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Section 1: 8-K (FORM 8K)

 

 

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): September 25, 2018

 

 

 

ELECTROMED, INC. 

(Exact Name of Registrant as Specified in Its Charter)

 

Minnesota 001-34839 41-1732920

(State or Other Jurisdiction of 

Incorporation)

(Commission File Number)

(I.R.S. Employer Identification 

Number) 

 

500 Sixth Avenue NW 

New Prague, MN 56071 

(Address of Principal Executive Offices)(Zip Code)

 

(952) 758-9299 

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable 

(Former Name or Former Address, if Changed Since Last Report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On September 25, 2018, Electromed, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal year ended June 30, 2018. The full text of the press release is attached as Exhibit 99.1.

 

Item 9.01Financial Statements and Exhibits

 

(d) Exhibits:

 

99.1Press Release dated September 25, 2018.

 

The information contained in this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ELECTROMED, INC.  
     
Date: September 25, 2018 By: /s/ Jeremy T. Brock  
  Name: Jeremy T. Brock  
  Title: Chief Financial Officer  

 

 

 

EXHIBIT INDEX

 

Exhibit Number   Description   Method of Filing
99.1   Press Release dated September 25, 2018   Furnished Electronically

 

 

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Section 2: EX-99.1 (PRESS RELEASE DATED SEPTEMBER 25, 2018)

 

Exhibit 99.1

 

(graphic) 

 

FOR IMMEDIATE RELEASE

 

Electromed, Inc. Announces Fiscal 2018 Fourth Quarter Financial Results

 

-- 14.8% year-over-year increase in home care revenue --

 

New Prague, Minnesota – September 25, 2018 – Electromed, Inc. (“Electromed” or the “Company”) (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced financial results for the three months ended June 30, 2018 (“Q4 FY 2018”).

 

Q4 FY 2018 Highlights 

Net revenue increased 13.3% to $8.2 million from $7.3 million during the three months ended June 30, 2017 (“Q4 FY 2017”). Net revenue for the prior year comparable period included a favorable impact of $703,000 from a one-time item related to a settlement agreement with Centers for Medicare and Medicaid Services.

Gross profit rose 12.2% to $6.7 million from $6.0 million in Q4 FY 2017.

Operating income grew 5.1% to $1.6 million from $1.5 million in Q4 FY 2017.

Net income expanded 18.2% to $1.1 million, or $0.13 per diluted share, from $946,000, or $0.11 per diluted share, in Q4 FY 2017.

Cash flow from operating activities increased 48.1% to $570,000 from $385,000 in Q4 FY 2017.

Field sales employees grew to 50 at the end of Q4 FY 2018 from 40 at the end of Q4 FY 2017.

 

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “In the fourth quarter of fiscal 2018, we delivered strong top and bottom-line growth, driven by a 14.8% year-over-year increase in home care revenue. We benefitted from investments made earlier in the year to expand our sales force, improve our reimbursement skills and processes, and advance physician awareness and education surrounding the benefits of high frequency chest wall oscillation therapy (“HFCWO”) with our SmartVest® device. As a result, this quarter we achieved a greater number of referrals, of significantly higher quality, translating into exceptional growth in approvals.”

 

Ms. Skarvan continued, “The incremental investments initiated in fiscal 2018 position Electromed for double-digit revenue and earnings growth over the next few years. Looking ahead, we remain focused on improving sales force productivity, enhancing our reimbursement processes, increasing HFCWO awareness and education among physicians and patients, promulgating evidence-based studies that differentiate SmartVest, developing innovative device features, and expanding our covered lives.

 

“Last month, we announced the first independent study suggesting that HFCWO therapy with SmartVest significantly reduces severe exacerbations and hospitalizations, and may meaningfully slow the otherwise normal progression of non-cystic fibrosis bronchiectasis. A growing body of evidence, including this study, reinforces our optimism for expanding the market for HFCWO and gaining share in the large, underpenetrated bronchiectasis market. As always, our underlying mission is to improve quality-of-life and outcomes for a greater number of patients with compromised pulmonary function, while reducing overall healthcare utilization through SmartVest airway clearance therapy.”

 

 

 

Q4 FY 2018 Review 

 

Net revenue increased 13.3% to $8.2 million in Q4 FY 2018 from $7.3 million in Q4 FY 2017, primarily driven by higher home care revenue. Home care revenue rose 14.8% to $7.7 million in Q4 FY 2018 from $6.7 million in Q4 FY 2017, primarily due to growth in approvals as a result of continued improvements in our reimbursement operations that led to a greater referral to approval percentage and a higher average selling price per device. Net revenue for the prior year comparable period included a favorable impact of $703,000 from a one-time item related to a settlement agreement with Centers for Medicare and Medicaid Services.

