SAINT PAUL, Minn., Jan. 6, 2016 /PRNewswire/ -- MGC Diagnostics Corporation (NASDAQ: MGCD), a global medical technology company, today reported financial results for the fourth quarter and the fiscal year 2015, ended October 31, 2015.
Fiscal Year 2015 and Fourth Quarter Highlights:
-- Total fiscal year 2015 revenues grew 24.9% to $37.5 million, from $30.0
million in fiscal 2014. Fourth quarter 2015 revenue increased by 9.3% to
$10.6 million, compared to $9.7 million in the prior year period.
-- Fiscal year 2015 operating income was $1.6 million, compared to an
operating loss of ($811,000) for fiscal 2014. Operating income for the
fourth quarter 2015 was $883,000 compared to an operating loss of
($95,000) in the fiscal 2014 fourth quarter.
-- Net income for fiscal year 2015 was $4.0 million, or $0.94 per diluted
share, compared to a net loss of $1.2 million, or ($0.28) per share for
fiscal 2014. For the fourth quarter 2015 the Company reported net income
of $1.0 million, or $0.24 per diluted share, compared to a net loss of
($336,000), or ($0.08) per diluted share in the prior year period.
-- Fiscal year 2015 domestic equipment and accessories revenues included 66
competitive conversions contributing $3.0 million in revenue, compared
to 48 competitive conversions contributing $2.9 million in revenue
during fiscal 2014.
-- The Attachment Rate, which reflects the percentage of Extended Service
Contracts added at the point of sale to customer equipment purchases,
was 32% for both fiscal 2015 and 2014.
-- Fiscal 2015 domestic equipment, supplies and accessories revenues from
Medical Graphics increased 12.7% to $19.5 million, compared to $17.3
million for fiscal 2014. Medisoft contributed domestic revenues of
$558,000 from its U.S. distributor.
-- Gross margin for the fiscal year was 51.6% (54.1% for Medical Graphics
and 36.7% for Medisoft), compared to 55.0% in fiscal 2014 (56.1% for
Medical Graphics and 28.7% for Medisoft). Fourth quarter 2015 gross
margin was 52.4%, including gross margin for Medical Graphics and
Medisoft of 53.8% and 42.6%, respectively.
-- Sales backlog going into fiscal year 2016 was $2.6 million ($2.3 million
for Medical Graphics and $293,000 for Medisoft), an all-time high,
compared to $1.9 million at the end of fiscal year 2014.
"We are very pleased with our record fourth quarter and fiscal year 2015 financial results," said Todd Austin, chief executive officer of MGC Diagnostics. "Our Medical Graphics subsidiary experienced one of its best operating quarters in the Company's history by posting revenue of $9.2 million and operating income of $1.0 million. Medical Graphics' fiscal year 2015 results were just as impressive with revenue of $32.0 million, the best result since 2007, and operating income of $2.7 million, the most profitable year on record."
"In addition, Medical Graphics started the first quarter of fiscal year 2016 with a sales backlog of $2.3 million, the best start to a new year since 2007. These results could not have been accomplished without the dedication and hard work of all of our employees. I am particularly proud of the performance of our selling team and their contribution to our fiscal 2015 success," said Mr. Austin.
Additional Fiscal 2015 Fourth Quarter Data:
-- Gross margin for the quarter was 52.4% (53.8% for Medical Graphics and
42.6% for Medisoft), compared to 52.9% in the fiscal 2014 fourth quarter
(56.6% for Medical Graphics and 28.7% for Medisoft). Gross margin for
equipment, supplies and accessories was 48.8% for the quarter (50.0% for
Medical Graphics and 42.6% for Medisoft), compared to 49.1% in the prior
year's quarter (53.1% for Medical Graphics and 28.7% for Medisoft).
Gross margin for services was 69.3% for the quarter, compared to 69.3%
for the same period last year.
-- Fourth quarter 2015 general and administrative expenses totaled $1.4
million, or 13.4% of revenue, compared to $1.7 million, or 17.8% of
revenue in the comparable quarter last year. This decrease is due to
lower Medical Graphics general and administrative expenses of $350,000,
partially offset by higher Medisoft general and administrative expenses
of $44,000.
-- Sales and marketing expenses were $2.5 million, or 23.4% of revenue,
compared to $2.6 million, or 27.1% of revenue in the 2014 fourth
quarter. This decrease is due to lower Medisoft sales and marketing
expenses of $273,000, partially offset by higher Medical Graphics sales
and marketing expenses of $130,000.
