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Press release from PR Newswire

Atrium Innovations Announces 2012 Second Quarter Financial Results

Thursday, August 09, 2012

Atrium Innovations Announces 2012 Second Quarter Financial Results16:00 EDT Thursday, August 09, 2012 Solid Organic Growth Performance QUEBEC CITY, Aug. 9, 2012 /PRNewswire/ - Atrium Innovations Inc. (TSX: ATB), a globally recognized leader in the development, manufacturing and commercialization of innovative, science-based dietary supplements endorsed by health professionals, today released its results for the quarter ended June 30, 2012. Second Quarter 2012 Highlights: (All amounts are in US dollars.) Total revenue growth of 4.1% over last year, or 7.4% on a currency-neutral basis, all organic, to reach $109.5 million Total branded revenue recorded solid organic growth of 12.2% EBITDA of $21.3 million or 19.5% of revenue, reflecting investments in marketing Adjusted diluted EPS of $0.38 for the quarter Cash flows before working capital, interest and after restructuring costs remain strong at $17.8 million "We posted solid organic growth on a global basis with a particularly strong performance from our branded products at 12.2%, reflecting solid momentum in the HCP and Retail channels in North America. While our European operations faced some headwinds from the weak general economy, we are pleased by the 3.7% growth rate (currency neutral) recorded for the quarter. Overall, revenues surpassed our expectations given the expected decrease in our Retail Private Label business," said Pierre Fitzgibbon, President and CEO. "Lower EBITDA margin for the quarter reflects a growth rate at Garden of Life well above the industry. In addition, significant investments in mailers were made at Nutri-Health which caused a negative EBITDA. As a result, we are currently reviewing the traditional mailing business model. "Aligned with our right-sizing initiatives, we have decided to close our manufacturing operations in Penticton, British Columbia by the end of September 2012. Production is in the process of being transferred to our other manufacturing facilities. "As indicated over the past year, we face heightened pressure from a regulatory perspective. Associated expenses to elevate our cGMP standards have and will continue to impact margins. However, we are seeing evidence that the industry dynamic is changing which will allow overtime recovering part of these regulatory expenses," concluded Mr. Fitzgibbon. For the quarter ended June 30, 2012, Atrium recorded revenues of $109.5 million representing an increase of 4.1% (7.4% on a currency-neutral basis) compared to revenues of $105.2 million in 2011. The increase, all organic, is mainly attributable to the solid performance of our branded products with organic growth of 12.2% including solid momentum of HCP and HFS brands partially offset by revenue decreases from the Private Label businesses, and also the unfavourable impact of exchange rates. EBITDA for the quarter was $21.3 million or 19.5% of revenues compared to $23.8 million or 22.6% of revenues for the same period in 2011. The EBITDA margin decreased by 3.1% year over year and is largely explained by a decline in the gross margin related to product mix, additional investments in marketing in the retail branded segment and the euro/US dollar exchange rate with an unfavourable impact of $0.9 million. Net earnings attributable to shareholders were $12.2 million for the second quarter in 2012 compared to $14.4 million in 2011, while net earnings per share ("EPS") on a diluted basis were $0.36 per share, as compared to $0.44 per share for the same period in 2011. The adjusted diluted EPS were $0.38 in 2012 compared to diluted EPS of $0.44 in 2011. Cash flows from operating activities before changes in non-cash working capital items, interest expenses and restructuring costs were $17.8 million, compared to $18.9 million in 2011. As at June 30, 2012, the Company had a total debt of $281.4 million and a cash position of $11.6 million. About Atrium Atrium Innovations Inc. is a globally recognized leader in the development, manufacturing and commercialization of innovative, science-based dietary supplements endorsed by health professionals. The Company distributes its extensive portfolio of products mainly in the healthcare practitioner and health food and specialized store channels, with a primary focus in North America and Europe. Atrium is at the forefront of science, innovation and education in the dietary supplement industry. The Company has over 1,100 employees and operates eight manufacturing facilities.  Additional information is available at www.atrium-innovations.com. Conference Call and Webcast Atrium will hold its quarterly conference call and webcast to discuss its 2012 second quarter results on August 10, 2012 at 8:30 a.m., Eastern Time.  Participants may access the call by using the following numbers: 514-807-9895 (Montreal Area), 888-231-8191 (Toll Free) or 647-427-7450 (Toronto area and overseas).  A live webcast is also available via the Company's website at www.atrium-innovations.com in the News Center section.  A replay of the webcast will also be available on our website for a period of 30 days.  