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Section 1: 8-K (FORM 8K DATED FEBRUARY 12, 2019)

 

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): February 12, 2019

     
     

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 2.02

Results of Operations and Financial Condition

 

On February 12, 2019, Electromed, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended December 31, 2018. The full text of the press release is attached as Exhibit 99.1.

 

Item 9.01Financial Statements and Exhibits

 

(d) Exhibits:

 

99.1       Press Release dated February 12, 2019.

 

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:  February 12, 2019   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 February 12, 2019   Furnished Electronically

 

 

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Section 2: EX-99.1 (PRESS RELEASE DATED FEBRUARY 12, 2019)

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

Electromed, Inc. Announces Fiscal 2019 Second Quarter Financial Results

 

-- 15.1% year-over-year increase in revenue --

 

New Prague, Minnesota – February 12, 2019 – Electromed, Inc. (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced financial results for the three months ended December 31, 2018 (Q2 FY 2019).

 

Q2 FY 2019 Highlights

 

Net revenue increased 15.1% to $8.0 million from $7.0 million during the three months ended December 31, 2017 (Q2 FY 2018).

 

Gross profit rose 12.2% to $6.1 million from $5.4 million in Q2 FY 2018.

 

Operating income declined to $672,000, from $771,000 in Q2 FY 2018, reflecting a $181,000 increase in research and development (R&D) spending to support a new product feature.

 

Net income equaled $378,000, or $0.04 per diluted share, compared to $420,000, or $0.05 per diluted share, in Q2 FY 2018.

 

Cash flow from operating activities totaled $518,000, compared to $1.2 million in Q2 FY 2018. Cash flow from operating activities in Q2 FY 2018 included approximately $563,000 from Medicare related to a settlement of older claims that were in appeals.

 

Field sales employees grew to 52 at the end of Q2 FY 2019 from 43 at the end of Q2 FY 2018.

 

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “We achieved more referrals and approvals compared to the same quarter in the prior year, reflecting our expanded sales force, ongoing excellence in our reimbursement operations and continuing efforts to advance physician awareness and education surrounding the benefits of high frequency chest wall oscillation therapy (HFCWO) with our SmartVest® device. In our institutional market, we achieved another quarter of strong revenue growth, driven primarily by our strategic focus on integrated delivery networks.”

 

Q2 FY 2019 Review

 

Net revenue increased 15.1% to $8.0 million, from $7.0 million in Q2 FY 2018, primarily driven by higher home care revenue. Home care revenue rose 13.0% to $7.3 million from $6.5 million in Q2 FY 2018, primarily due to growth in referrals and approvals driven by a larger field sales staff and continued improvements in the company’s reimbursement operations that led to a greater referral to approval percentage.

 

Gross profit increased 12.2% to $6.1 million, or 75.7% of net revenue, from $5.4 million, or 77.6% of net revenue, in Q2 FY 2018. The increase in gross profit resulted primarily from an increase in home care revenue. The decrease in gross profit as a percentage of net revenue was driven by a lower selling price per device in the company’s institutional market.

 

Operating expenses, which include selling, general and administrative (SG&A) as well as R&D expenses, totaled $5.4 million, or 67.3% of net revenue, compared with $4.6 million, or 66.5% of net revenue, in the same period of the prior year. SG&A expenses increased 12.6% to $5.2 million, from $4.6 million in Q2 FY 2018, 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 team. As a percentage of revenue, SG&A expenses improved to 64.3% compared to 65.7%, reflecting ongoing cost-containment efforts and improvements in sales force productivity. R&D expenses increased to $238,000, from $57,000 in Q2 FY 2018, due to work on an innovative product feature designed to improve patients’ access to treatment adherence data.

 

 

 

 

Operating income totaled $672,000, compared to $771,000 in Q2 FY 2018.

 

Net income before income tax expense totaled $689,000 compared to $766,000 in Q2 FY 2018.

 

Net income equaled $378,000, or $0.04 per diluted share, compared to $420,000, or $0.05 per diluted share, in Q2 FY 2018. In Q2 FY 2019, income tax expense totaled $311,000, compared to $346,000 in the same period of the prior year.

 

“We remain dedicated to achieving double digit top-line growth and expect improved bottom-line results over the next few years through diligent execution of our growth strategy, enhanced sales force productivity and tighter expense management,” Ms. Skarvan added. “Our sales team is hyper-focused on strategic accounts and visit frequency within each of our territories to drive further market share gains. Moreover, we are intensifying our efforts to secure home care referrals from hospitals, which have powerful economic incentives to prescribe SmartVest at the time patients are discharged to avoid costly readmission penalties under the Affordable Care Act. With continued progress in these areas, we see a tremendous opportunity to gain share in the large and growing bronchiectasis market.”

 

Year-to-Date FY 2019 Summary

 

For the six months ended December 31, 2018, revenue grew 15.2% to $15.3 million, from $13.3 million in the same period of fiscal 2018, driven by a 13.3% increase in home care revenue. Gross margins were 75.9%, compared to 76.1% in the prior fiscal year, while net income was approximately $532,000, or $0.06 per diluted share, compared to approximately $501,000, or $0.06 per diluted share, in the first six months of fiscal 2018.