 

Gross profit increased 12.2% to $6.7 million, or 81.7% of net revenue, in Q4 FY 2018 from $6.0 million, or 82.5% of net revenue, in Q4 FY 2017. The increase in gross profit resulted primarily from an increase in home care revenue.

 

Operating expenses, which include selling, general and administrative (“SG&A”) as well as research and development (“R&D”) expenses, totaled $5.1 million, or 62.4% of revenue, in Q4 FY 2018 compared with $4.5 million, or 61.7% of revenue, in the same period of the prior year. SG&A expenses increased 14.4% to $5.1 million in Q4 FY 2018 from $4.4 million in Q4 FY 2017, primarily due to higher payroll and compensation-related expenses and increased travel, meals and entertainment expenses which were driven by the expansion of our sales force. These increased costs were partially offset by a $406,000 refund of medical device excise taxes that was recognized during Q4 FY 2018. R&D expenses totaled $81,000 in Q4 FY 2018 compared to $65,000 in Q4 FY 2017.

 

Operating income increased 5.1% to $1.6 million in Q4 FY 2018 from $1.5 million in Q4 FY 2017, primarily due to increased gross profit driven by higher revenue and a refund of medical device excise taxes, which were partially offset by costs related to the expansion of our sales force.

 

Net income before income tax expense rose 7.6% to $1.6 million in Q4 FY 2018 from $1.5 million in Q4 FY 2017.

 

Net income increased 18.2% to $1.1 million, or $0.13 per diluted share, in Q4 FY 2018, from $946,000, or $0.11 per diluted share, in Q4 FY 2017. In Q4 FY 2018, income tax expense totaled $500,000, compared to $559,000 in the same period of the prior year.

 

Full Year FY 2018 Summary 

 

For the twelve months ended June 30, 2018, revenue grew 11.0% to $28.7 million from $25.9 million in fiscal 2017, driven by a 13.8% increase in home care revenue. Gross margins were 79.6%, compared to 79.5% in the prior fiscal year, while net income was $1.9 million, or $0.22 per diluted share, compared to $2.2 million, or $0.26 per diluted share in fiscal 2017.

 

Financial Condition 

 

Electromed’s balance sheet at June 30, 2018 included cash of $7.5 million, long-term debt including current maturities of $1.1 million, working capital of $17.5 million, and shareholders’ equity of $21.9 million.

 

 

 

Conference Call 

 

Management will host a conference call on September 26, 2018 at 8:00 am CT (9:00 am ET) to discuss Q4 FY 2018 financial results and other matters.

 

Interested parties may participate in the call by dialing: 

(877) 407-9753 (Domestic)

(201) 493-6739 (International)

 

The conference call will also be accessible via the following link: 

http://www.investorcalendar.com/event/37302.

 

For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section of Electromed’s web site at: http://investors.smartvest.com/.

 

About Electromed, Inc.

 

Electromed, Inc. manufactures, markets, and sells products that provide airway clearance therapy, including the SmartVest® Airway Clearance System, to patients with compromised pulmonary function. The Company is headquartered in New Prague, Minnesota and was founded in 1992. Further information about Electromed can be found at www.smartvest.com.

 

Cautionary Statements

 

Certain statements in this release constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect current views with respect to future events and financial performance and include any statement that does not directly relate to a current or historical fact. Forward-looking statements can generally be identified by words such as “believe,” “estimate,” “expect,” “may,” “plan” “potential,” “should,” “will,” and similar expressions, including the negative of these terms, but they are not the exclusive means of identifying such statements. Forward-looking statements cannot be guaranteed and actual results may vary materially due to the uncertainties and risks, known or unknown associated with such statements. Examples of risks and uncertainties for the Company include, but are not limited to: the competitive nature of our market; risks associated with expansion into international markets; changes to Medicare, Medicaid, or private insurance reimbursement policies; new drug or pharmaceutical discoveries; changes to health care laws; changes affecting the medical device industry; our need to maintain regulatory compliance and to gain future regulatory approvals and clearances; our ability to protect and expand our intellectual property portfolio; our ability to renew our line of credit or obtain additional credit as necessary; our ability to develop new sales channels for our product; and general economic and business conditions, as well as other factors described from time to time in our reports to the Securities and Exchange Commission (including the Company’s most recent Annual Report on Form 10-K, as amended from time to time, and subsequent reports on Form 10-Q and Form 8-K). Investors should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions investors should take into account when making investment decisions. Shareholders and other readers should not place undue reliance on “forward-looking statements,” as such statements speak only as of the date of this release.

 

Contacts:  
   
Electromed, Inc. The Equity Group Inc.
Jeremy Brock, Chief Financial Officer Kalle Ahl, CFA
(952) 758-9299 (212) 836-9614
[email protected] [email protected]
   
  Devin Sullivan
  (212) 836-9608
  [email protected]

 

 

 

Financial Tables Follow:

 

Electromed, Inc. 

