

 

7,047,718

 

 

6,577,002

 

Inventories

 

 

1,435,045

 

 

1,470,775

 

Prepaid expenses and other current assets

 

 

338,794

 

 

269,193

 

Deferred income taxes

 

 

514,000

 

 

514,000

 

Total current assets

 

 

15,351,330

 

 

9,441,697

 

Property and equipment, net

 

 

2,733,898

 

 

2,688,941

 

Finite-life intangible assets, net

 

 

1,305,293

 

 

1,055,776

 

Deferred common stock offering costs

 

 

—

 

 

828,034

 

Other assets

 

 

146,673

 

 

128,789

 

Total assets

 

$

19,537,194

 

$

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

 

 

400,111

 

 

397,886

 

Accounts payable

 

 

930,921

 

 

1,239,827

 

Accrued compensation

 

 

676,212

 

 

665,083

 

Warranty reserve

 

 

389,754

 

 

363,277

 

Other accrued liabilities

 

 

185,357

 

 

60,308

 

Income tax payable

 

 

52,291

 

 

7,789

 

Total current liabilities

 

 

3,902,774

 

 

4,502,298

 

Long-term debt, less current maturities

 

 

1,925,673

 

 

2,033,325

 

Deferred income taxes

 

 

145,000

 

 

145,000

 

Total liabilities

 

 

5,973,447

 

 

6,680,623

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

Electromed, Inc. stockholders’ equity:

 

 

 

 

 

 

 

Common stock, $0.01 par value; authorized: 10,000,000 shares; issued and outstanding: 8,087,885 and 6,187,885 shares, respectively

 

 

80,879

 

 

61,879

 

Additional paid-in capital

 

 

12,655,425

 

 

6,685,362

 

Retained earnings

 

 

909,943

 

 

797,873

 

Common stock subscriptions receivable for shares outstanding of 48,500

 

 

(82,500

)

 

(82,500

)

Total stockholders’ equity

 

 

13,563,747

 

 

7,462,614

 

Total liabilities and stockholders’ equity

 

$

19,537,194

 

$

14,143,237

 

-more-


Electromed, Inc. and Subsidiary
Condensed Consolidated Statements of Income (Unaudited)

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
September 30,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Net revenues

 

$

4,165,429

 

$

3,228,120

 

Cost of revenues

 

 

1,161,947

 

 

727,100

 

Gross profit

 

 

3,003,482

 

 

2,501,020

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Selling, general and administrative

 

 

2,557,338

 

 

1,764,858

 

Research and development

 

 

198,386

 

 

115,466

 

Total operating expenses

 

 

2,755,724

 

 

1,880,324

 

Operating income

 

 

247,758

 

 

620,696

 

Interest expense, net of interest income of $1,971and $1,196 respectively

 

 

59,688

 

 

67,440

 

Net income before income taxes

 

 

188,070

 

 

553,256

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(76,000

)

 

(211,000

)

Net income

 

 

112,070

 

 

342,256

 

Less: Net income attributable to noncontrolling interest

 

 

―

 

 

(6,519

)

Net income attributable to Electromed, Inc.

 

$

112,070

 

$

335,737

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Electromed, Inc. common shareholders:

 

 

 

 

 

 

 

Basic

 

$

0.02

 

$

0.06

 

Diluted

 

$

0.02

 

$

0.05

 

 

 

 

 

 

 

 

 

Weighted-average Electromed, Inc. common shares outstanding:

 

 

 

 

 

 

 

Basic

 

 

6,986,798

 

 

6,057,883

 

Diluted

 

 

7,002,904

 

 

6,116,489

 

-more-


Electromed, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
September 30,

 

 

 

2010

 

2009

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

Net income

 

$

112,070

 

$

342,256

 

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

 

 

 

 

 

 

 

Depreciation

 

 

78,684

 

 

79,241

 

Amortization of finite-life intangible assets

 

 

25,721

 

 

4,832

 

Amortization of debt issuance costs

 

 

13,408

 

 

2,504

 

Share-based compensation expense

 

 

42,900

 

 

39,173

 

Deferred income taxes

 

 

―

 

 

(78,000

)

Loss on disposal of property and equipment

 

 

2,385

 

 

1,302

 

Issuance of common stock for payment of services

 

 

―

 

 

22,500

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(470,716

)

 

(253,459

)

Inventories

 

 

35,730

 

 

(129,979

)

Prepaid expenses and other assets

 

 

(96,234

)

 

(63,948

)

Accounts payable and accrued liabilities

 

 

194,943

 

 

89,198

 

Net cash provided by (used in) operating activities

 

 

(61,109

)

 

55,620

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

Expenditures for property and equipment

 

 

(97,544

)

 

(25,138

)

Expenditures for finite-life intangible assets

 

 

(196,332

)

 

―

 

Net cash used in investing activities

 

 

(293,876

)

 

(25,138

)

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

Payments on revolving line of credit

 

 

(500,000

)

 

―

 

Principal payments on long-term debt including capital lease obligations

 

 

(105,428

)

 

(99,459

)

Payments of deferred financing fees

 

 

(4,659

)

 

―

 

Proceeds from sales of 1.9 million shares of common stock, net of offering costs of $1,229,882

 

 

6,370,118

 

 

―

 

Proceeds from warrant exercises

 

 

―

 

 

49,333

 

Proceeds from subscription notes receivable

 

 

―

 

 

7,500

 

Net cash provided by (used in) financing activities

 

 

5,760,031

 

 

(42,626

)

Net increase (decrease) in cash and cash equivalents

 

 

5,405,046

 

 

(12,144

)

Cash and cash equivalents

 

 

 

 

 

 

 

Beginning of period

 

 

610,727

 

 

361,916

 

End of period

 

$

6,015,773

 

$

349,772

 

####