Prism Medical Reports Second Quarter Results

TORONTO, July 24, 2013 /CNW/ - Prism Medical Ltd., ("Prism Medical" or "the Company") (TSXV: PM), a leading provider of durable medical equipment and related services to the mobility challenged, today reported financial results for the second quarter (Q2) ended May 31, 2013.

Financial Summary

(in thousands of
Canadian dollars)
Three months ended May 31 Six months ended May 31
  2013 2012 % Change 2013 2012 % Change
Revenues $19,711 $21,912 (10.0%) $37,016 $40,569 (8.8%)
Gross margin $7,911 $8,764 (9.7%) $14,256 $16,068 (11.3%)
(as % of revenues) 40.1% 40.0%   38.5% 39.6%  
Total SG&A $5,933 $6,545 (9.4%) $11,558 $12,588 (8.2%)
(as % of revenues) 30.1% 29.9%   31.2% 31.0%  
Net income $1,257 $1,538 (18.3%) $1,462 $2,347 (37.7%)
(as % of revenues) 6.4% 7.0%   3.9% 5.8%  
Adjusted EBITDA $2,897 $2,843 1.9% $4,437 $4,840 (8.3%)
(as % of revenues) 14.7% 13.0%   12.0% 11.9%  
Earnings per share            
Basic $0.15 $0.18 (16.7%) $0.17 $0.28 (39.3%)
Diluted $0.15 $0.18 (16.7%) $0.17 $0.28 (39.3%)

Second Quarter Highlights

  • EBITDA performance slightly ahead of last year and significantly higher than the last three quarters;
  • Solid growth in US market particularly in the institutional sector;
  • The performance of the MedCare supply agreement in line with expectations;
  • SG&A costs continue to be well below prior year levels and in line with expectations;
  • UK performing well despite the economic environment and the non-repeating first half 2012 Leonard Cheshire sales;
  • Canadian sales were well below last year due to high non-repeating first half 2012 BC sales and a general slowdown in government expenditures;
  • Two dividends of $0.08 per share have been paid this fiscal year;
  • Gross margin rates in excess of 40%.

Financial Review

Revenues for the three months and six months ended May 31 2013 decreased by $2,201 or 10.0% and $3,552 or 8.8% respectively as detailed below:

United Kingdom (UK)

For the three and six months ended May 31, 2013, UK revenues decreased $1,314 or 11.8% and $1,750 or 8.6% respectively compared to the same periods last year.  The prior year included the positive impact of continued sales from the Leonard Cheshire contract.  If we exclude the Leonard Cheshire impact in prior year's revenue, the UK's first half revenues in fiscal 2013 would be slightly ahead of the same period last year. Despite the continued impact of the austerity cuts in the UK, the healthcare market remains solid.

United States (US)

For the three and six months ended May 31, 2013, US revenues increased $1,863 or 41.5%  and $2,529 or 27.0% respectively compared to the same periods last year. The increase in revenues related primarily to increased product sales to the institutional market and incremental sales generated through our exclusive supply agreement with  MedCare Products Inc. ("MedCare").  Incremental revenues from the MedCare transactions were in line with our expectations.  In addition, we signed up more dealers in the home care sector as we continue to expand our geographic footprint.

Canada

For the three and six months ended May 31, 2013, Canada revenues decreased $2,750 or 44% and $4,331 or 40.1 % respectively compared to the same periods last year. Last year's second quarter continued to be favorably impacted by a large replacement order for ceiling track lifts in B.C.  Provincial budgetary spending continues to be tight.

Gross Margin

For the three and six months ended May 31, 2013, gross margin decreased $853 or 9.7% and $1,812 or 11.3% compared to the same periods last year due to lower Canadian and UK revenues offset by incremental margins from sales to MedCare.  As a percentage of revenues, gross margin remained steady at 40.0% in the second quarter compared to the prior quarter in fiscal 2012 and decreased from 39.6% to 38.5% for the six months ended May 31, 2013 and 2012. The Leonard Cheshire contract and the high replacement sales in BC contributed to the higher margins last year when compared to this quarter and the six months ended May 31, 2013 as fixed costs were spread over a larger revenue base. In addition, the margins in the first half of this year were negatively impacted by the acquisition of MedCare's inventory which carried a higher valuation and re-sold at lower margin rates than similar product produced by the Company. Offsetting these negative, largely one time impacts, were significant reductions in our fixed overhead costs in the UK.

