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Press release from CNW Group

Prism Medical Reports Second Quarter Results

Friday, July 13, 2012

Prism Medical Reports Second Quarter Results06:00 EDT Friday, July 13, 2012TORONTO, July 13, 2012 /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, 2012.Financial Summary(in thousands of Canadian dollars) Three months ended May 31 Six months ended May 31               2012 2011 % Change 2012 2011 % ChangeRevenues $21,912 $18,811 16.5% $40,569 $34,964 16.0%Gross profit $8,764 $8,054 8.8% $16,068 $14,629 9.8%(as % of revenues) 40.0% 42.8%   39.6% 41.8%  Net income $1,538 $1,143 34.6% $2,347 $1,980 18.5%(as % of revenues) 7.0% 6.1%   5.8% 5.7%  EBITDA1 $2,843 $2,768 2.7% $4,815 $4,931 (2.4%)(as % of revenues) 13.0% 14.7%   11.9% 14.1%  Earnings per share            Basic $0.18 $0.20 (10.0%) $0.28 $0.35 (20.0%)Diluted $0.18 $0.16 12.5% $0.28 $0.28 0%             Second Quarter HighlightsCanadian revenues grew by 71.1% in Q2 2012 compared to the same period last year, primarily due to strong institutional replacement sales and continued expansion in QuebecRevenues from the UK grew by 12.7% in Q2 2012 compared to Q2 2011, driven by large institutional contracts and organic initiativesPortable gantry unit launched successfully in CanadaContinued investment in the US market for future growthWitnessed continued strength in home care product and service demand in all geographies"Strong Canadian sales and recent bundled contract wins in the UK produced double digit top-line growth this quarter," said Stuart Meldrum, Chief Executive Officer of Prism Medical. "During Q2 we maintained our focus on the US and expect to continue to win new business as we expand our platform in this underpenetrated market. The Canadian launch of our home care gantry was met with good initial orders and we expect interest to grow as we introduce this product in the US in the coming months."Financial ReviewRevenuesTotal revenues for Q2 2012 grew by 16.5% to $21.9 million compared to $18.8 million in Q2 2011. North American revenues grew by 20.6% year-over-year and the region accounted for 49.0% of revenues in Q2 2012 compared to 47.0% in the second quarter of 2011.The United States represented 21.0% of the Company's revenues in Q2 2012 compared to 28.0% in Q2 2011. Revenues in the US declined by 14.5% in Q2 2012 compared with the same period in the prior year. The decline was due to timing delays in several institutional projects. Business development efforts are proceeding on target and we expect to maintain our traction as we grow our presence in this market.Canadian sales composed 28.0% of the Company's revenues in Q2 2012 compared to 19.0% in Q2 2011. Revenues in Canada grew by 71.1% in Q2 2012 compared with the same period in the prior year. The increase in revenues was due to the continuation of stronger institutional demand for our products as health care institutions replaced end-of-life products, new institutions were built in several provinces and as we continued to penetrate the Quebec market.The United Kingdom comprised 51.0% of the Company's revenues in Q2 2012 compared to 53.0% in Q2 2011. Revenues in the UK grew by 12.8% in Q2 2012 compared with the same period in the prior year. The growth in revenue was primarily due to strong revenues resulting from the Leonard Cheshire contract and the acquisition of Movement 2.Gross ProfitGross profit dollars for the three month period ended May 31, 2012 grew by 8.8%, to $8.8 million compared with the prior year. Gross profit rate for the three month period ended May 31, 2012 decreased slightly to 40.0%, from 42.8% in Q2 2011. One-off large sales orders with slightly lower margins and, inefficiencies in installation in the US contributed to the decrease. In addition, the second quarter of 2011 was favourably impacted by a number of one-time adjustments to margins. In the second quarter, we continued to improve the gross margin rate of our UK engineering teams as management activities continued to deliver integration efficiencies.Selling, General and Administrative SG&A expenses increased by $0.8 million in the three month period ended May 31, 2012, compared with the corresponding period in the prior year. The increase in SG&A was due to costs associated with various strategic initiatives, specifically further investment in the US management and sales teams as well as the acquisition of Movement 2.EBITDA1EBITDA for the three month period ended May 31, 2012, grew approximately 2.7% to $2,843, or 13.0% of sales, compared to $2,768, or 14.7% of sales in Q2 2011.Net Income Net Income for the three month period ended May 31, 2012 grew approximately 34.6% to $1,538, or 6.9% of sales, compared to $1,143, or 6.1% of sales, in Q2 2011. Tax recoveries recorded in the US contributed to a lower effective tax rate compared to the prior period.LiquidityAt May31, 2012, total debt net of cash was $12.0million, compared with $12.6 million at November30, 2011.OutlookPrism 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 credit 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 DeclarationThe Board of Directors has approved a dividend of $0.08 per common share payable on July31, 2012 to the shareholders of record on July24, 2012.Notice of Conference Call Prism Medical will host a conference call on July 13, 2012 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 detailsDial-In Number: (647) 427-7450 or (888) 231-8191Taped Replay:(416) 849-0833 or (855) 859-2056Reference Number:98481244  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 MeasuresPrism 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 EBITDA to measure its financial performance. EBITDA consists of earnings before interest, income taxes, depreciation, amortization and stock-based compensation expense. 