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InfuSystem Holdings, Inc. Reports Profit in Second Quarter 2013

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Three and Six Month Results Show Year-to-Year Improvements

MADISON HEIGHTS, Mich.-- InfuSystem Holdings, Inc. (NYSE MKT: INFU) (“InfuSystem” or the “Company”), a leading national provider of infusion pumps and related services for the healthcare industry in the United States, today reported that net income in the second quarter was $0.1 million, equal to $0.00 per diluted share, compared to a $0.8 million net loss, or $0.04 loss per diluted share, in the prior year period. Net income for the six months ended June 30, 2013 was $0.2 million, equal to $0.01 per diluted share, compared to a $1.7 million net loss, or $0.08 per diluted share, in the prior year period.

The Company continues to strengthen its overall performance and we expect to build on these results in the second half of 2013, said Eric Steen, Chief Executive Officer. “Organic growth will drive the business as well as build shareholder value. InfuSystem’s strong market share and highly-differentiated customer service capabilities position us well to take advantage of a consolidating market. In particular, we are experiencing strong growth in the commercial payor market. We also expect to generate revenue growth from new therapies and services,” he concluded.

Revenues in the second quarter of 2013 were $14.7 million, up 4% from $14.1 million in the second quarter of 2012. Revenues for the six months ended June 30, 2013 were $29.4 million, a 3% increase, compared to $28.4 million for the same prior year period. The increase in revenues was primarily related to a 5% increase in rental revenue compared to prior year periods. Sales revenue was down 5% from prior year for the second quarter and down approximately 9% from prior year-to-date period. The increase in rental revenues was primarily related to the addition of larger customers, increased penetration into existing customer accounts, the increase in the colorectal cancer and other cancer patients treated with the Company’s services and the continuation of the revision to claims processing guidelines by a major group of third-party payors.

Gross profit for the three months ended June 30, 2013 was $10.3 million, which was consistent with the same period in the prior year. It represented 70% of revenues in the current period compared to 73% in the prior year. Gross profit for the six months ended June 30, 2013 was $20.8 million, which was also consistent with the same period in the prior year. It represented 71% of revenues in the current period compared to 73% in the prior year. The decrease in the gross margin as a percentage of revenue in 2013 was primarily related to a decrease in rental gross margins from direct pay customers.

Operating Results

SG&A decreased to $9.5 million from $10.2 million, down approximately 8%, when compared to the second quarter of 2012. For the six months ended June 30, 3012, SG&A decreased to $19.2 million from $21.2 million, down approximately 9%, when compared to the same prior year period.

During the three months ended June 30, 2013, general and administrative expenses were $5.0 million compared to $6.1 million for the same prior year period. General and administrative expenses have decreased from 44% to 34% of revenues for the second quarter of 2013 compared to the same period in the prior year. The decrease was primarily attributed to prior year costs of $2.4 million pertaining to the additional legal, accounting and outside services fees as a result of the special meeting, changes in the composition of the Board of Director’s, and severance costs associated with the Settlement Agreement offset by previously recognized stock compensation expense of $1.3 million, for which the requisite service was not rendered last year.

During the six months ended June 30, 2013, general and administrative expenses were $10.0 million compared to $12.4 million for the same six month period in 2012. The decrease between these periods was primarily related to prior year professional service and other costs for the Concerned Stockholder Group which totaled approximately $2.3 million; severance payments for a former CEO amounted to $1.0 million; $0.6 million was recorded during the three months ended March 31, 2012 for retention payments to key employees; and $1.3 million of previously recognized stock compensation expense was reversed due to the forfeiture and failure to meet the requisite service period.

Other expenses for the three months ended June 30, 2013 were $0.9 million compared to $1.2 million for the comparable prior year period. This decrease was mainly attributed to an increase of $0.2 million of additional interest expense due to the cost of the new debt facility offset by a prior year loss on the extinguishment of debt of $0.6 million.

Other expenses for the six months ended June 30, 2013 were $1.5 million compared to $1.8 million for the comparable prior year period. This decrease was mainly attributed to an increase of $0.5 million of additional interest expense due to the cost of the new debt facility offset by a prior year loss on the extinguishment of debt of $0.6 million and a one-time cash receipt of $0.3 million related to a mutual insurance policy we received in the first quarter of 2013.