-- Research and development expenses were $693,000, or 6.6% of revenue in
the fiscal 2015 fourth quarter, down from $791,000, or 8.2% of revenue
in last year's fourth quarter. This decrease is primarily due to lower
Medical Graphics research and development expenses of $116,000,
partially offset by higher Medisoft research and development expenses of
$18,000.
Additional Full Year 2015 Data:
-- Total fiscal year 2015 revenues grew 24.9% to $37.5 million compared to
$30.0 million in fiscal 2014. Medical Graphics' revenue grew 11.6% in
fiscal 2015 and Medisoft's revenue grew 324.6% due to a full year of
revenue in fiscal 2015, compared to one quarter of revenue in fiscal
2014.
-- Operating income was $1.6 million, compared to an operating loss of
($811,000) for fiscal 2014. For fiscal 2015, Medical Graphics had
operating income of $2.7 million and Medisoft had an operating loss of
$1.1 million, compared to operating losses of ($215,000) and ($596,000)
for Medical Graphics and Medisoft, respectively, for fiscal 2014.
-- Net income was $4.0 million or $0.94 per diluted share, compared to a
net loss of $1.2 million, or ($0.28) per share for fiscal 2014. For
fiscal 2015, Medical Graphics had net income of $5.0 million and
Medisoft had a net loss of ($1.0 million), compared to net losses of
($652,000) and ($508,000) for Medical Graphics and Medisoft,
respectively, for fiscal 2014.
-- Gross margin was 51.6% (54.1% for Medical Graphics and 36.7% for
Medisoft), compared to 55.0% in fiscal 2014 (56.1% for Medical Graphics
and 28.7% for Medisoft). Gross margin for equipment, supplies and
accessories was 47.5% (49.8% for Medical Graphics and 36.7% for
Medisoft), compared to 51.6% in fiscal 2014 (52.9% for Medical Graphics
and 28.7% for Medisoft). Gross margin for services was 69.8%, compared
to 67.7% for fiscal 2014.
-- In the 2015 third quarter, Medical Graphics recognized a tax benefit of
$3.1 million when it partially reversed the valuation allowance on
domestic deferred tax assets that are primarily related to its net
operating loss carryforwards.
"The dramatic increase in fiscal 2015 profitability was a result of increased revenue, expense reductions and a tax benefit of $3.5 million, or $0.84 per diluted share, due primarily to the partial reversal of the valuation allowance on deferred tax assets, primarily related to the Company's U.S. net operating loss carry-forwards," continued Mr. Austin.
"We continue to make progress transforming Medisoft into a growing and profitable business," said Mr. Austin. Although Medisoft's fourth quarter revenue remained consistent with the prior two sequential quarters at $1.4 million, gross margin improved to 42.6%, its best quarterly result of the year. From an operations perspective, Medisoft is much more stable today than it was earlier in the year. We firmly believe that Medisoft is the right platform to expand MGC Diagnostics' international presence."
Mr. Austin concluded, "As we reflect on the past fiscal year, everyone at MGC Diagnostics is very proud of the accomplishments and the results these efforts produced. We began fiscal 2016 with a $2.3 million domestic sales backlog and a global sales pipeline that gives us confidence in driving improved financial performance. We will continue to execute on our strategic initiatives to build on the record operating results and sales momentum we generated in fiscal 2015. We believe that our business model and strategies are properly aligned to further enhance shareholder value and we look forward to the year ahead."
Subsequent Event
In March 2014, MGC entered into a distribution agreement under which it agreed to purchase and distribute sleep diagnostic products for a third-party manufacturer. In December 2015, MGC informed the manufacturer that MGC was rescinding the distribution agreement. MGC rescinded the distribution agreement because it violates specific statutory requirements that are unrelated to product safety or performance. As of October 31, 2015, the Company's inventory balance included approximately $450,000 of inventory that it had purchased from the manufacturer.
Rescission of the distribution agreement requires the manufacturer to repurchase MGC's inventory. As an alternative to this repurchase, MGC has offered to enter into a "wind-down agreement" under which MGC would have the right to sell the inventory it has purchased.
The manufacturer has not yet responded to MGC's notice of rescission.
MGC has not recognized any impairment of this inventory as of October 31, 2015 because it believes the manufacturer will either repurchase the inventory or that MGC and the manufacturer will agree that MGC may sell this inventory. If MGC is unable to successfully resolve this matter, MGC may determine that some or all of its sleep diagnostics inventory is impaired and MGC would then incur an impairment charge against this inventory.
Conference Call
The Company has scheduled a conference call for Wednesday, January 6, 2016 at 4:30 p.m. ET to discuss its financial results for the fourth quarter and fiscal year 2015 that ended October 31, 2015.
