PolyMedica Corporation (NASDAQ: PLMD): Fiscal 2008 First Quarter
Highlights: Net revenues were $190.6 million, an increase of 22%
over the prior year; Earnings per share were $0.49, an increase of
96% over the prior year; Diabetes revenues were $126.6 million, an
increase of 11% over the prior year; Pharmacy revenues were $64.0
million, an increase of 52% over the prior year; and Operating cash
flow was $19.1 million compared with $16.8 million in the prior
year. PolyMedica Corporation (NASDAQ: PLMD) today reported revenue
growth of 22% to $190.6 million in the first fiscal quarter of 2008
compared with $155.9 million for the same period last year. Net
income for the quarter was $11.4 million, or $0.49 per diluted
share, compared with $5.9 million, or $0.25 per diluted share, in
the first quarter of fiscal 2007. In accordance with Statement of
Financial Accounting Standards (SFAS) No. 123R, �Share-Based
Payment,� the Company recognized $3.1 million of pre-tax
stock-based compensation expense ($1.9 million after taxes, or
$0.08 per diluted share) during the first quarter of fiscal 2008.
Excluding the impact of stock-based compensation expense in both
periods, earnings per share for the first quarter of fiscal 2008
were $0.57 compared with $0.33 in the prior year period. Commenting
on the Company�s results, Chief Executive Officer Patrick Ryan
said, �The Company continued to successfully execute on its
strategic initiatives, reporting strong revenue growth in both the
diabetes and pharmacy businesses. Earnings per share continue to
grow as we reported 96% growth from a year ago. Our balance sheet
remains strong as we generated over $19 million in operating cash
flow and repaid $12.8 million in debt. We�re excited and encouraged
by our future opportunities including the expansion of our services
in fiscal 2008.� Mr. Ryan continued, �While we are pleased with the
Company�s position and this quarter�s strong financial results, we
are saddened by the recent passings of our Chairman, Tom Pyle, and
a former Board member, Dan Bernstein, who recently retired after 12
years of service. Tom and Dan helped shape the Company�s future and
were trusted advisors and friends.� Recently, the Company entered
into an agreement with Blue Cross Blue Shield of Florida (�BCBSF�)
that reduces reimbursement for certain medications. The agreement,
which will impact the Company�s pharmacy segment, is expected to
reduce revenue and operating income by approximately $9 million in
fiscal 2008, and, on an annualized basis, $15 million. Commenting
on the BCBSF agreement and the outlook for the remainder of the
fiscal year, Mr. Ryan added, �The BCBSF contract, which we
highlighted in the past as the Pharmacy FEP contract, is a legacy
contract that hasn�t been a critical element of our company�s
growth strategy. When we developed our financial projections and
guidance for fiscal 2008, we considered, among other factors, the
possibility of a price reduction in the BCBSF contract. As a
result, we continue to believe that we�ll be able to achieve our
earnings guidance for the year by building on the first quarter�s
strong growth, leveraging our platform and reducing product and
SG&A costs. Our abilities to operate efficiently, provide
superior service and adapt to change are fundamental strengths.