Jonathan P. Foster, Chief Financial Officer, noted, “The combination of effective, on-going cost management practices, meaningful debt reduction of more than $2.5 million since December 31, 2012, and increasing free cash flow allows us to actively take advantage of growth opportunities. In particular, the increase of $1.3 million from medical equipment in rental service since year-end builds a strong base from which to generate even further rental revenue growth.”

Selling and marketing expenses were $2.5 million, which was consistent with the second quarter of 2012. For the six months ended June 30, 2013, selling and marketing expenses were $4.9 million compared to $5.3 million. The decrease in selling and marketing expenses was mainly attributed to lower travel, entertainment and salaries and commissions.

For the three months ended June 30, 2013, Adjusted EBITDA was $3.3 million for the second quarter of 2013 compared to $3.6 million in 2012. For the six months ended June 30, 2013, Adjusted EBITDA was $7.0 million, which was consistent with the same prior year period. The Company utilizes Adjusted EBITDA as a means to measure its operating performance. A reconciliation from Adjusted EBITDA, a non-GAAP measure, to net income can be found in the appendix.

Financial Condition

Net cash provided by operations for the six months ended June 30, 2013 was $2.2 million compared to $2.3 million for the prior year. Although net income is significantly improved from a year ago, increases in A/R are offsetting any cash improvement at June 30, 2013 when compared to the prior year.

As of June 30 2013, we had cash and cash equivalents of $0.1 million and $5.1 million of availability on the Credit Facility compared to $2.3 million and $4.7 million, respectively, at December 31, 2012. During the six months ended June 30, 2013, the Company paid down $2.5 million of total debt.

Conference Call

The Company will conduct a conference call for investors on Tuesday, August 13, 2013 at 9:00 a.m. Eastern Time to discuss second quarter performance and results. Eric Steen, Chief Executive Officer, and Jonathan P. Foster, Chief Financial Officer, will discuss the Company’s financial performance and answer questions from the financial community. To participate in this call, please dial in toll-free (877) 261-8992 inside the U.S. and (847) 619-6548 outside the U.S and use the confirmation number 35310595.

About InfuSystem Holdings, Inc.

InfuSystem Holdings, Inc. is a leading provider of infusion pumps and related services to hospitals, oncology practices and other alternate site healthcare providers. Headquartered in Madison Heights, Michigan, the Company delivers local, field-based customer support and also operates Centers of Excellence in Michigan, Kansas, California, and Ontario, Canada. The Company’s stock is traded on the NYSE MKT under the symbol INFU.

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those predicted by such forward-looking statements. These risks and uncertainties include general economic conditions, as well as other risks, detailed from time-to-time in the Company’s publicly filed documents.

Additional information about InfuSystem Holdings, Inc. is available at www.infusystem.com.

FINANCIAL TABLES FOLLOW

               
INFUSYSTEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 30, December 31,
(in thousands, except share data)   2013     2012  
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 102 $ 2,326
Accounts receivable, less allowance for doubtful accounts of $3,811 and
$3,136 at June 30, 2013 and December 31, 2012, respectively 9,440 8,511
Inventory 1,379 1,339
Other current assets 713 684
Deferred income taxes   1,986     1,971  
 
Total Current Assets 13,620 14,831
Medical equipment held for sale or rental 3,155 2,626
Medical equipment in rental service, net of accumulated depreciation 14,005 13,071
Property & equipment, net of accumulated depreciation 798 867
Deferred debt issuance costs, net 2,106 2,362
Intangible assets, net 24,221 25,541
Deferred income taxes 17,689 17,806
Other assets   157     419  
 
Total Assets $ 75,751   $ 77,523  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 3,833 $ 2,135
Accounts payable - related party - 9
Current portion of long-term debt 3,124 3,953
Other current liabilities   2,782     4,098  
 
Total Current Liabilities 9,739 10,195
Long-term debt, net of current portion   25,204     27,315  
 
Total Liabilities $ 34,943   $ 37,510  
 
Stockholders’ Equity
Preferred stock, $.0001 par value: authorized 1,000,000 shares; none issued - -
Common stock, $.0001 par value; authorized 200,000,000 shares; issued and outstanding
22,088,731 and 21,891,041, respectively, as of June 30, 2013 and 21,990,000 and
21,802,515, as of December 31, 2012, respectively 2 2
Additional paid-in capital 89,381 88,742
Retained deficit   (48,575 )   (48,731 )
 