Participants can dial (877) 317-6789 or (412) 317-6789 to access the conference call, or listen via a live Internet webcast on the Company's website at www.mgcdiagnostics.com. A replay of the conference call will be available by dialing (877) 344-7529 or (412) 317-0088, confirmation code 10077496, through January 13, 2016. A webcast replay of the conference call will be accessible on the Company's website at www.mgcdiagnostics.com for 90 days.
About MGC Diagnostics
MGC Diagnostics Corporation (NASDAQ: MGCD), is a global medical technology company dedicated to cardiorespiratory health solutions. The Company, through its Medical Graphics Corporation and Medisoft SA subsidiaries, develops, manufactures and markets non-invasive diagnostic systems. This portfolio of products provides solutions for disease detection, integrated care, and wellness across the spectrum of cardiorespiratory healthcare. The Company's products are sold internationally through distributors and in the United States through a direct sales force targeting heart and lung specialists located in hospitals, university-based medical centers, medical clinics, physicians' offices, pharmaceutical companies, medical device manufacturers, and clinical research organizations (CROs). For more information about MGC Diagnostics, visit www.mgcdiagnostics.com.
Cautionary Statement Regarding Forward Looking Statements
From time to time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, MGC Diagnostics Corporation may make forward-looking statements concerning possible or anticipated future financial performance, business activities or plans that include the words "believes," "expects," "anticipates," "intends" or similar expressions. For these forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in federal securities laws. These forward-looking statements are subject to a number of factors, risks and uncertainties, including those disclosed in our periodic filings with the SEC, which could cause actual performance, activities or plans after the date the statements are made to differ significantly from those indicated in the forward-looking statements. For a list of these factors, see the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward Looking Statements," in the Company's Form 10-K for the year ended October 31, 2014, and any updates in subsequent filings on Form 10-Q or Form 8-K under the Securities Exchange Act of 1934.
Contacts:
Company Investors
------- ---------
Wesley W. Winnekins Joe Dorame, Robert Blum, Joe Diaz
Chief Financial Officer Lytham Partners, LLC
MGC Diagnostics Corporation (602) 889-9700
(651) 484-4874 mgcd@lythampartners.com
(Financial Tables to Follow)
MGC DIAGNOSTICS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 2015 and October 31, 2014
(In thousands, except share and per share data)
October 31, October 31,
2015 2014
---- ----
Assets (Unaudited) (Revised -
Note 1)
Current Assets
Cash
and
cash
equivalents $6,553 $5,675
Accounts
receivable, net
of allowance
for doubtful
accounts 7,416 7,068
of $117 and
$228,
respectively
Inventories, net
of obsolescence
reserve of $228
and 6,759 5,548
$387, respectively
Prepaid expenses
and other
current assets 988 2,425
--- -----
Total current
assets 21,716 20,716
------ ------
Property and
equipment, net
of accumulated
depreciation 2,894 3,469
of $4,431 and
$4,180,
respectively
Intangible
assets, net 4,305 4,375
Goodwill 3,324 3,810
Deferred income
taxes 3,342 -
Other non-
current assets 7 14
--- ---
Total
Assets $35,588 $32,384
======= =======
Liabilities and
Shareholders'
Equity
Current
Liabilities:
Accounts
payable $2,617 $3,161
Employee
compensation 1,854 1,664
Deferred income 3,608 3,804
Current portion
of long-term
debt 785 786
Other current
liabilities and
accrued
expenses 1,493 1,416
----- -----
Total current
liabilities 10,357 10,831
------ ------
Long-term
liabilities:
Long-term debt,
less current
portion 2,158 2,947
Deferred income
taxes - 347
Long-term
deferred income
and other 3,146 2,814
----- -----
Total
Liabilities 15,661 16,939
------ ------
Commitments and
Contingencies
Shareholders'
Equity:
Common stock,
$0.10 par
value,
authorized
25,000,000
shares, 427 420
4,324,379 and
4,255,593
shares issued
and 4,274,386
and
4,198,558 shares
outstanding in
2015 and 2014,
respectively
Undesignated
shares,
authorized
5,000,000
shares, no
shares issued
and outstanding
- -
Additional paid-
in capital 24,118 23,470
Accumulated
deficit (4,355) (8,331)
Accumulated
other
comprehensive
loss (263) (114)
---- ----
Total
Shareholders'
Equity 19,927 15,445
------ ------
Total
Liabilities
and
Shareholders'
Equity $35,588 $32,384
------- -------
Note 1 - At July 31, 2015, the
Company revised its August 1,
2014 purchase price allocation to
reflect receipt of bank funds
provided for in the stock
purchase agreement and
adjustments to previously
unidentified Medisoft
liabilities.
