Prism Medical Reports Third Quarter Results

TORONTO, Oct. 30, 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 third quarter (Q3) ended August 31, 2012.

Financial Summary

(in thousands of Canadian dollars)	Three months ended August 31						Nine months ended August 31
		2012		2011		% Change		2012		2011		% Change
Revenues		$17,188		$18,450		(6.8%)		$57,757		$53,407		8.1%
Gross profit		$6,690		$7,001		(4.4%)		$22,758		$21,627		5.2%
(as % of revenues)		38.9%		37.9%				39.4%		40.5%
Net income		$71		$443		(84.0%)		$2,417		$2,420		0%
(as % of revenues)		0%		2.4%				4.2%		4.5%
EBITDA^1		$1,003		$1,730		(42.0%)		$5,843		$6,640		(12.0%)
(as % of revenues)		5.8%		9.3%				10%		12.4%
Earnings per share
Basic		$0.01		$0.07		(85.7%)		$0.29		$0.40		(27.5%)
Diluted		$0.01		$0.07		(85.7%)		$0.29		$0.35		(17.1%)

Third Quarter Highlights

• The UK and Canadian business have performed well as strategic initiatives continue to be successfully implemented, however budgetary constraints and economic uncertainty in the US impacted the Company's Q3 results. The US  market is underdeveloped and dependent on capital project implementations which are more sensitive to budgetary contractions.
• Subsequent to the quarter the Company's lender increased the Credit Facility relating to the demand revolving loan from $15.0 million to $17.5 million and the demand revolving loan to finance acquisitions from $7.5 million to $27.5 million.

"Our financials for this quarter were not as strong as we anticipated, primarily due to the economic uncertainty in the U.S.," said Stuart Meldrum, Chief Executive Officer of Prism Medical. "The performance of the US economy has resulted in  reduced capital spending by our customers. However, the U.S. market is relatively underpenetrated and we continue to believe in the positive long term trends that underpin our optimism of the growth potential of this market. We have also been successfully implementing our strategic initiatives in the UK and Canada, and we have been performing well in these markets. We continue to see strength in service revenues from the UK and strong institutional demand for our products in Canada."

Financial Review

Revenues

Total revenues for Q3 2012 decreased by 6.8% to $17.2 million compared to $18.4 million in Q3 2011.

The United States represented 25.0% of the Company's revenues in Q3 2012 compared to 27.0% in Q3 2011. Revenues in the U.S. declined by 12.2% in Q3 2012 compared with the same period in the prior year. The decline was primarily due to the economic uncertainty in the U.S., resulting in delay or cancellation of capital spending projects. However, economic uncertainty does not affect the positive long term trends that underpin the Company's optimism of the growth potential of this market.

Canadian sales composed 17.0% of the Company's revenues in Q3 2012 unchanged from Q3 2011. Revenues in Canada decreased by 9.1% in Q3 2012 compared with the same period in the prior year. Canada had a particularly strong first half resulting in a small market correction in the quarter.

The United Kingdom comprised 58.0% of the Company's revenues in Q3 2012 compared to 56.0% in Q3 2011. Revenues in the UK decreased by 3.6% in Q3 2012 compared with the same period in the prior year however on a year to date basis revenues are ahead of last year and have remained strong.

Gross Profit

Gross profit dollars for the three month period ended August 31, 2012 decreased by 4.4%, to $6.7 million compared with the prior year. Gross profit rate for the three month period ended August 31, 2012 increased slightly to 38.9% from 37.9% in Q3 2011. The increase in gross profit rate was primarily due to continuing improvements in engineering efficiencies in the UK.

Selling, General and Administrative

Selling and marketing expenses for the three months ended August 31, 2012 increased by 17.1% to $1.9 million, compared to the same period in the prior year. General and administrative expenses increased by 9.1% to $4.6 million in the three month period ended August 31, 2012, compared with the corresponding period in the prior year. The increase in SG&A was primarily due to increased costs in the US to support an anticipated revenue growth and expansion.

