Polymedica Corp (MM) (NASDAQ:PLMD)
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From May 2019 to May 2024
PolyMedica Corporation (NASDAQ: PLMD):
Highlights:
Earnings per share in the fiscal fourth quarter increased 9% from last
quarter to $0.47; including a $0.04 charge for litigation, GAAP EPS
was $0.43;
Adjusted earnings per share for fiscal 2007 increased 22% from last
year to $1.80; including the effects in fiscal 2007 of stock-based
compensation expense of $0.32 per diluted share and including a $0.04
per share charge for litigation, GAAP EPS was $1.44;
Revenues for fiscal 2007 were $675 million, a 37% increase over the
prior year;
Diabetes revenue for fiscal 2007 increased 19% year over year;
Pharmacy revenue for fiscal 2007 increased 117% year over year; and
The Company generated operating cash flow of $55 million in fiscal
2007 compared with $11 million last year.
PolyMedica Corporation (NASDAQ: PLMD) today reported revenue growth of
27% to $178.3 million in the fourth fiscal quarter of 2007 compared with
$140.6 million for the same period last year. Income from continuing
operations, excluding a $1.4 million litigation charge, net of taxes,
for the quarter was $10.9 million, or $0.47 per diluted share, compared
sequentially with $9.8 million, or $0.43 per diluted share, in the third
quarter. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 123R, “Share-Based Payment,”
the Company recognized $2.8 million of pre-tax stock-based compensation
expense ($1.8 million after taxes, or $0.08 per diluted share) during
the fourth quarter of fiscal 2007. Excluding the impact of stock-based
compensation expense and the litigation charge, earnings per share from
continuing operations for the quarter were $0.54. Earnings per share
from continuing operations in the fourth quarter of fiscal 2006 were
$0.33.
Commenting on the Company’s results, Chief
Executive Officer Patrick Ryan said, “We are
pleased with our Fiscal 2007 results. The Company invested a significant
amount of human and financial capital as we expanded our patient-centric
model to ensure we were meeting the growing needs of our patients. Our
programs were well received by our patients. Enrollment in the Liberty
Part D drug benefit program resulted in year over year pharmacy revenue
growth of 117%. The expansion of our marketing and acquisition programs,
sales channels and service offerings in our core diabetes business
resulted in 19% year over year revenue growth. Our focus on leveraging
the efficiencies in our business model allowed the Company to decrease
selling, general and administrative expenses as a percentage of net
revenues by 380 basis points. The combination of all these efforts
contributed to our 22% growth in earnings per share over last year.”
Mr. Ryan continued, “Our team did an
outstanding job in fiscal 2007 in a dynamic and evolving marketplace.
Our efforts to date have provided a strong foundation for fiscal 2008.
The Liberty brand is trusted by our patients, and they continue to look
to Liberty to meet more of their healthcare needs. As we eclipse one
million active patients in fiscal 2008, our strategy remains clear; we
will leverage the strength of the Liberty brand and our unique
direct-to-consumer model to meet the comprehensive healthcare needs of
our patients.”
Guidance for Fiscal Year Ending March 31, 2008
The Company also announced guidance for the fiscal year ending March 31,
2008:
Full Year:
Revenue growth of 18% - 21% to $800 - $815 million.
Gross margin of 45% – 47% of revenue.
Selling, general and administrative expense of 34% - 36% of revenue.
GAAP earnings per share growth of 46% - 53% to $2.10 - $2.20, on 23.6
million shares outstanding.
Earnings per share, excluding stock-based compensation, of $2.40 -
$2.52.
Operating cash flow of $80 to $90 million.
Capital expenditures of $10 to $15 million.
Effective tax rate of 37%.
Results of Operations for the Fourth Quarter
Net revenues:
Three Months Ended
March 31,
March 31,
$
%
(in thousands)
2007
2006
Change
Change
Diabetes
$
123,550
$
110,463
$
13,087
12%
Pharmacy
54,723
30,166
24,557
81%
Net revenues
$
178,273
$
140,629
$
37,644
27%
Net revenues in the fourth quarter of fiscal 2007 increased 27% to
$178.3 million compared with $140.6 million for the same period last
year. Diabetes revenue increased $13.1 million, or 12%, from last year,
primarily due to the 8% increase in diabetes patients and the 4%
increase in revenue per shipment.
Pharmacy revenue increased $24.6 million, or 81%, from last year,
primarily due to the increase in patients served through the Company’s
Medicare Part D drug benefit program. The Company dispensed 572,000
prescriptions in the fourth quarter compared with 262,000 dispensed
prescriptions in the prior year period.
