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Press release from Marketwire

Prism Medical Reports First Quarter Results

Monday, April 29, 2013

Prism Medical Reports First Quarter Results

16:15 EDT Monday, April 29, 2013

TORONTO, ONTARIO--(Marketwired - April 29, 2013) - Prism Medical Ltd., ("Prism Medical" or "the Company") (TSX VENTURE:PM), a leading provider of durable medical equipment and related services to the mobility challenged, today reported financial results for the first quarter (Q1) ended February 28, 2013.

Financial Summary

Three months ended February 28 (29)
2013
$
2012
$
Revenues 17,305 18,657
Gross margin 6,345 7,304
As a % of revenues 36.7 % 39.1 %
Net income 205 809
As a % of revenues 1.2 % 4.3 %
Adjusted EBITDA 1,540 1,997
As a % of revenues 8.9 % 10.7 %
Earnings per share
Basic 0.02 0.10
Diluted 0.02 0.10

Expressed in thousands of Canadian dollars except for earnings per share and where otherwise noted.

First Quarter Highlights

  • US revenues increased $666 or 13.7% compared to the same period last year

  • The Company acquired the manufacturing assets of MedCare Products Inc. (MedCare) and entered into a 10-year renewable agreement to exclusively supply all products MedCare sells in the moving and handling industry. The Company also acquired a 49% interest in MedCare. This transaction benefits Prism in a number of ways. It brings new relationships with a top-tier hospital network that can be leveraged nationally. MedCare's parts supply and service businesses generate recurring revenues and its well-accepted line of floor lifts nicely complements our existing line.

  • The completion of an agreement with Sunrise Senior Living to provide its range of lifting and transfer products, services and training to Sunrise communities across the United States and Canada.

  • Last year's successful restructuring resulted in the company's SG&A costs being $618 or 10.2% lower than Q1, 2012. This excludes the incremental amortization of the MedCare supply agreement.

Financial Review

United Kingdom (UK)

UK revenues for the three months ended February 28, 2013 decreased $438 or 4.7% compared to the same period last year. The initial sales from the Leonard Cheshire contract boosted last year's first quarter. 2013 has seen revenues return to a more normalized level. Despite the continued impact of the UK's austerity cuts, the healthcare market remains solid.

United States (US)

Sales generated through Prism's U.S. investment in MedCare Products Inc. led to US revenue growth $666 or 13.7% for the three months ended February 28, 2013, compared to the previous year's first quarter. Offsetting this gain was decreased sales in our hospital group business. Although continued uncertainty exists within the US hospital groups, Prism's pipeline related to hospital capital expenditure projects has stabilized and is beginning to grow. Incremental revenues from the MedCare transaction met our expectations. Additionally, our US homecare business is progressing as more and more homecare dealers are being signed up.

Canada

Canadian revenues for the three months ended February 28, 2013 decreased $1,580 or 34.6% compared to the same period last year. Last year's first quarter was favourably impacted by a large B.C. order for replacement ceiling track lifts.

Gross Margin

Gross margin for the three months ended February 28, 2013 decreased $959 or 13.1% compared to the same period last year due to lower Canadian and UK revenues offset by incremental margins from sales to MedCare. The gross margin rates decreased from 39.1% to 36.7% and were impacted by various adjustments mainly related to the MedCare acquisition. The Company purchased approximately $2 million of inventory in the MedCare transaction and this inventory was fair-valued at a higher value than manufactured inventory thereby reducing normal anticipated margin rates; we eliminated share of profits on MedCare's unsold inventory; and, we had a favourable onetime accounting adjustment in the first quarter of last year. Taken together, these adjustments negatively impacted our year over year gross margin comparison by about $0.5 million with the margin rate being impacted by 2.9%.