Selling, General and Administrative

Selling, general and administrative expenses for the three and six months ended May 31, 2013 decreased $612 or 9.4%  and $1,030 or 8.2% in the first half of fiscal 2013 respectively. Included in SG&A is $200 and $400 respectively relating to the amortization of the MedCare supply agreement over a 10 year period.  The decrease in SG&A was due to restructuring initiatives taken by the Company in the 4th quarter of 2012 which was anticipated to remove $2,500 of SG&A costs in 2013.

Adjusted EBITDA1

Adjusted EBITDA for the three month period ended May 31, 2013 grew approximately 1.9% to $2,897, or 14.7% of sales, compared to $2,843, or 13.0% of sales in Q2 2012.   Adjusted EBITDA for the six month period ended May 31, 2013 decreased 8.3% to $4,437 compared to $4,840 for the six months ended May 31, 2012.  The US profitability level improved significantly in the quarter and first half of this year compared to the same periods last year as a result of increased institutional sales, the positive impact of the MedCare transaction and significantly lower SG&A costs.  These positive variances were partially offset by lower sales in the UK and Canada as a result of non-repeating first half 2012 Leonard Cheshire sales in the UK and non-repeating BC sales in Canada.

Net Income

Net Income for the three and six months ended May 31, 2013 decreased $281 or 18.3% and $885 or 37.7% respectively compared to comparable periods last year.

Liquidity

At May 31, 2013, total debt net of cash was $19.7 million, compared with $10.1 million at November 30, 2012. The increase in net debt relates to a bank indebtedness incurred on the acquisition of the MedCare supply agreement.

Outlook

Prism intends to grow sales, profitability and return on shareholders' equity. The Company believes that performance will be positively affected by continued North American institutional demand for our products, improved manufacturing efficiencies, greater geographic coverage, and revenues and profits from new product introductions. Through the addition of additional distribution, both through independent dealers and Company-owned platforms, Prism hopes to achieve gradual growth in UK and North American profitability even with the ongoing restricted spending environment.

The demand for our core products and services, in management's estimation, continues to experience growth at different rates in the geographic markets in which we participate. Government funding for our products, particularly in Canada and the UK is a key driver of sales. Although government policies related to healthcare in the markets we operate continues to change, we believe that the long term trend continues to be favorable.

We estimate that for Prism, the US market holds the greatest long-term potential to provide above-average revenue growth. Institutional penetration for safe patient moving and handling equipment is well below what may be witnessed in mature markets such as the UK and the homecare market is similarly underdeveloped. While budget constraints and the cyclicality of the institutional order pipeline can cause variability in US revenue, our efforts to build a larger footprint in this market have already translated into strong revenue growth. Prism is actively growing its sales footprint in the US and designing affordable products for the private-pay homecare market.

Dividend Declaration

The Board of Directors has approved a dividend of $0.08 per common share payable on September 2, 2013 to shareholders of record on August 15, 2013. This will be the third dividend payment of this fiscal year.

While the Company has no formal policy on dividend payments and the Board of Directors determines the suitability of such payments on a quarterly basis, the Company views dividend payments an important part of its investor strategy and expects to continue its historical pattern of four dividend payments per fiscal year.

Notice of Conference Call

Prism Medical will host a conference call on July 25, 2013 at 9:00 a.m. EST to discuss its financial results.  Stuart Meldrum, CEO, will Chair and George Chiarucci, CFO, will co-chair the call. All interested parties can join the call by referring to the information below:

Conference call details

Dial-In Number:  (647) 427-7450 or (888) 231-8191
Taped Replay:      (416) 849-0833 or (855) 859-2056
Reference Number:   21911042
   

Please dial in 15 minutes prior to the call to secure a line. A live audio webcast of the conference call will also be available at www.prismmedicalltd.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.