 

Financial Condition

 

The Company’s balance sheet at December 31, 2018 included cash of $7.2 million, compared to $6.8 million at the same time a year earlier, working capital of $19.9 million, and shareholders’ equity of $23.8 million. During the quarter, the Company utilized cash to repay the required balloon payment of approximately $1,085,000 to satisfy the balance of our term debt. As a result of this payment, the Company now has no long-term debt.

 

Conference Call

 

Management will host a conference call on February 13, 2019 at 8:00 am CT (9:00 am ET) to discuss Q2 FY 2019 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:

https://78449.themediaframe.com/dataconf/productusers/elctr/mediaframe/28686/indexl.html

 

 

 

 

For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section of the Company’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 the Company 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 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

 

   December 31, 2018   June 30, 2018 
         
Assets          
Current Assets          
Cash  $7,211,122   $7,455,844 
Accounts receivable (net of allowances for doubtful accounts of $45,000)   11,937,466    11,811,308 
Contract assets   781,806    776,338 
Inventories   2,735,934    2,486,848 
Prepaid expenses and other current assets   329,327    751,541 
Income tax receivable   24,860     
Total current assets   23,020,515    23,281,879 
Property and equipment, net   2,875,807    3,091,242 
Finite-life intangible assets, net   618,034    649,103 
Other assets   6,257    5,907 
Deferred income taxes   361,000    364,000 
Total assets  $26,881,613   $27,392,131 
           
Liabilities and Shareholders’ Equity          
Current Liabilities          
Current maturities of long-term debt  $   $1,101,043 
Accounts payable   713,097    810,644 
Accrued compensation   1,195,479    1,269,849 
Income taxes payable       397,390 
Warranty reserve   790,000    760,000 
Other accrued liabilities   372,494    464,357 
Total current liabilities   3,071,070    4,803,283 
           
Commitments and Contingencies          
           
Shareholders’ Equity          
Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,384,184 and 8,288,659 issued and outstanding at December 31, 2018 and June 30, 2018, respectively   83,842    82,887 
Additional paid-in capital   15,641,714    14,953,103 
Retained earnings   8,084,987    7,552,858 
Total shareholders’ equity   23,810,543    22,588,848 
Total liabilities and shareholders’ equity  $26,881,613   $27,392,131 

 

 

 

 

Electromed, Inc.

Condensed Statements of Operations

 

   For the Three Months Ended
December 31,
   For the Six Months Ended
December 31,
 
   2018   2017   2018   2017 
Net revenues  $8,012,487   $6,963,044   $15,288,370   $13,267,366 
Cost of revenues   1,950,040    1,560,427    3,683,039    3,174,032 
Gross profit   6,062,447    5,402,617    11,605,331    10,093,334 
                     
Operating expenses                    
Selling, general and administrative   5,152,394    4,575,172    10,428,148    9,096,076 
Research and development   237,838    56,794    306,028    127,458 
Total operating expenses   5,390,232    4,631,966    10,734,176    9,223,534 
Operating income   672,215    770,651    871,155    869,800 
                     
Interest income (expense), net   16,521    (4,894)   29,974    (9,093)
Net income before income taxes   688,736    765,757    901,129    860,707 
                     
Income tax expense   311,000    346,000    369,000    360,000 
Net income  $377,736   $419,757   $532,129   $500,707 
                     
Income per share:                    
Basic  $0.05   $0.05   $0.06   $0.06 
Diluted  $0.04   $0.05   $0.06   $0.06 
                     
Weighted-average common shares outstanding:                    
Basic   8,298,961    8,200,167    8,279,493    8,200,167 
Diluted   8,669,739    8,648,886    8,658,346    8,645,987 

 

 

 

 

Electromed, Inc.

Condensed Statements of Cash Flows

 

   Six Months Ended December 31, 
   2018   2017 
Cash Flows From Operating Activities          
Net income  $532,129   $500,707 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation  $329,947   $329,719 
Amortization of finite-life intangible assets  $59,863   $56,610 
Amortization of debt issuance costs  $1,958   $4,394 
Share-based compensation expense  $500,745   $386,248 
Deferred taxes  $3,000   $(50,000)
Loss on disposal of property and equipment  $1,198   $ 
Changes in operating assets and liabilities:          
Accounts receivable  $(126,158)  $347,190 
Contract assets  $(5,468)  $7,356 
Inventories  $(242,459)  $169,723 
Prepaid expenses and other assets  $421,864   $4,074 
Income tax receivable  $(24,860)  $ 
Income tax payable  $(397,390)  $(72,414)
Accounts payable and accrued liabilities  $(233,780)  $(153,824)
Net cash provided by operating activities  $820,589   $1,529,783 
           
Cash Flows From Investing Activities          
Expenditures for property and equipment  $(122,337)  $(228,176)
Expenditures for finite-life intangible assets  $(28,794)  $(10,038)
Net cash used in investing activities  $(151,131)  $(238,214)
           
Cash Flows From Financing Activities          
Principal payments on long-term debt including capital lease obligations  $(1,103,001)  $(25,041)
Issuance of common stock upon exercise of options  $188,821   $ 
Net cash used in financing activities  $(914,180)  $(25,041)
Net (decrease) increase in cash  $(244,722)  $1,266,528 
Cash          
Beginning of period  $7,455,844   $5,573,709 
End of period  $7,211,122   $6,840,237 

 

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