Selling, General and Administrative

Selling, general and administrative expenses for the three months ended February 28, 2013 were $5,625 compared to $6,043 for the same period last year, a decrease of $418 or 6.9%. However, included in the SG&A was a 10 year $200 amortization charge related to the MedCare supply agreement. Without this charge, the actual decrease in SG&A was $618 or 10.2%. This decrease results primarily from the Company's the 4th quarter of 2012 restructuring initiatives. The Company estimates that in excess of $2,500 of 2012 SG&A costs are not expected to re-occur in fiscal 2013.

Adjusted EBITDA

The first quarter adjusted EBITDA performance was below last year's first quarter; however, this was largely caused by the adjustments made relating to the MedCare acquisition and it does represent a significant improvement over the third and fourth quarter performance of last year.

Net Income

Net Income for 2013's first quarter declined by $604 or 74.7% to $205 compared to $809 in the previous year's first quarter. Earnings per share from the first quarter of 2012 to the first quarter of 2013 declined from $0.10 per share to $0.02 per share. In summary, the significant improvement in our cost structure and the favourable impact of the MedCare transaction were offset by lower revenues, primarily in Canada, due to favourable circumstances in Canada's previous year's first quarter. Net Income was further impacted by lower margin rates due to valuation adjustments related to the MedCare transactions, higher interest costs and foreign exchange losses.

Liquidity

As at February 28, 2013, the Company had $1,516 cash and bank indebtedness of $12,009 compared to $1,381 and $10,127 respectively, as at November 30, 2012.

Cash flows used in operating activities represented outflows of $1,271 for the three months ended February 28, 2013 compared to inflows of $688 in the same period last year. The main reason for this was the increase in non-cash working capital balances resulted in cash used in operating activities of $2,217 for the three months ended February 28, 2013 compared a use of cash of $591 for the same period last year. In excess of $1,500 of the increase in working capital related to MedCare.

Outlook

The Company intends to grow sales and profitability and provide a reasonable return on shareholders' equity. The Company believes that performance will be positively affected by a continued North American institutional demand for our products, improved manufacturing efficiencies, greater geographic coverage, and revenues and profits new products will bring. Through its growth strategies, the Company hopes to achieve continued profitable growth in the UK and North America.

Government funding for our products, particularly in Canada and the UK is a key driver of sales. Budget pressure on health care spending is causing government agencies to search out the most cost effective solution for health care provision. This, the Company believes, puts us in an excellent position to win more business. On this basis, we believe that our business will continue to grow and that the long term trend continues to be favourable.

Dividend Declaration

The Board of Directors has approved a dividend of $0.08 per common share payable on June 3, 2013 to shareholders of record on May 16, 2013. This will be the second 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 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 April 30, 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: 55461192

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.

1 Non-GAAP Financial Measures

Prism Medical's consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). The Company also uses non‐GAAP measures such as Adjusted EBITDA to measure its financial performance. Adjusted EBITDA consists of earnings before interest, income taxes, depreciation, amortization, stock‐based compensation expense and equity gains or 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 GAAP and does not have a standardized meaning prescribed by GAAP 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.

PRISM MEDICAL LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)


(thousands of Canadian dollars)
February 28
2013
$
November 30
2012
$
ASSETS
Current assets
Cash and cash equivalents 1,516 1,381
Accounts receivable, net 15,079 14,371
Inventories 13,180 10,768
Prepaid expenses 1,355 1,030
Other receivables 726 1,202
Income taxes recoverable 320 219
Total current assets 32,176 28,971
Equity investment 370 -
Equipment and leaseholds 2,839 3,017
Intangible assets 13,624 5,580
Goodwill 18,294 18,456
Deferred income tax assets 921 694
Total assets 68,224 56,718
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness 12,009 10,127
Accounts payable, accrued liabilities and other 9,288 8,818
Current portion of deferred revenue 162 221
Income taxes payable 432 783
Current portion of long-term debt 570 570
Total current liabilities 22,461 20,519
Retirement benefit obligation 369 291
Long-term portion of deferred revenue 321 312
Long-term debt 10,309 821
Deferred income tax liabilities 1,765 1,565
Total liabilities 35,225 23,508
Shareholders' equity 32,999 33,210
Total liabilities and shareholders' equity 68,224 56,718
PRISM MEDICAL LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended


