Prism Medical Reports First Quarter Results

TORONTO, May 7, 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 first quarter (Q1) ended February 29, 2012.

Financial Summary

(in thousands of Canadian dollars)	Three months ended February 29/28
	2012	2011	% Change
Revenues	$18,657	$16,153	15.5%
Gross profit	$7,304	$6,635	10.1%
(as % of revenues)	39.1%	40.8%
Net income	$809	$838	(3.5%)
(as % of revenues)	4.3%	5.2%
EBITDA^1	$1,973	$2,148	(8.2%)
(as % of revenues)	10.6%	13.3%
Earnings per share
Basic	$0.12	$0.15
Diluted	$0.10	$0.12

First Quarter Highlights

• Canadian revenues grew by 35.6% in Q1 2012 compared to the same period last year
• Revenues from the US grew by 15.2% in Q1 2012 compared to Q1 2011
• Advancement of  the bundled service offering in the UK by winning a large contract from Leonard Cheshire Disability to supply assisted baths as well as mobile and ceiling track hoists having previously won the service and repair business
• Continued to expand sales in Quebec
• Strong institutional demand driven by new build projects and replacement programs for existing facilities in all geographies as well as continued growth in adoption of product in the US
• Continued strength in the demand for home care products and services in all geographies
• The company strengthened its management team to enable further growth

"During Q1 we continued to build our platform in the underpenetrated US market by adding sales representatives in new territories. Over the past five years, revenues from the United States have grown by almost 50% per year as we have advanced our local sales and service capabilities," said Stuart Meldrum, Chief Executive Officer of Prism Medical. "The contract with Leonard Cheshire in the UK further validates our recent product additions, which have helped us win large, multi-year bundled sales and service contracts. We expect the demand for safe patient moving and handling equipment to grow rapidly over the next decade, particularly in North America, and we are building a leading local platform to capture market share."

Financial Review

Revenues

Total revenues for Q1 2012 grew by 15.5% to $18.7 million compared to $16.2 million in Q1 2011. North America accounted for 50.0% of revenues in Q1 2012 compared to 47.0% in the first quarter of 2011. North American revenues grew by 24.2% year-over-year.

In the United States, growth was primarily driven by higher sales to home care and institutional dealers. In Q1 2012, revenue growth was offset by lower direct sales to integrated delivery network (IDN) hospitals compared to favourable order timing to these IDN`s in Q1 2011.

In the Canadian market, increased government spending levels, particularly in Ontario and geographic expansion into Quebec contributed to revenue growth. In British Columbia, a contract to replace end-of-life ceiling lifts in provincial hospitals contributed strongly to Q1 2012 revenue growth.

The UK comprised 50.0% of the Company's revenues compared to 53.0% last year. Revenues in the UK grew by 7.8% year-over-year, primarily due to the acquisition of Movement 2 as well as strong installation revenues resulting from the Leonard Cheshire contract.

Gross Profit

Gross profit dollars for the quarter grew by 10.1% to $7.3 million or 39.1% of revenues compared to $6.6 million or 40.8% of revenues in Q1 2011. Gross profit rate decreased slightly as a result of the mix of business in the quarter, in particular lower rates on US installation sales due to a lower margin on the specific completed projects. In addition, the first quarter of 2011 was favourably impacted by a number of one-time adjustments to margins. Also of note, in the first quarter, we achieved a significant improvement in the gross margin rate of our UK engineering teams as management activities delivered integration efficiencies.

Selling, General and Administrative

Selling and marketing for the three months ended February 29, 2012 increased $0.2 million or 14.0% and general and administrative expenses increased by $0.8 million or 21.0% compared to the same period last year. The increase is primarily due to the impact of the Movement 2 acquisition and investment in our people and infrastructure, particularly in the US, to support our geographic expansion.

EBITDA¹

EBITDA for the quarter declined by 8.3% to $2.0 million, or 10.6% of revenues, compared to $2.2 million, or 13.3% of revenues in the same period last year. IFRS transitional adjustments did not impact EBITDA for the three months ended February 29, 2012 but favourably impacted the comparable period last year by $0.2 million.  Excluding IFRS adjustments, EBITDA for the quarter was on a par with the same period in the prior year.

Net Income

Net Income for the quarter declined by 3.6% to $0.81 million compared to $0.84 million in Q1 2011. Excluding the above noted IFRS adjustments, net income would have increased by 16.5% ($0.7 million in Q1 2011 versus $0.8 million in Q1 2012).

Liquidity

At February 29, 2012, total debt net of cash was $12.9 million, compared with $12.6 million at November 30, 2011.

Outlook

The Company intends to grow sales and profitability to provide a reasonable 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 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. Budgetary pressures on health care spending  is causing government agencies to look for increasingly cost effective solutions for health care provision and in this respect the Company believes it is well positioned to win more business. On this basis, we believe that our business will continue to grow in all geographies 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 May 31, 2012 to the shareholders of record on May 23, 2012.