The provision for sales returns and allowances in the fourth quarter of
2007 was $3.2 million, or 1.8% of gross revenues, compared with $3.6
million, or 2.5% of gross revenues, in last year’s
fourth quarter. The decrease in the amount and the percentage of sales
returns and allowances to gross revenues in the fourth quarter ended
March 31, 2007, was attributable to the revenue growth of the Pharmacy
segment, which generates a lower rate of sales returns and allowances
and a reduction in sales returns of diabetes products during the quarter.
Gross Margin:
Three Months Ended
March 31,
March 31,
$
%
(in thousands)
2007
2006
Change
Change
Diabetes
$
72,174
$
62,724
$
9,450
15%
Pharmacy
9,766
7,564
2,202
29%
Gross margin
$
81,940
$
70,288
$
11,652
17%
Gross margin dollars in the fourth quarter increased 17% to $81.9
million from $70.3 million for the same period last year. Diabetes gross
margin dollars increased $9.5 million and Pharmacy gross margin dollars
increased $2.2 million from last year. Overall, the Company’s
gross margin was 46.0% of net revenues in the fourth quarter compared
with 50.0% last year and 44.2% in the third quarter of fiscal 2007.
Diabetes gross margin was 58.4% in the fourth quarter compared with
56.8% last year and 56.5% in the third quarter. The increase in Diabetes
gross margin from last year was primarily attributable to a decrease in
diabetes strip pricing and related product costs. The increase in
Diabetes gross margin from the third quarter was due to a decrease in
the Diabetes commercial business, which generates lower gross margin
rates.
Pharmacy gross margin was 17.9% in the fourth quarter ended March 31,
2007, compared with 25.1% in the prior year and 17.0% in the third
quarter. The decrease in Pharmacy gross margin from last year 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.
Selling, general and administrative expenses:
Three Months Ended
March 31,
March 31,
(in thousands)
2007
2006
Employee compensation and benefits
$
24,160
$
25,198
Direct-response advertising amortization
13,154
11,163
Depreciation expense
2,781
2,124
Amortization of intangible assets
3,800
2,268
Provision for doubtful accounts
5,157
5,607
Stock-based compensation
2,814
275
Other
12,682
10,080
Selling, general and administrative expenses
$
64,548
$
56,715
As a percentage of net revenues
36.2%
40.3%
The $7.8 million increase in selling, general and administrative expense
from last year related primarily to a $2.5 million increase in
stock-based compensation as a result of the implementation of SFAS 123R
in fiscal 2007 and increases in the amortization of direct-response
advertising and intangible assets. Other SG&A expense primarily includes
legal, accounting, communications cost and marketing expense. SG&A
expense, in dollars, increased from the third quarter by $3.5 million
and included a $1.4 million litigation charge recorded during the
quarter. As a percentage of revenue, SG&A expense in the fourth quarter
was 36.2% compared with 40.3% last year and 34.4% in the third quarter.
Other income and expense:
Other income and expense of $1.7 million decreased $169,000 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
comparable to the third quarter of fiscal 2007. The overall weighted
average interest rate on all debt was 2.6% in the fourth quarter
compared with 2.7% in the third quarter and 5.8% in last year’s
fourth quarter.
Results of Operations for the Fiscal Year Ended March 31, 2007
Net revenues:
Fiscal Year Ended
March 31,
March 31,
$
%
(in thousands)
2007
2006
Change
Change
Diabetes
$
476,077
$
399,460
$
76,617
19%
Pharmacy
199,410
92,055
107,355
117%
Net revenues
$
675,487
$
491,515
$
183,972
37%
Net revenues for the fiscal year ended March 31, 2007, increased 37% to
$675.5 million compared with $491.5 million for the same period last
year. Diabetes revenue increased $76.6 million, or 19%, from last year,
due to the increase in patients and the fiscal 2006 acquisitions of NDP
and IntelliCare. Pharmacy revenue increased $107.4 million, or 117%,
from last year due to the growth of dispensed prescriptions resulting
from patients enrolling in the Company’s
Medicare Part D drug benefit program.
Gross Margin:
Fiscal Year Ended
March 31,
March 31,
$
%
(in thousands)
2007
2006
Change
Change
Diabetes
$
271,566
$
230,282
$
41,284
18%
Pharmacy
36,946
29,366
7,580
26%
Gross margin
$
308,512
$
259,648
$
48,864
19%
Gross margin dollars for the fiscal year ended March 31, 2007, increased
19% to $308.5 million from $259.6 million for the same period last year
due to revenue growth in both the Diabetes and Pharmacy segments this
year. Diabetes gross margin dollars increased $41.3 million and Pharmacy
gross margin dollars increased $7.6 million from last year. Overall, the
Company’s gross margin decreased to 45.7% of
net revenues compared with 52.8% last year due to a higher percentage of
revenues derived from the Pharmacy segment which generates lower gross
margins than the Company’s historical
business. Diabetes gross margin was 57.0% and consistent with 57.6% last
year.