MGC DIAGNOSTICS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except per share data)
Three Months Ended Year Ended
October 31, October 31,
2015 2014 2015 2014
---- ---- ---- ----
(Unaudited) (Revised - Note 2) (Unaudited) (Revised - Note 2)
Revenues
Equipment, supplies and
accessories revenues $8,734 $7,882 $30,636 $23,619
Service revenues 1,821 1,778 6,831 6,369
----- ----- ----- -----
10,555 9,660 37,467 29,988
------ ----- ------ ------
Cost of revenues
Cost of equipment, supplies and
accessories revenues 4,469 4,008 16,082 11,443
Cost of service revenues 560 545 2,066 2,058
--- --- ----- -----
5,029 4,553 18,148 13,501
----- ----- ------ ------
Gross margin 5,526 5,107 19,319 16,487
----- ----- ------ ------
Operating expenses:
Selling and marketing 2,474 2,617 8,831 8,519
General and administrative 1,412 1,718 5,722 5,878
Research and development 693 791 2,931 2,805
Amortization of intangibles 64 76 232 96
--- --- --- ---
4,643 5,202 17,716 17,298
----- ----- ------ ------
Operating income 883 (95) 1,603 (811)
Interest expense, net 50 65 247 69
Foreign currency (gain) loss (29) 398 929 456
--- --- --- ---
Income (loss) before taxes 862 (558) 427 (1,336)
Benefit from taxes (150) (222) (3,549) (176)
---- ---- ------ ----
Net income (loss) $1,012 $(336) $3,976 $(1,160)
Other comprehensive loss, net of tax
Effect of foreign currency
translation adjustments (27) (94) (149) (114)
--- --- ---- ----
Comprehensive income
(loss) $985 $(430) $3,827 $(1,274)
==== ===== ====== =======
Income (loss) per share:
Basic $0.24 $(0.08) $0.94 $(0.28)
===== ====== ===== ======
Diluted $0.24 $(0.08) $0.94 $(0.28)
===== ====== ===== ======
Weighted average common shares
outstanding:
Basic 4,269 4,198 4,238 4,171
===== ===== ===== =====
Diluted 4,285 4,198 4,247 4,171
===== ===== ===== =====
Note 2 - Adjusted to reflect
changes to deferred income
recognition as part of
liability adjustments referred
to in Note 1.
MGC DIAGNOSTICS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Year ended October 31,
----------------------
2015 2014
---- ----
Cash flows from operating activities: (Unaudited) (Revised - Note 3)
Net income (loss) $3,976 $(1,160)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation 439 366
Amortization 627 215
Stock-based compensation 496 441
Deferred income taxes (3,655) (197)
Loss on foreign currency 938 455
(Decrease) increase in allowance for
doubtful accounts (111) 81
(Decrease) increase in inventory
obsolescence reserve (159) 81
Loss on disposal of equipment 3 4
Changes in operating assets and
liabilities:
Accounts receivable (356) 1,923
Inventories (1,133) (1,459)
Prepaid expenses and other current assets 913 (674)
Accounts payable (423) 265
Employee compensation 236 (586)
Deferred income 238 883
Other current liabilities and accrued
expenses 129 (296)
--- ----
Net cash provided by operating activities 2,158 342
----- ---
Cash flows from investing activities:
Purchases of property and equipment and
intangible assets (927) (1,226)
Net assets of business acquired, net of
cash received 447 (7,644)
--- ------
Net cash used in investing activities (480) (8,870)
---- ------
Cash flows from financing activities:
Proceeds from long-term borrowing - 4,000
Payment of debt issuance costs (5) (71)
Payment on long-term borrowings (800) (200)
Dividends paid - (30)
Proceeds from issuance of common stock
under employee stock 117 138
purchase plan
Proceeds from the exercise of stock
options 57 6
Repurchase of common stock upon vesting of
restricted stock awards (48) (123)
Repurchase of common stock - (3)
Net cash (used in) provided by financing
activities (679) 3,717
---- -----
Effect of exchange rates on cash (121) (88)
Net increase (decrease) in cash and cash
equivalents 878 (4,899)
Cash and cash equivalents at beginning of
year 5,675 10,574
----- ------
Cash and cash equivalents at end
of year $6,553 $5,675
====== ======
Cash paid for taxes $53 $75
Cash paid for interest 173 54
Supplemental non-cash items:
Warrants issued for acquisition $ - $421
Current and non-current liabilities
issued for leasehold improvements - 33
Common stock issued for long-term
liability 33 -
Accrued dividends (reversal) - (4)
Note 3 - See Notes 1
and 2.
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SOURCE MGC Diagnostics Corporation