We�re well positioned strategically and focused on continuing to
execute upon our growth plan.� � Results of Operations for First
Quarter Net revenues: Three Months Ended June 30, March 31, June
30, Prior Year Prior Year (in thousands) 2007 2007 2006 $ Change %
Change Diabetes $126,596 $123,550 $113,783 $12,813 11% Pharmacy
64,029 54,723 42,106 21,923 52% Net revenues $190,625 $178,273
$155,889 $34,736 22% Net revenues in the first quarter of fiscal
2008 increased 22% to $190.6 million compared with $155.9 million
for the same period last year. Diabetes revenue increased $12.8
million, or 11%, from last year�s first quarter, primarily due to
an 8% increase in diabetes patients and a 5% increase in revenue
per shipment. Pharmacy revenue increased $21.9 million, or 52%,
from last year�s first quarter, primarily due to the increase in
patients served through the Company�s Medicare Part D drug benefit
program. The Company dispensed 655,000 prescriptions in the first
quarter compared with 408,000 dispensed prescriptions in the prior
year period. The provision for sales returns and allowances in the
first quarter of 2008 was $4.0 million, or 2.1% of gross revenues,
compared with $3.4 million, or 2.1% of gross revenues, in last
year�s first quarter. � Gross Margin: Three Months Ended June 30,
March 31, June 30, Prior Year Prior Year (in thousands) 2007 2007
2006 $ Change % Change Diabetes $74,808 $72,174 $63,605 $11,203 18%
Pharmacy 11,084 9,766 8,728 2,356 27% Gross margin $85,892 $81,940
$72,333 $13,559 19% Gross margin dollars in the first quarter
increased 19% to $85.9 million from $72.3 million for the same
period last year. Diabetes gross margin dollars increased $11.2
million and Pharmacy gross margin dollars increased $2.4 million
from last year. Overall, the Company�s gross margin was 45.1% of
net revenues in the first quarter compared with 46.4% last year and
46.0% in the fourth quarter of fiscal 2007. Diabetes gross margin
was 59.1% in the first quarter compared with 55.9% last year and
58.4% in the fourth quarter of fiscal 2007. The increase in
Diabetes gross margin from last year and last quarter was primarily
attributable to a decrease in diabetes product costs. Pharmacy
gross margin was 17.3% in the first quarter ended June 30, 2007,
compared with 20.7% in the prior year and 17.9% in the fourth
quarter of fiscal 2007. The decrease in Pharmacy gross margin from
last year and last quarter was due to the growth in net revenues
attributable to the Liberty Part D drug benefit program, which
generates a lower product gross margin than the historical Pharmacy
business. In addition, the decrease in Pharmacy gross margins from
last quarter also related to an increase in brand prescription
revenue that generates lower gross margins than generic
prescription revenue. � Selling, general and administrative
expenses: Three Months Ended June 30, March 31, June 30, (in
thousands) 2007 2007 2006 Employee compensation and benefits
$26,079 $24,160 $24,359 Direct-response advertising amortization
13,194 13,154 11,642 Depreciation expense 2,724 2,781 2,456
Amortization of intangible assets 4,659 3,800 2,425 Provision for
doubtful accounts 6,326 5,157 5,397 Stock-based compensation 3,077
2,814 3,014 Other 10,291 12,682 10,971 Selling, general and
administrative expenses $66,350 $64,548 $60,264 � As a percentage
of net revenues 34.8% 36.2% 38.7% The $6.1 million increase in
selling, general and administrative expense from last year related
primarily to increases in the amortization of direct-response
advertising and intangible assets related to higher spending in
these areas during the past year. In addition, employee
compensation and benefits and provision for doubtful accounts
increased as a result of growth in the Company�s diabetes and
pharmacy businesses. Other SG&A expense primarily includes
legal, accounting, communications cost and marketing expense.
SG&A expense, in dollars, increased from the fourth quarter of
fiscal 2007 by $1.8 million. As a percentage of revenue, SG&A
expense in the first quarter of fiscal 2008 was 34.8% compared with
38.7% last year and 36.2% in the fourth quarter of fiscal 2007.
Other income and expense: Other income and expense of $1.5 million
decreased $1.3 million from last year due to a reduction in the
overall interest rate as a result of the Company�s issuance of 1%
coupon convertible notes in the second quarter of fiscal 2007.