Pharmacy gross margin decreased to 18.5% compared with 31.9% last year
due to the growth in net revenue attributable to the Liberty Part D drug
benefit program, which generates a lower gross margin than the
historical pharmacy business.
Selling, general and administrative expenses:
Fiscal Year Ended
March 31,
March 31,
(in thousands)
2007
2006
Employee compensation and benefits
$
94,567
$
85,010
Direct-response advertising amortization
49,389
42,409
Depreciation expense
10,348
7,881
Amortization of intangible assets
13,999
7,521
Provision for doubtful accounts
20,981
20,084
Stock-based compensation
11,768
1,419
Other
45,015
33,041
Selling, general and administrative expenses
$
246,067
$
197,365
As a percentage of net revenues
36.4%
40.2%
The $48.7 million increase in selling, general and administrative
expense from last year related primarily to increased headcount to
support the growth of the Diabetes and Pharmacy businesses, amortization
expense and other general costs associated with the fiscal 2006
acquisitions of NDP and IntelliCare, the acquisitions of certain assets
of 15 diabetes companies acquired since September 30, 2005, the
inclusion of stock-based compensation in the financial statements in
fiscal 2007 and an increase in direct-response advertising amortization.
Other SG&A expense primarily includes legal, accounting, communications
costs and marketing expense. As a percentage of revenue, SG&A expense
for the fiscal year ended March 31, 2007, was 36.4% compared with 40.2%
in the year earlier period.
Other income and expense:
Other income and expense of $9.4 million increased $5.5 million from
last year due to the higher level of average debt outstanding during the
period. The Company’s average debt balance
increased primarily due to the fiscal 2006 acquisitions of NDP and
IntelliCare, combined with the acquisitions of certain assets of 15
diabetes companies acquired since September 30, 2005.
Balance Sheet and Cash Flow Highlights
The Company’s cash flows for the fiscal
year ended March 31, 2007 and 2006, included the following:
Fiscal Year Ended
March 31,
March 31,
$
2007
2006
Change
Summary Cash Flow Data:
Cash flows from operating activities
$
55,317
$
11,407
$
43,910
Cash flows used for investing activities
(44,890)
(53,586)
8,696
Cash flows used for financing activities
(17,435)
(20,966)
3,531
Net change in cash and cash equivalents
(7,008)
(63,145)
56,137
Beginning cash and cash equivalents
9,101
72,246
(63,145)
Ending cash and cash equivalents
$
2,093
$
9,101
$
(7,008)
Fiscal Year Ended
March 31,
March 31,
$
2007
2006
Change
Additional Cash Flow/Balance Sheet Data:
Purchase of property, plant and equipment
$
(10,135)
$
(12,747)
$
2,612
Purchase of businesses, net of cash received
–
(75,373)
75,373
Proceeds from sale of businesses
–
44,503
(44,503)
Purchase of patient lists and other contracts
(33,640)
(7,242)
(26,398)
Direct response advertising expenditures
(59,558)
(55,945)
(3,613)
Proceeds from convertible note offering
180,000
–
180,000
Net purchase of derivative instruments
(26,268)
–
(26,268)
Repurchase of common stock
(29,624)
(198,596)
168,972
Net cash flow from credit facility
(131,300)
190,000
(321,300)
A/R days sales outstanding
59
67
Inventory days on hand
35
44
Diabetes Patients:
Three Months Ended
Twelve Months Ended
March 31,
March 31,
2007
2007
Diabetes patients, beginning of period
925,000
875,000
New diabetes patients from marketing programs
52,000
189,000
New diabetes patients from acquisitions
9,000
54,000
Patient attrition
(43,000)
(175,000)
Diabetes patients as of March 31, 2007
943,000
943,000
Other Key Operating Metrics:
Three Months Ended
March 31,
Dec. 31,
March 31,
2007
2006
2006
Diabetes:
Diabetes shipments
653,000
633,000
608,000
Revenue per shipment
$
175
$
180
$
169
Quarterly reorder rate
93.1%
91.3%
87.9%
Patient retention
95.3%
94.7%
94.9%
Acquisition cost per patient - Marketing
$
298
$
338
$
281
Other revenue included in Diabetes segment (000s)
$
9,156
$
8,097
$
7,996
Pharmacy:
Dispensed prescriptions
572,000
566,000
262,000
Patients receiving prescriptions during quarter
100,000
91,000
73,000
Average prescriptions shipped to each patient in quarter
5.72
6.22