About Prism Medical Ltd.

Prism Medical Ltd. is one of the largest providers and manufacturers of durable medical equipment and related services to the mobility challenged in Canada, the US and the UK, with more than 100,000 installations and 200,000 product solutions sold. The Prism Medical brands include Waverley Glen and ErgoSafe, North America's leading supplier of lifting, handling and repositioning aid products and services across Canada and the US. Freeway and Prism Service & Repair are leading suppliers of moving and handling products and services in the UK. For further information visit Prism Medical's website at www.prismmedicalltd.com or www.sedar.com.

1Non-IFRS Financial Measures

Prism Medical's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Company also uses non-IFRS measures such as Adjusted EBITDA to measure its financial performance. Adjusted EBITDA consists of earnings before interest, income taxes, depreciation, amortization and stock-based compensation expense and equity gains and losses from investments in associates accounted on an equity basis. Adjusted EBITDA is a financial metric used by many investors to compare companies on the basis of operating results, asset value and the ability to incur and service debt. Management believes that Adjusted EBITDA is a useful measure for evaluating the performance of the Company. Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS and may not be comparable to similarly titled financial metrics reported by other companies.

Forward-Looking Information

This document contains forward‐looking statements relating to our operations and to the environment in which we operate and our strategy, action plans and investments, which may involve estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond our control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward‐looking statements. These factors include those set forth in this report and our other public filings. Consequently, readers should not place any undue reliance on such forward‐looking statements. These forward‐looking statements are made as of the date of this report. Prism Medical is under no obligation to update any forward‐looking statements contained herein should material facts change due to new information, future events or other factors. All forward‐looking statements attributable to Prism Medical are expressly qualified by these cautionary statements. 

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.


PRISM MEDICAL LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)
(thousands of Canadian dollars) May 31
2013
$
November 30
2012
$
     
ASSETS    
Current assets    
Cash and cash equivalents 1,907 1,381
Accounts receivable, net 15,132 14,371
Inventories 13,485 10,768
Prepaid expenses 1,759 1,030
Other receivables 621 1,202
Income taxes recoverable 486 219
Total current assets 33,390 28,971
Equity investment 327 -
Equipment and leaseholds 2,618 3,017
Intangible assets 13,310 5,580
Goodwill 18,418 18,456
Deferred income tax assets 822 694
Total assets 68,885 56,718
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities    
Bank indebtedness 10,876 10,127
Accounts payable, accrued liabilities and other 9,864 8,818
Current portion of deferred revenue 180 221
Income taxes payable 871 783
Current portion of long-term debt 1,175 570
Total current liabilities 22,966 20,519
     
Retirement benefit obligation 447 291
Long-term portion of deferred revenue 312 312
Long-term debt 9,523 821
Deferred income tax liabilities 1,757 1,565
Total liabilities 35,005 23,508
     
Total Shareholders' equity  33,880 33,210
Total liabilities and shareholders' equity 68,885 56,718
     



PRISM MEDICAL LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
  Three months ended Six months ended
(thousands of Canadian dollars, except per share amounts) May 31
2013
$
May 31
2012
$
May 31
2013
$
May 31
2012
$
         
Revenues 19,711 21,912 37, 16 40,569
Cost of products and services sold 11,800 13,148 22,760 24,501
Gross margin 7,911 8,764 14,256 16,068
         
Expenses        
Selling and marketing expenses 1,754 1,902 3,280 3,636
General and administrative expenses 4,179 4,643 8,278 8,952
Interest expense 304 208 561 394
Foreign exchange loss 10 79 88 79
Loss from equity investment 45 - 137 -
  6,292 6,832 12,344 13,061
Income before income taxes 1,619 1,932 1,912 3,007
         
Income tax provision (recovery)        
      Current 276 372 459 597
      Deferred 86 22 (9) 63
  362 394 450 660
Net income for the period 1,257 1,538 1,462 2,347
         