Other income and expense was $1.7 million in the fourth quarter of
fiscal 2007. The overall weighted average interest rate on all debt
was 3.1% in the first quarter compared with 2.6% in the fourth
quarter and 6.5% in last year�s first quarter. Balance Sheet and
Cash Flow Highlights The Company's cash flows for the three months
ended June 30, 2007 and 2006, included the following: � Three
Months Ended June 30, June 30, $ 2007 � 2006 � Change Summary Cash
Flow Data: Cash flows from operating activities $19,053 $16,769
$2,284 Cash flows used for investing activities (3,066 ) (11,613 )
8,547 Cash flows used for financing activities (14,111 ) (11,669 )
(2,442 ) Net change in cash and cash equivalents 1,876 (6,513 )
8,389 Beginning cash and cash equivalents 2,093 � 9,101 � (7,008 )
Ending cash and cash equivalents $3,969 � $2,588 � $1,381 � � Three
Months Ended June 30, June 30, $ 2007 � 2006 � Change Additional
Cash Flow/Balance Sheet Data: Purchase of property, plant and
equipment $(2,458 ) $(444 ) $(2,014 ) Purchase of patient lists and
other contracts (608 ) (11,169 ) 10,561 Direct response advertising
expenditures (15,579 ) (15,396 ) (183 ) Repayment of debt (12,800 )
(10,000 ) (2,800 ) A/R days sales outstanding 54 58 Inventory days
on hand 29 36 Three Twelve Months Months Ended Ended June 30, June
30, � 2007 � � 2007 � Diabetes Patients: Diabetes patients,
beginning of period 943,000 888,000 New diabetes patients from
marketing programs 55,000 198,000 New diabetes patients from
acquisitions 6,000 52,000 Patient attrition � (47,000 ) � (181,000
) Diabetes patients as of June 30, 2007 � 957,000 � � 957,000 � �
Other Key Operating Metrics: Three Months Ended June 30, March 31,
June 30, � 2007 � � 2007 � � 2006 � Diabetes: Diabetes shipments
661,000 653,000 619,000 Revenue per shipment $ 179 $ 175 $ 170
Quarterly reorder rate 91.7 % 93.1 % 93.2 % Patient retention 95.0
% 95.3 % 95.3 % Acquisition cost per patient - multi-channel
marketing $ 282 $ 298 $ 336 Other revenue included in Diabetes
segment (000s) $ 8,543 $ 9,156 $ 8,185 � Pharmacy: Dispensed
prescriptions 655,000 572,000 408,000 Patients receiving
prescriptions during quarter 115,000 100,000 83,000 Average
prescriptions shipped to each patient in quarter 5.69 5.72 4.90
Revenue per dispensed prescription $ 98 $ 96 $ 103 Gross margin per
dispensed prescription $ 17 $ 17 $ 21 Brand revenue dollars as % of
total Pharmacy revenue 81.7 % 81.0 % 83.0 % Brand prescriptions as
% of total Pharmacy prescriptions 52.6 % 49.1 % 54.2 % Conference
Call and Replay PolyMedica management will host a conference call
and live webcast tomorrow, Wednesday, August�1, 2007, at 9:00 a.m.
Eastern time to discuss the Company�s financial results. The number
to call for this interactive conference call is 1-800-728-2167. A
90-day online replay will be available beginning approximately one
hour following the conclusion of the live broadcast. A link to
these events can be found on the Company�s website at
www.polymedica.com or at www.earnings.com. About PolyMedica For
more than a decade, PolyMedica Corporation has been the nation�s
largest provider of blood glucose testing supplies and related
services to people with diabetes and today serves more than 957,000
active diabetes patients. The Company also offers a full service
pharmacy to meet patients� medication needs and provides patient
education to help its patients better manage their health
conditions. Through proactive patient outreach, convenient home
delivery and administrative support, PolyMedica makes it simple for
patients to obtain the supplies and medications they need, while
encouraging compliance with physicians� orders. More information
about PolyMedica can be found on the Company�s website at
www.polymedica.com. This press release contains forward-looking
statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties, which could cause actual
results to differ materially from those anticipated. Such risks and