A copy of Atrium's financial statements will also be available on the Company's website. Caution Regarding Non-IFRS Financial Measures The Company provides non-IFRS financial measures (Gross profit*, EBIT*, EBITDA*, and Adjusted EPS*) as supplemental information regarding its operational performance. These non-IFRS financial measures are directly derived from the Company's financial statements and are presented in a consistent manner. The Company uses these measures for the purposes of evaluating its historical and prospective financial performance, as well as its performance relative to competitors. These measures also help the Company to plan and forecast for future periods as well as to make operational and strategic decisions. The Company believes that providing this information to investors, in addition to IFRS measures, allows them to see the Company's results through the eyes of management, and to better understand its historical and future financial performance. The presentation of this additional information is not prepared in accordance with IFRS. Therefore, the information may not necessarily be comparable to that of other companies and should be considered as a supplement to, not a substitute for, or superior to, the comparable measures calculated in accordance with IFRS. *Gross profit means sales less cost of sales. EBIT means earnings before interest and tax. EBITDA means earnings before interest, tax, depreciation, amortization, restructuring and acquisition costs. Cautionary Note and Forward-Looking Statements This press release contains certain forward-looking statements with respect to the Company. These forward-looking statements, by their nature, require the Company to make certain assumptions and necessarily involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements. Forward-looking statements are not guarantees of performance. These forward-looking statements, including financial outlooks, may involve, but are not limited to, comments with respect to the Company's business or financial objectives, its strategies or future actions, its targets, expectations for financial condition or outlook for operations and future contingent payments.  Words such as "may", "will", "would", "could", "expect", believe", "plan", "anticipate", "intend", "estimate", "continue", or the negative or comparable terminology, as well as terms usually used in the future and the conditional, are intended to identify forward-looking statements.  Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances. The Company considers theses assumptions to be reasonable based on information currently available to it, but cautions the reader that these assumptions regarding future events, many of which are beyond its control, may ultimately prove to be incorrect since they are subject to risks and uncertainties that affect the Company and its business. For additional information with respect to these and other factors and assumptions underlying the forward-looking statements made in this press release, see the Company's quarterly and annual Management Discussion and Analysis for the fiscal year ended December 31, 2011 filed with the Canadian securities commissions. The forward-looking information set forth herein reflects the Company's expectations as at the date of this press release and is subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law. Attachments: Financial Summary Balance sheet, results and cash flow statement Atrium Innovations Inc. Financial Summary (unaudited) (in millions of US dollars except per share amounts)             Consolidated results for the quarters ended June 30,   2012 $   2011 $   Change             Revenues 109.5   105.2   4%             Gross profit (1) 55.8   54.9       51.0%   52.2%                 EBITDA (2) 21.3   23.8   -11%   19.5%   22.6%                 Net earnings attributable to shareholders 12.2   14.4   -15%             Diluted net earnings per share 0.36   0.44   -18% Reconciliation to non IFRS Financial Data           Net earnings attributable to shareholders 12.2   14.4     Interest expenses for acquisition-related contingent liabilities -   0.1     Adjusted net earnings under non-IFRS 12.2   14.5   -16%             Adjusted diluted net earnings per share under non-IFRS (3) 0.38   0.44   -14%                         Consolidated results for the six-month period ended June 30,   2012 $   2011 $   Change             Revenues 219.4   212.9   3%             Gross profit (1) 114.5   115.7       52.2%   54.3%                 EBITDA (2) 44.1   47.2   -7%   20.1%   22.2%                 Net earnings attributable to shareholders 23.9   28.6   -16%             Diluted net earnings per share 0.68   0.86   -21% Reconciliation to non IFRS Financial Data           Net earnings attributable to shareholders 23.9   28.6     Provision for restructuring costs, net of related taxes 2.9   -     Interest expenses for acquisition-related contingent liabilities 0.1   0.1     Adjusted net earnings under non-IFRS 26.9   28.7   -6%             Adjusted diluted net earnings per share under non-IFRS (3) 0.84   0.86   -2% (1) Gross profit means sales less cost of sales. (2) EBITDA means earnings before interest, taxes, depreciation, amortization, restructuring and acquisition-related costs. (3) Without giving the dilutive effect of the convertible debentures. Atrium Innovations Inc. Consolidated Balance Sheets (Expressed in thousands of US dollars)           As at June 30,   As at December 31,   2012 $   2011 $ Assets               Current assets       Cash 11,638   22,800 Accounts receivable 55,859   52,189 Income taxes recoverable 7,803   5,841 Inventory 97,611   93,250 Prepaid expenses 6,750   4,588   179,661   178,668         Property, plant and equipment 24,374   23,296 Deferred charges and others 4,061   4,218 Intangible assets 258,285   257,853 Goodwill 353,286   356,275 Deferred tax assets 2,262   5,634   821,929   825,944 Liabilities               