Notice of Conference Call

Prism Medical will host a conference call on May 7, 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 details

Dial-In Number: [phone] or [phone]

Taped Replay:     [phone] or [phone]

Reference Number:  77294134

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 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 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)	February 29 2012 $	November 30 2011 $	December 1 2010 $
ASSETS
Current assets
Cash and cash equivalents	1,162	3,113		946
Accounts receivable, net	16,017	16,870		16,127
Inventories	12,097	11,839		12,595
Prepaid expenses	1,363	970		858
Other receivables	763	1,051		932
Income taxes recoverable	187	193		351
Total current assets	31,589	34,036		31,809
Deferred development costs	1,188	1,057		739
Property, plant and equipment	3,462	3,795		4,216
Goodwill	18,335	18,671		18,279
Intangible assets	3,782	3,992		3,067
Future income tax assets	190	276		559
Total Assets	58,546	61,827		58,669
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness	9,300	10,850		8,060
Accounts payable and accrued liabilities	8,228	9,110		11,057
Current portion of  provisions	92	92		60
Current portion of deferred revenue	176	179		167
Income taxes payable	908	1,048		643
Current portion of long-term debt	2,144	2,096		12,330
Total current liabilities	20,848	23,375		32,317
Long-term portion of  provisions	62	64		-
Long-term portion of deferred revenue	296	301		285
Long-term debt	2,613	2,768		3,641
Future income tax liabilities	1,684	1,671		1,409
Total liabilities	25,503	28,179		37,652
Total Shareholders' equity	33,043	33,648		21,017
Total liabilities and shareholders' equity	58,546	61,827		58,669

PRISM MEDICAL LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
						Three months ended
(thousands of Canadian dollars, except per share amounts)						February 29 2012 $		February 28 2011 $
Revenues						18,657		16,153
Cost of products and services sold						11,353		9,518
Gross profit						7,304		6,635
Expenses
Selling and marketing						1,735		1,525
General and administrative expenses						4,308		3,544
Interest expense						186		472
Foreign exchange (gains)						-		(73)
						6,229		5,468
Income before income taxes						1,075		1,167
Income tax provision
					Current	225		146
					Deferred	41		183
						266		329
Net income for the period						809		838
Earnings per share
Basic						0.10		0.15
Diluted						0.10		0.12

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 29 2012 $		February 28 2011 $
Net income for the period			809		838
Other comprehensive income
	Unrealized gain (loss) on translation of foreign subsidiaries		(839)		(965)
Total comprehensive income (loss) for the period			(30)		(127)

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 $	Other Paid In Capital $	Contributed Surplus $		Retained Earnings $	Accumulated Other Comprehensive Income (Loss) $		Total 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
Balance as at December 1, 2010		5,587	11,917	1,395	546		7,159	-		21,017
	Net income for the period	-	-	-	-		838	-		838
Other comprehensive income (loss)		-	-	-	-		-	(965)		(965)
Total comprehensive income (loss) for the period		-	-	-	-		838	(965)		(127)
Stock based compensation		-	-	-	23		-	-		23
Dividends paid on common shares		-	-	-	-		(419)	-		(419)
Balance as at February 28, 2011		5,587	11,917	1,395	569		7,578	(965)		20,474

PRISM MEDICAL LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
			Three months ended
(thousands of Canadian dollars)			February 29 2012 $		February 28 2011 $
Cash flows from operating activities
Net income for the period			809		838
Cash taxes paid			(167)		(250)
Interest paid			(170)		(193)
Add (deduct) items not affecting cash
	Future income taxes		99		144
	Depreciation and amortization		616		486
	Stock-based compensation		92		23
	Interest accretion on convertible debt		-		95
	Foreign exchange (gain) loss		-		(73)
			1,279		1,070
Net change in non-working capital balances related to operations			(591)		(3,054)
Cash provided by (used in) operating activities			688		(1,984)
Cash flows from investing activities
	Deferred charges		(175)		(101)
	Intangible assets		(17)		(25)
	Purchase of property, plant and equipment		(107)		(138)
Cash used in investing activities			(299)		(264)
Cash flows from financing activities
	Capital lease obligations		258		-
	(Decrease) increase in bank indebtedness		(1,550)		2,444
	Repayment of long-term debt		(338)		(723)
	Dividends paid		(667)		(419)
Cash provided by (used in) financing activities			(2,297)		1,302
Effect of foreign exchange rate changes on cash			(43)		-
Net decrease in cash and cash equivalents during the period			(1,951)		(946)
Cash and cash equivalents, beginning of period			3,113		946
Cash and cash equivalents, end of period			1,162		-

George Chiarucci
Chief Financial Officer
[email protected] 
416-260-2145 ext. 229

Jonathan Ross
TMX Equicom
[email protected]
416-815-0700 ext. 248