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 EBITDA is a useful measure for evaluating the performance of the Company. 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 InformationThis 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 312012$November 302011$   (Note 21)ASSETS   Current assets   Cash and cash equivalents 2,3203,113Accounts receivable, net 14,98516,870Inventories 12,73311,839Prepaid expenses 1,651970Other receivables 8401,051Income taxes recoverable 439193Total current assets 32,96834,036Deferred charges 1,3571,057Property, plant and equipment 3,3143,795Goodwill 18,57718,671Intangible assets 3,6523,992Future income tax assets 260276Total Assets 60,12861,827LIABILITIES AND SHAREHOLDERS' EQUITY   Current liabilities   Bank indebtedness 10,31910,850Accounts payable and accrued liabilities 7,8949,110Current portion of  provisions 6092Current portion of deferred revenue 178179Income taxes payable 1,3441,048Current portion of long-term debt 1,9502,096Total current liabilities 21,74523,375    Long-term portion of  provisions -64Long-term portion of deferred revenue 301301Long-term debt 2,0862,768Future income tax liabilities 1,6601,671Total liabilities 25,79228,179    Shareholders' equity  34,33633,648Total liabilities and shareholders' equity  60,12861,827    On behalf of the Board:Director                                                                                                        Director"Andrew McIntyre"                                                                                          "Howard Taylor"_________________                                                                                     _________________PRISM MEDICAL LTD.CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)   Three months ended May 31 Six months ended May 31 20122011 20122011 $$ $$Revenues21,91218,811 40,56934,964Cost of products and services sold13,14810,757 24,50120,335Gross profit8,7648,054 16,06814,629      Expenses         Selling and marketing1,9021,917 3,6363,442    General and administrative expenses4,6433,817 8,9527,303    Interest expense208441 394913    Foreign exchange (gains) losses79112 7938 6,8326,287 13,06111,696Income before income taxes1,9321,767 3,0072,933      Income tax provision (recovery)      Current372213 597360 Deferred22411 63593 394624 660953Net income for the period1,5381,143 2,3471,980      Earnings per share       Basic$0.18$0.20 $0.28$0.35 Diluted$0.18$0.16 $0.28$0.28PRISM MEDICAL LTD.CONDENSED INTERIM CONSOLIDATED STATEMENTS OF TOTAL COMPREHENSIVE INCOME (LOSS) (UNAUDITED)(thousands of Canadian dollars, except per share amounts)  Three months ended May 31 Six months ended May 31  20122011 20122011 $$ $$Net income for the period1,5381,143 2,3471,980Other comprehensive income      Unrealized gain (loss) on translation of foreign subsidiaries841 855 (11)57Total comprehensive income (loss) for the period2,3791,998 2,3362,037      PRISM MEDICAL LTD.CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(UNAUDITED)(Thousands of Canadian dollars and numberof common shares)NumberofCommonShares#ShareCapital$OtherPaid InCapital$ContributedSurplus$RetainedEarnings$AccumulatedOtherComprehensiveIncome (Loss)$TotalEquity$Balance as at November 30, 20118,33423,676-7039,2323833,649Net income for the period ---2,347-2,347Other comprehensive income (loss)       ----(11)(11)Total comprehensive income (loss) for the Period ---2,347(11)2,336Issued under stock option plan 227-(33)--194Stock based compensation37- 161--161Dividends paid on common shares ---(2,004)-(2,004)Balance as at May 31, 20128,37123,903-8319,5752734,336               Balance as at December 1, 20105,58711,9171,3955467,159-21,017Net income for the period----1,980-1,980Other comprehensive income (loss)---- 5757Total comprehensive income (loss) for the period----1,980572,037Issued under stock option plan120433-73--506Redemption of convertible debentures3471,300(14)---1,286Dividends paid on common shares----(1,292)-(1,292)Balance as at May 31, 20116,05413,6501,3816197,8475723,554        PRISM MEDICAL LTD.CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  Three months ended Six months ended(thousands of Canadian dollars) May 312012$May 312011$ May 312012$May 312011$       Cash flows from operating activities      Net income for the period 1,5381,143 2,3471,980Cash taxes paid (50)- (217)(250)Interest paid (172)(170)  (342)(728)Add (deduct) items not affecting cash       Deferred income taxes (84)460 15628 Depreciation and amortization 651508 1,267994 Stock-based compensation 6941 16183 Interest accretion on convertible debt -46 -92 Post-retirement benefit obligation 63- 126- Foreign exchange (gain) loss 29112 2939  2,0442,140 3,3862,838Net change in non-working capital balances related to operations 260298 (394)(2,384)Cash provided by operating activities 2,3042,438 2,992454       Cash flows from investing activities       Deferred charges (238)(98) (412)(199) Intangible assets (26)(23) (43)(48) Purchase of property, plant and equipment (129)(308) (236)(446) Purchase of a business -(400) -(400)Cash used in investing activities (393)(829) (691)(1,093)Cash flows from financing activities       Increase (decrease) in bank indebtedness 1,019(976) (531)1,468 Increase in long-term debt 23625 281625 Repayment of long-term debt (675)(818) (1,013)(1,541) Issuance of share capital 194433 194433 Dividends paid (1,337)(873) (2,004)(1,292)Cash used in financing activities (776)(1,609) (3,073)(307)       Effect of foreign exchange rate changes on cash 23- (21)-Net increase (decrease) in cash and cash equivalents during the period 1,158- (793)(946)Cash and cash equivalents, beginning of period 1,162- 3,113946Cash and cash equivalents, end of period  2,320- 2,320-    For further information: George Chiarucci Chief Financial Officer gchiarucci@prismmedicalltd.com 416-260-2145 ext. 229 Babak Pedram TMX Equicom bpedram@equicomgroup.com 416-815-0700 ext. 264