3.59
Revenue per dispensed prescription
$
96
$
97
$
115
Gross margin per dispensed prescription
$
17
$
17
$
29
Brand revenue dollars as % of total Pharmacy revenue
81.0%
80.4%
80.8%
Brand prescriptions as % of total Pharmacy prescriptions
49.1%
50.3%
52.8%
Conference Call and Replay
PolyMedica management will host a conference call and live webcast
tomorrow, Thursday, May 24, 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 943,000 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, 2006, and Quarterly Reports on Form
10-Q for the periods ended June 30, 2006, September 30, 2006 and
December 31, 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
Fiscal Year Ended
March 31,
March 31,
March 31,
March 31,
2007
2006
2007
2006
Net revenues
$
178,273
$
140,629
$
675,487
$
491,515
Cost of sales
96,333
70,341
366,975
231,867
Gross margin
81,940
70,288
308,512
259,648
Selling, general and administrative expenses
64,548
56,715
246,067
197,365
Income from operations
17,392
13,573
62,445
62,283
Other income and expense
(1,701)
(1,870)
(9,418)
(3,909)
Income from continuing operations before income taxes
15,691
11,703
53,027
58,374
Income tax provision
5,727
3,950
19,355
20,992
Income from continuing operations,
net of income taxes
9,964
7,753
33,672
37,382
Income from discontinued operations,
net of income taxes
–
(888)
–
23,016
Net income
$
9,964
$
6,865
$
33,672
$
60,398
Income from continuing operations,
net of income taxes, per weighted
average share, diluted
$
0.43
$
0.33
$
1.44
$
1.47
Income from discontinued operations,
net of income taxes, per weighted
average share, diluted
–
(0.04)
–
0.91
Net income per weighted average share, diluted
$
0.43
$
0.29
$
1.44
$
2.38
Weighted average shares, diluted
23,289
23,730
23,376
25,370
POLYMEDICA CORPORATIONConsolidated Balance Sheets(In
thousands)
March 31,
March 31,
2007
2006
ASSETS
Current assets
Cash and cash equivalents
$
2,093
$
9,101
Accounts receivable, net
117,309
104,013
Inventories
37,554
34,467
Deferred income taxes
4,787
4,334
Income tax receivable
–
6,662
Prepaid expenses and other current assets
18,344
9,896
Total current assets
180,087
168,473
Property, plant and equipment, net
61,098
64,678
Goodwill
64,598
64,488
Intangible assets, net
46,870
27,228
Direct response advertising, net
101,487
91,653
Notes receivable
14,433
9,548
Other assets
8,873
3,249
Total assets
$
477,446
$
429,317
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
61,423
$
47,015
Current portion, capital lease obligations
804
596
Total current liabilities
62,227
47,611
Capital lease and other obligations
2,252
1,144
Convertible notes
180,000
–
Credit facility
58,700
190,000
Deferred income taxes
12,351
31,411
Total liabilities
315,530
270,166
Total shareholders’ equity
161,916
159,151
Total liabilities and shareholders’ equity
$
477,446
$
429,317
POLYMEDICA CORPORATION
Statement of Operations – Reconciliation
of Non-GAAP Financial Measures
(In thousands, except per share amounts)
Three Months Ended
March 31, 2007
Reported
Adjusted
GAAP
Litigation
Non-GAAP
Totals
Charge
Totals
Income before income taxes
$
15,691
$
1,433
$
17,124
Income tax provision
5,727
523
6,250
Net income
$
9,964
$
910
$
10,874
Diluted earnings per share
$
0.43
$
0.04
$
0.47
Weighted average shares, diluted
23,289
23,289
23,289
Three Months Ended
March 31, 2007
Reported
Stock-
Adjusted
GAAP
Litigation
Based
Non-GAAP
Totals
Charge
Compensation
Totals
Income before income taxes
$
15,691
$
1,433
$
2,814
$
19,938
Income tax provision
5,727
523
1,027
7,277
Net income
$
9,964
$
910
$
1,787
$
12,661
Diluted earnings per share
$
0.43
$
0.04
$
0.08
$
0.54
Weighted average shares, diluted
23,289
23,289
23,289
23,289
Fiscal Year Ended
March 31, 2007
Reported
Stock-
Adjusted
GAAP
Litigation
Based
Non-GAAP
Totals
Charge
Compensation
Totals
Income before income taxes
$
53,027
$
1,533
$
11,768
$
66,328
Income tax provision
19,355
560
4,295
24,210
Net income
$
33,672
$
973
$
7,473
$
42,118
Diluted earnings per share
$
1.44
$
0.04
$
0.32
$
1.80
Weighted average shares, diluted
23,376
23,376
23,376
23,376
The Company believes that referring to these non-GAAP totals
facilitates a better understanding of its annual operating results.