Total Stockholders’ Equity   40,808     40,013  
 
Total Liabilities and Stockholders’ Equity $ 75,751   $ 77,523  
 
                 
INFUSYSTEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands, except share data) 2013       2012 2013        

2012

 
Net revenues:
Rentals $ 13,618 $ 12,973 $ 27,061 $ 25,878
Product sales   1,044     1,099     2,302     2,542  
Net revenues 14,662 14,072 29,363 28,420
 
Cost of revenues:
Cost of revenues - Product, service and supply costs 2,845 2,148 5,424 4,383
Cost of revenues - Pump depreciation and loss on disposal   1,487     1,650     3,186     3,327  
Gross profit   10,330     10,274     20,753     20,710  
 
Selling, general and administrative expenses:
Provision for doubtful accounts 1,327 893 2,987 2,140
Amortization of intangibles 652 674 1,324 1,358
Selling and marketing 2,482 2,541 4,890 5,286
General and administrative   5,008     6,137     10,039     12,410  
 
Total selling, general and administrative:   9,469     10,245     19,240     21,194  
 
Operating income (loss) 861 29 1,513 (484 )
 
Other (expense) income:
Interest expense (924 ) (663 ) (1,798 ) (1,264 )
Loss on extinguishment of long term debt - (552 ) - (552 )
Other income   24     -     336     2  
 
Total other expense   (900 )   (1,215 )   (1,462 )   (1,814 )
 
Income (loss) before income taxes (39 ) (1,186 ) 51 (2,298 )
Income tax benefit   144     358     105     555  
 
Net income (loss) $ 105   $ (828 ) $ 156   $ (1,743 )
 
Net income (loss) per share:
Basic $ 0.00 $ (0.04 ) $ 0.01 $ (0.08 )
Diluted $ 0.00 $ (0.04 ) $ 0.01 $ (0.08 )
Weighted average shares outstanding:
Basic 21,860,866 21,196,085 21,802,515 21,164,315
Diluted 22,015,499 21,196,085 22,238,160 21,164,315
 
           
INFUSYSTEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Six Months Ended
June 30,
(in thousands)   2013           2012  
 
NET CASH PROVIDED BY OPERATING ACTIVITIES   2,233     2,274  
 
INVESTING ACTIVITIES
Purchases of medical equipment and property (2,564 ) (2,964 )
Proceeds from sale of medical equipment and property   1,726     2,545  
NET CASH USED IN INVESTING ACTIVITIES   (838 )   (419 )
 
FINANCING ACTIVITIES
Principal payments on term loans and capital lease obligations (16,918 ) (4,318 )
Cash proceeds from bank loans and revolving credit facility 13,340 2,500
Common stock repurchased to satisfy statutory withholding on stock based compensation   (41 )   (32 )
NET CASH USED IN FINANCING ACTIVITIES   (3,619 )   (1,850 )
Net change in cash and cash equivalents (2,224 ) 5
Cash and cash equivalents, beginning of period   2,326     799  
Cash and cash equivalents, end of period $ 102   $ 804  
 
               
INFUSYSTEM HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(UNAUDITED)
 
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) 2013       2012 2013       2012  
 
Net income (loss) $   105 $   (828 ) $   156 $   (1,743 )
Adjustments:
Interest Expense 924 663 1,798 1,264
Income Tax Benefit (144 ) (358 ) (105 ) (555 )
Depreciation 1,343 1,458 2,645 2,903
Amortization     652       674       1,324       1,358  
 
EBITDA $ 2,880 $ 1,609 $ 5,818 $ 3,227
 
Concerned Stockholder Group and Retention - 1,111 - 2,577
Early extinguishment of debt - 552 - 552
Stock compensation 221 292 679 633
Strategic alternative costs (including transition costs) 247 - 519 -
       
EBITDA - Adjusted $   3,348   $   3,564   $   7,016   $   6,989  
 

The Dilenschneider Group
Rob Swadosh / Patrick Malone
212-922-0900

Source: InfuSystem Holdings, Inc.