uncertainties include, but are not limited to, rules and
regulations promulgated under the Act, unanticipated changes in
Medicare reimbursement, successful participation in new
reimbursement programs, outcomes of government reviews, inquiries,
investigations and related litigation, continued compliance with
government regulations, fluctuations in customer demand, management
of rapid growth, competition from other healthcare product vendors,
timing and acceptance of new product introductions, general
economic conditions, geopolitical events and regulatory changes, as
well as other especially relevant risks detailed in the Company�s
filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the period ended March 31, 2007, and
Quarterly Reports on Form 10-Q for the periods ended December 31,
September 30, and June 30, 2006. The information set forth herein
should be read in light of such risks. The Company assumes no
obligation to update the information contained in this press
release. � POLYMEDICA CORPORATION Consolidated Statements of
Operations (In thousands, except per share amounts) � Three Months
Ended June 30, June 30, $ % � 2007 � � 2006 � Change Change � Net
revenues $ 190,625 $ 155,889 $ 34,736 22.3 % Cost of sales �
104,733 � � 83,556 � � 21,177 � 25.3 % � Gross margin 85,892 72,333
13,559 18.7 % Selling, general and administrative expenses � 66,350
� � 60,264 � � 6,086 � 10.1 % � Income from operations 19,542
12,069 7,473 61.9 % Other income and expense � (1,464 ) � (2,757 )
� 1,293 � 46.9 % � Income before income taxes 18,078 9,312 8,766
94.1 % � Income tax provision � 6,689 � � 3,399 � � 3,290 � 96.8 %
� Net income $ 11,389 � $ 5,913 � $ 5,476 � 92.6 % � Diluted
earnings per share $ 0.49 � $ 0.25 � $ 0.24 � 96.0 % � Weighted
average shares, diluted 23,414 23,538 (124 ) (0.5 %) � POLYMEDICA
CORPORATION Consolidated Balance Sheets (In thousands) � June 30,
March 31, 2007 2007 ASSETS � Current assets Cash and cash
equivalents $ 3,969 $ 2,093 Accounts receivable, net 114,714
117,309 Inventories 34,061 37,554 Deferred income taxes 4,787 4,787
Prepaid expenses and other current assets � 22,550 � 18,344 � Total
current assets 180,081 180,087 � Property, plant and equipment, net
60,831 61,098 Goodwill 64,598 64,598 Intangible assets, net 42,819
46,870 Direct response advertising, net 103,815 101,487 Notes
receivable 14,657 14,433 Other assets � 8,181 � 8,873 � Total
assets $ 474,982 $ 477,446 � LIABILITIES AND SHAREHOLDERS' EQUITY �
Current liabilities: Accounts payable and accrued expenses $ 57,825
$ 61,423 Current portion, capital lease obligations � 664 � 804 �
Total current liabilities 58,489 62,227 � Capital lease and other
obligations 5,221 2,252 Convertible notes 180,000 180,000 Credit
facility 45,900 58,700 Deferred income taxes � 11,994 � 12,351 �
Total liabilities 301,604 315,530 Total shareholders' equity �
173,378 � 161,916 � Total liabilities and shareholders' equity $
474,982 $ 477,446 � � POLYMEDICA CORPORATION Statement of
Operations � Reconciliation of Non-GAAP Financial Measures (In
thousands, except per share amounts) � Three Months Ended June 30,
2007 Reported Stock- Adjusted GAAP Based Non-GAAP Totals
Compensation Totals Income before income taxes $ 18,078 $ 3,077 $
21,155 Income tax provision � 6,689 � 1,138 � 7,827 Net income $
11,389 $ 1,939 $ 13,328 � Diluted earnings per share $ 0.49 $ 0.08
$ 0.57 � Weighted average shares, diluted 23,414 23,414 23,414 �
Three Months Ended June 30, 2006 Reported Stock- Adjusted GAAP
Based Non-GAAP Totals Compensation Totals Income before income
taxes $ 9,312 $ 3,014 $ 12,326 Income tax provision � 3,399 � 1,100
� 4,499 Net income $ 5,913 $ 1,914 $ 7,827 � Diluted earnings per
share $ 0.25 $ 0.08 $ 0.33 � Weighted average shares, diluted
23,538 23,538 23,538 The Company believes that referring to these
non-GAAP totals facilitates a better understanding of its annual
operating results.
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