EBITDA¹

EBITDA for the three month period ended August 31, 2012 decreased by 42.0% to $1,003, or 5.8% of sales, compared to $1,730, or 9.3% of sales in Q3 2011. EBITDA for the nine month period ended August 31, 2012 decreased by 12% to $5,843 or 10.1% of sales compared to $6,640 or 12.4% of sales in the comparative period last year.

Net Income

Net income for the three months ended August 31, 2012 decreased by $372 or 84% and was virtually unchanged for the nine months ended August 31, 2012 compared to the same period last year.  The decrease in the third quarter was driven by lower operating profit offset by lower interest expense and higher tax recoveries recorded in the U.S..  Basic earnings per share and current quarter fully diluted earnings per share dropped due to the lower net income.  On a year-to-date basis, fully diluted earnings per share dropped from $0.35 to $0.29 despite net income remaining relatively unchanged.  This was due to the impact of the conversion of the convertible debentures on the calculation of the prior year fully diluted earnings per share.

Liquidity

At August 31, 2012, total debt net of cash was $12.4 million, compared with $12.6 million at November 30, 2011.

Dividends paid to date

In this fiscal year, the Company has paid $0.32 per share in dividends or $0.08 per share per quarter.  This being the anticipated dividend level for the Company during this fiscal year, no further dividend payments will be made for the balance of the year.

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. With the 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 continue to change, we believe that the long term trend continues to be favourable.

We estimate that for Prism, the U.S. 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 U.S. 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 U.S. and designing affordable products for the private-pay homecare market.

Notice of Conference Call

Prism Medical will host a conference call on November 1, 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:

DATE:	Thursday, November 1, 2012
TIME:	9:00 a.m. Eastern Time
DIAL-IN NUMBER:	[phone] or [phone]
TAPED REPLAY:	[phone] or [phone]
REFERENCE NUMBER:	58440717

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)		August 31 2012 $	November 30 2011 $
			(Note 19)
ASSETS
Current assets
Cash and cash equivalents		1,795	3,113
Accounts receivable, net		12,962	16,870
Inventories		12,645	11,839
Prepaid expenses		1,134	970
Other receivables		567	1,051
Income taxes recoverable		1,113	193
Total current assets		30,216	34,036
Property, plant and equipment		3,208	3,795
Goodwill		18,177	18,671
Intangible assets		5,389	5,049
Future income tax assets		248	276
Total Assets		57,238	61,827
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness		10,549	10,850
Accounts payable and accrued liabilities		6,539	9,170
Current portion of  provisions		-	32
Current portion of deferred revenue		182	179
Income taxes payable		1,521	1,048
Current portion of long-term debt		1,894	2,096
Total current liabilities		20,685	23,375
Long-term portion of  provisions		-	64
Long-term portion of deferred revenue		303	301
Long-term debt		1,794	2,768
Future income tax liabilities		1,695	1,671
Total liabilities		24,477	28,179
Shareholders' equity		32,761	33,648
Total liabilities and shareholders' equity		57,238	61,827

On behalf of the Board:
Director			Director
"Andrew McIntyre"			"Howard Taylor"
_________________			_________________
Andrew McIntyre			Howard Taylor

PRISM MEDICAL LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
			Three months ended August 31		Nine months ended August 31
			2012	2011	2012	2011
			$		$	$
Revenues			17,188	18,450	57,757	53,407
Cost of products and services sold			10,498	11,449	34,999	31,780
Gross profit			6,690	7,001	22,758	21,627
Expenses
		Selling and marketing	1,905	1,627	5,543	5,172
		General and administrative expenses	4,611	4,227	13,562	11,427
		Interest expense	165	437	559	1,350
		Foreign exchange (gains) losses	(86)	(12)	(8)	26
			6,595	6,279	19,656	17,975
Income before income taxes			95	722	3,102	3,652
Income tax provision (recovery)
		Current	(37)	733	561	1,093
		Deferred	61	(454)	124	139
			24	279	685	1,232
Net income for the period			71	443	2,417	2,420
Earnings per share
		Basic	0.01	0.07	0.29	0.40
		Diluted	0.01	0.07	0.29	0.35

PRISM MEDICAL LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF TOTAL COMPREHENISVE INCOME (LOSS) (UNAUDITED)
(thousands of Canadian dollars,)		Three months ended August 31			Nine months ended Aug 31
		2012		2011	2012	2011
		$		$	$	$
Net income for the period		71		443	2,417	2,420
Other comprehensive income
	Unrealized gain (loss) on translation of foreign
	subsidiaries	(1,171)		(824)	(1,182)	(748)
Total comprehensive income (loss) for the period		(1,100)		(381)	1,235	1,672

.