Condensed Balance Sheets

 

   June 30, 2018   June 30, 2017 
         
         
Assets          
Current Assets          
Cash  $7,455,844   $5,573,709 
Accounts receivable (net of allowances for doubtful accounts of $45,000)   11,563,208    9,949,759 
Inventories   2,360,693    2,559,485 
Prepaid expenses and other current assets   832,202    393,319 
Total current assets   22,211,947    18,476,272 
Property and equipment, net   3,091,242    3,303,233 
Finite-life intangible assets, net   649,103    721,276 
Other assets   91,912    99,868 
Deferred income taxes   594,000    460,000 
Total assets  $26,638,204   $23,060,649 
           
Liabilities and Shareholders’ Equity          
Current Liabilities          
Current maturities of long-term debt  $1,101,043   $50,703 
Accounts payable   810,644    663,376 
Accrued compensation   1,209,738    946,623 
Income taxes payable   397,390    156,524 
Warranty reserve   760,000    640,000 
Other accrued liabilities   464,357    438,748 
Total current liabilities   4,743,172    2,895,974 
Long-term debt, less current maturities and net of debt issuance costs       1,097,125 
Total liabilities   4,743,172    3,993,099 
           
Commitments and Contingencies          
           
Shareholders’ Equity          
Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,288,659 and 8,230,167 issued and outstanding at June 30, 2018 and June 30, 2017, respectively   82,887    82,302 
Additional paid-in capital   14,953,103    14,028,602 
Retained earnings   6,859,042    4,956,646 
Total shareholders’ equity   21,895,032    19,067,550 
Total liabilities and shareholders’ equity  $26,638,204   $23,060,649 

 

 

 

Electromed, Inc. 

Condensed Statements of Operations

 

   For the Three Months Ended   For the Twelve Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
Net revenues  $8,240,564   $7,273,901   $28,697,622   $25,861,144 
Cost of revenues   1,507,159    1,272,100    5,841,601    5,292,715 
Gross profit   6,733,405    6,001,801    22,856,021    20,568,429 
                     
Operating expenses                    
Selling, general and administrative   5,061,167    4,422,953    19,596,053    16,402,214 
Research and development   81,320    64,621    251,443    596,876 
Total operating expenses   5,142,487    4,487,574    19,847,496    16,999,090 
Operating income   1,590,918    1,514,227    3,008,525    3,569,339 
                     
Interest income (expense), net   28,296    (8,733)   19,871    (49,867)
Net income before income taxes   1,619,214    1,505,494    3,028,396    3,519,472 
                     
Income tax expense   500,000    559,000    1,126,000    1,290,000 
Net income  $1,119,214   $946,494   $1,902,396   $2,229,472 
                     
Income per share:                    
Basic  $0.14   $0.12   $0.23   $0.27 
Diluted  $0.13   $0.11   $0.22   $0.26 
                     
Weighted-average common shares outstanding:                    
Basic   8,221,437    8,171,319    8,207,365    8,168,152 
Diluted   8,578,295    8,493,619    8,620,102    8,461,120 

 

 

 

Electromed, Inc. 

Condensed Statements of Cash Flows

 

   Twelve Months Ended June 30, 
   2018   2017 
Cash Flows From Operating Activities          
Net income  $1,902,396   $2,229,472 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   676,426    636,709 
Amortization of finite-life intangible assets   113,601    118,418 
Amortization of debt issuance costs   6,351    13,067 
Share-based compensation expense   862,674    479,482 
Deferred taxes   (134,000)   (117,000)
Loss on disposal of property and equipment   25,990    3,302 
Loss on disposal of intangible assets   4,122    132,724 
Changes in operating assets and liabilities:          
Accounts receivable   (1,613,449)   (2,338,322)
Inventories   234,594    (28,334)
Prepaid expenses and other assets   (433,363)   49,864 
Income tax receivable       192,685 
Income tax payable   240,866    156,524 
Accounts payable and accrued liabilities   555,992    (337,470)
Net cash provided by operating activities   2,442,200    1,191,121 
           
Cash Flows From Investing Activities          
Expenditures for property and equipment   (526,227)   (618,763)
Expenditures for finite-life intangible assets   (45,550)   (68,385)
Net cash used in investing activities   (571,777)   (687,148)
           
Cash Flows From Financing Activities          
Principal payments on long-term debt including capital lease obligations   (50,700)   (48,747)
Issuance of common stock upon exercise of options   62,412     
Payments of deferred financing fees       (4,872)
Net cash provided by (used in) financing activities   11,712    (53,619)
Net increase in cash   1,882,135    450,354 
Cash          
Beginning of period   5,573,709    5,123,355 
End of period  $7,455,844   $5,573,709 

 

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