Earnings per share        
Basic 0.15 0.18 0.17 0.28
Diluted 0.15 0.18 0.17 0.28




PRISM MEDICAL LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)      
     
             
(thousands of Canadian dollars and number
of common shares)
Number
of
common
shares
#
Share
capital
$
Contributed
surplus
$
Retained
earnings
$
Accumulated
other
comprehensive
income (loss)
$
Total
shareholders'
equity
$
Balance as at November 30, 2012 8,391 24,010 997 8,841 (638) 33,210
Net income for the period   - - 1,462 - 1,462
Other comprehensive income (loss)   - - - 416 416
Total comprehensive income (loss) for the period   - - 1,462 416 1,878
Stock based compensation     135 - - 135
Dividends paid on common shares   - - (1,343) - (1,343)
Balance as at May 31, 2013 8,391 24,010 1,132 8,960 (222) 33,880
           
             
             
(thousands of Canadian dollars and number
of common shares)
Number
of
common
shares
#
Share
capital
$
Contributed
surplus
$
Retained
earnings
$
Accumulated
other
comprehensive
income (loss)
$
Total
shareholders'
equity
$
Balance as at November 30, 2011 8,334 23,676 703 9,232 38 33,649
Net income for the period   - - 2,347   2,347
Other comprehensive income (loss)   - - - (11) (11)
Total comprehensive income (loss) for the period   - - 2,347 (11) 2,336
Issued under stock option plan   227 (33) - - 194
Stock based compensation 37 - 161 - - 161
Dividends paid on common shares   - - (2,004) - (2,004)
Balance as at May 31, 2012 8,371 23,903 831 9,575 27 34,336

 




PRISM MEDICAL LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
  Three months ended Six months ended
(thousands of Canadian dollars) May 31
2013
$
May 31
2012
$
May 31
2013
$
May 31
2012
$
         
Cash flows from operating activities        
Net income for the period 1,257 1,538 1,462 2,347
Income tax provision 362 394 450 660
Interest expense 304 208 561 394
Income before interest and taxes 1,923 2,140 2,473 3,401
         
Cash taxes paid (284) (350) (602) (717)
Interest paid (262) (272) (481) (442)
  Add (deduct) items not affecting cash:        
  Depreciation and amortization 879 651 1,693 1,267
  Stock-based compensation 51 69 135 161
  Loss from equity investment 45 - 137 -
  Other items not affecting cash - foreign exchange and other 248 308 191 155
  2,600 2,546 3,546 3,825
Net change in non-cash working capital balances related to operations (44) (242) (2,261) (833)
Cash provided by operating activities 2,556 2,304 1,285 2,992
         
Cash flows from investing activities        
  Purchase of equipment and leaseholds (79) (129) (233) (236)
  Purchase of intangible assets (227) (264) (8,557) (455)
  Purchase of equity interest in associates -   (446)  
Cash used in investing activities (306) (393) (9,236) (691)
Cash flows from financing activities        
  (Decrease) increase in bank indebtedness (1,133) 1,019 749 (531)
  Increase in long-term debt - 23 9,240 281
  Repayment of long-term debt (91) (675) (181) (1,013)
  Issuance of share capital - 194 - 194
  Dividends paid (672) (1,337) (1,343) (2,004)
Cash provided by (used in) financing activities (1,896) (776) 8,465 (3,073)
         
Effect of foreign exchange rate changes on cash 37 23 12 (21)
Net increase (decrease) in cash and cash equivalents during the period 391   1,158 526 (793)
Cash and cash equivalents, beginning of period 1,516 1,162 1,381 3,113
Cash and cash equivalents, end of period 1,907 2,320 1,907 2,320

 

 

 

 

SOURCE: Prism Medical Ltd.

For further information:

George Chiarucci
Chief Financial Officer
gchiarucci@prismmedicalltd.com
416-260-2145 ext. 229

Profil de l'entreprise

Prism Medical Ltd.

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