Current liabilities       Accounts payable and accrued liabilities 42,669   44,122 Provision 2,869   - Contingent considerations 951   15,234 Income taxes 914   1,263 Deferred revenues 287   157 Derivative financial instruments -   704 Current portion of long-term debt 347   292   48,037   61,772         Contingent considerations -   479 Long-term debt 191,069   191,169 Convertible debentures 89,989   91,819 Deferred revenues -   75 Derivative financial instruments 193   - Deferred tax liabilities 65,132   67,056           394,420   412,370 Equity       Share capital 89,132   91,658 Stock options reserve 2,705   2,394 Retained earnings 354,090   337,201 Accumulated other comprehensive loss (18,403)   (17,706)   427,524   413,547 Non-controlling interest (15)   27   427,509   413,574   821,929   825,944 Atrium Innovations Inc. Consolidated Statements of Earnings (tabular amounts in thousands of US dollars, except share and per share data)                   Quarters ended June 30,   Six months ended June 30,                   2012 $   2011 $   2012 $   2011 $                 Revenues 109,467   105,161   219,419   212,913                 Operating expenses               Cost of sales 53,647   50,272   104,933   97,227 Selling and administrative expenses 36,404   32,185   74,117   70,780 Research and development costs 626   566   1,293   1,135 Restructuring costs -   -   4,000   -                   90,677   83,023   184,343   169,142                 Earnings from operations 18,790   22,138   35,076   43,771                 Other revenues (expenses)               Financial revenues 134   69   199   115 Financial expenses (3,621)   (2,744)   (7,253)   (4,743) Foreign exchange gain (loss) (22)   (45)   439   (242) Change in fair value of embedded derivative 539   -   2,461   -                   (2,970)   (2,720)   (4,154)   (4,870)                 Earnings before income taxes 15,820   19,418   30,922   38,901                 Income tax expense 3,619   4,728   7,100   9,797                 Net earnings for the period 12,201   14,690   23,822   29,104                                 Net earnings for the period attributable to               Shareholders 12,151   14,446   23,864   28,561 Non-controlling interest 50   244   (42)   543                 Net earnings per share               Basic 0.39   0.44   0.75   0.87 Diluted 0.36   0.44   0.68   0.86                 Weighted average number of shares outstanding (000's)               Basic 31,456   32,723   31,737   32,749 Diluted 35,719   33,107   36,001   33,157 Atrium Innovations Inc. Consolidated Statements of Cash Flows (expressed in thousands of US dollars)                   Quarters ended June 30,   Six months ended June 30,                   2012 $   2011 $   2012 $   2011 $ Cash flows from operating activities               Net earnings for the period 12,201   14,690   23,822   29,104                 Adjustments for:                 Depreciation and amortization 2,501   1,647   5,032   3,385   Deferred charges 285   212   498   259   Deferred revenues 40   (379)   52   (698)   Change in fair value of embedded derivative (539)   -   (2,461)   -   Stock-based compensation costs 131   199   311   288   Interest expense 3,255   2,447   6,497   4,058   Deferred income taxes 210   71   1,342   1,340   Foreign exchange gain on long-term debt 835   -   749   - Change in non-cash operating working capital items (5,154)   1,748   (10,737)   (11,607)                 Cash flows from operating activities 13,765   20,635   25,105   26,129                 Cash flows from financing activities               Increase in long-term debt -   187   12,090   232,898 Payments on long-term debt (7,885)   (12,699)   (7,970)   (225,602) Financing costs (60)   (239)   (84)   (428) Issuance of shares -   159   -   347 Shares redeemed and cancelled under a normal course issuer bid (456)   (1,661)   (9,501)   (3,250) Interest paid (1,613)   (2,011)   (6,349)   (3,218)                 Cash flows from (used in) financing activities (10,014)   (16,264)   (11,814)   747                 Cash flows from investing activities               Business acquisitions, net of cash acquired -   (3,642)   (14,809)   (16,265) Purchase of property, plant and equipment (2,047)   (1,238)   (3,665)   (1,697) Proceeds from disposal of property, plant and equipment 225   -   225   - Additions to intangible assets (3,730)   (2,930)   (5,620)   (5,031)                 Cash flows used in investing activities (5,552)   (7,810)   (23,869)   (22,993)                   (1,801)   (3,439)   (10,578)   3,883                 Effect of exchange rate changes on cash (649)   184   (584)   (889)                 Increase (decrease) in cash (2,450)   (3,255)   (11,162)   2,994                 Cash - Beginning of period 14,088   18,298   22,800   12,049                 Cash - Ending of period 11,638   15,043   11,638   15,043   SOURCE ATRIUM INNOVATIONS INC.For further information: <p> <b>Investor Relations</b>:<br/> Mario Paradis<br/> Vice President and Chief Financial Officer<br/> <b>Tel.: 418 652-1116</b><br font-weight="bold"></br> <a cr="true" href="mailto:mp@atrium-innovations.com">mp@atrium-innovations.com</a> </p> <p> <b>Media Relations:</b><br font-weight="bold"></br> Amélie Germain<br/> Director of Communications<br/> <b>Tel.: 418 652-1116</b> <b> </b><br font-weight="bold"></br> <a href="mailto:ag@atrium-innovations.com">ag@atrium-innovations.com</a> <br/> </p> <p> Pierre Boucher<br/> MaisonBrison Communications<br/> Tel.: 514 731-0000, ext. 237<br/> <a href="mailto:pierre@maisonbrison.com">pierre@maisonbrison.com</a><b> </b> </p>