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 Loss $		Total Equity $
Balance as at November 30, 2011	8,334	23,676	-	703		9,232	37		33,648
Net income for the period		-	-	-		2,417	-		2,417
Other comprehensive loss		-	-	-		-	(1,182)		(1,182)
Total comprehensive income (loss) for the period		-	-	-		2,417	(1,182)		1,235
Stock based compensation		-		266		-	-		266
Issued under stock option plan	57	334		(47)					287
Dividends paid on common shares		-	-	-		(2,675)	-		(2,675)
Balance as at August 31, 2012	8,391	24,010	-	922		8,974	(1,145)		32,761
Balance as at December 1, 2010	5,587	11,917	1,395	546		7,159	-		21,017
Net income for the period		-	-	-		2,420	-		2,420
Other comprehensive loss		-	-	-		-	(748)		(748)
Total comprehensive loss for the period		-	-	-		2,420	(748)		1,672
Issued on exercise of stock options	120	433		-		-	-		433
Redemption of convertible debentures	2,627	9,850	(8)						9,842
Stock-based compensation	-	-		111		-	-		111
Dividends paid on common shares	-	-	-	-		(1,911)	-		(1,911)
Balance as at August 31, 2011	8,334	22,200	1,387	657		7,668	(748)		31,164

PRISM MEDICAL LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Three months ended		Nine months ended
(thousands of Canadian dollars)		Aug 31 2012 $	Aug 31 2011 $	Aug 31 2012 $	Aug 31 2011 $
Cash flows from operating activities
Net income for the period		71	443	2,417	2,420
Income tax provision		24	279	685	1,232
Interest expense		165	437	559	1,350
Earnings before interest and taxes		260	1,159	3,661	5,002
Cash taxes paid		(456)	(3)	(940)	(247)
Interest paid		(126)	(168)	(467)	(479)
Add (deduct) items not affecting cash
Deferred income taxes		218	(422)	38	-
Depreciation and amortization		638	532	1,916	1,526
Stock-based compensation		105	39	266	112
Interest accretion on convertible debt		-	30	-	122
Pension expense		64	-	194	-
Other items not affecting cash - foreign exchange and other		(1,427)	(13)	(1,439)	(1,638)
		(724)	1,154	3,230	4,398
Net change in non-working capital balances related to operations		1,848	996	897	(1,794)
Cash provided by operating activities		1,124	2,150	4,127	2,604
Cash flows from investing activities
Deferred charges		(71)	(88)	(484)	(287)
Intangible assets		(590)	(20)	(633)	(68)
Purchase of property, plant and equipment		(126)	(263)	(362)	(709)
Purchase of a business		-	(2)	-	(402)
Cash used in investing activities		(787)	(373)	(1,479)	(1,466)
Cash flows from financing activities
Increase (decrease) in bank indebtedness		219	(413)	(312)	1,055
Proceeds from finance lease obligations		205	-	485	-
Increase in long-term debt		-	-	-	625
Repayment of long-term debt		(686)	(739)	(1,698)	(2,280)
Issuance of share capital		94	-	288	433
Dividends paid		(671)	(625)	(2,675)	(1,917)
Cash used in financing activities		(839)	(1,777)	(3,912)	(2,084)
Effect of foreign exchange rate changes on cash		(23)	-	(54)	-
Net decrease in cash and cash equivalents during the period		(525)	-	(1,318)	(946)
Cash and cash equivalents, beginning of period		2,320	-	3,113	946
Cash and cash equivalents, end of period		1,795	-	1,795	-

 

 

 

SOURCE: Prism Medical Ltd.

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

Babak Pedram
TMX Equicom
[email protected]
416-815-0700 ext. 264