(thousands of Canadian dollars, except per share amounts)
February 28
2013
$
February 29
2012
$
Revenues 17,305 18,657
Cost of products and services sold 10,960 11,353
Gross margin 6,345 7,304
Expenses
Selling and marketing expenses 1,526 1,735
General and administrative expenses 4,099 4,308
Interest expense 257 186
Foreign exchange loss 78 -
Loss from equity investment 92 -
6,052 6,229
Income before income taxes 293 1,075
Income tax provision (recovery)
Current 183 225
Deferred (95 ) 41
88 266
Net income for the period 205 809
Earnings per share
Basic 0.02 0.10
Diluted 0.02 0.10
PRISM MEDICAL LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF TOTAL COMPREHENISVE INCOME (LOSS)
(UNAUDITED)
Three months ended
(thousands of Canadian dollars, except per share amounts) February 28
2013
$
February 29
2012
$
Net income for the period
205
809
Other comprehensive income
Unrealized gain (loss) on translation of foreign subsidiaries 171 (839 )
Total comprehensive income (loss) for the period 376 (30 )
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 - - 205 - 205
Other comprehensive income (loss) - - - 171 171
Total comprehensive income (loss) for the period - - 205 171 376
Stock based compensation 84 84
Dividends paid on common shares - - (671 ) - (671 )
Balance as at February 28, 2013 8,391 24,010 1,081 8,375 (467 ) 32,999
(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 9,241 28 33,648
Net income for the period - - 809 - 809
Other comprehensive income (loss) - - - (839 ) (839 )
Total comprehensive income (loss) for the period - - 809 (839 ) (30 )
Stock based compensation - 92 - - 92
Dividends paid on common shares - - (667 ) - (667 )
Balance as at February 29, 2012 8,334 23,676 795 9,383 (811 ) 33,043
PRISM MEDICAL LTD.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended
(thousands of Canadian dollars) February 28
2013
$
February 29
2012
$
Cash flows from operating activities
Net income for the period 205 809
Income tax provision 88 266
Interest expense 257 186
Income before interest and taxes 550 1,261
Cash taxes paid (318 ) (367 )
Interest paid (219 ) (170 )
Add (deduct) items not affecting cash:
Depreciation and amortization 814 616
Stock-based compensation 84 92
Loss from equity investment 92 -
Pension expense 78 -
Other items not affecting cash - foreign exchange and other (135 ) (153 )
946 1,279
Net change in non-cash working capital balances related to operations (2,217 ) (591 )
Cash (used in) provided by operating activities (1,271 ) 688
Cash flows from investing activities
Purchase of equipment and leaseholds (154 ) (107 )
Purchase of intangible assets (8,330 ) (192 )
Purchase of equity interest in associates (446 ) -
Cash used in investing activities (8,930 ) (299 )
Cash flows from financing activities
(Decrease) increase in bank indebtedness 1,882 (1,550 )
Increase in long-term debt 9,240 -
Proceeds from finance lease - 258
Repayment of long-term debt (90 ) (338 )
Dividends paid (671 ) (667 )
Cash provided by (used in) financing activities 10,361 (2,297 )
Effect of foreign exchange rate changes on cash (25 ) (43 )
Net decrease in cash and cash equivalents during the period 135 (1,951 )
Cash and cash equivalents, beginning of period 1,381 3,113
Cash and cash equivalents, end of period 1,516 1,162

FOR FURTHER INFORMATION PLEASE CONTACT:

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

Contact Information:
Prism Medical Ltd.
George Chiarucci
Chief Financial Officer
416-260-2145 ext. 229
gchiarucci@prismmedicalltd.com

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