MGC Diagnostics Corporation Reports 2013 Third Quarter Operating Results PR Newswire SAINT PAUL, Minn., Aug. 29, 2013 SAINT PAUL, Minn., Aug. 29, 2013 /PRNewswire/ --MGC Diagnostics Corporation (NASDAQ: MGCD), a global medical technology company, today reported financial results for the third quarter ended July 31, 2013. Third Quarter Highlights: oRobust third quarter revenue of $7.9 million, a 15% increase over the fiscal 2012 third quarter. Sequential quarterly revenue growth of 4.8% from the fiscal 2013 second quarter; oNet income for the third quarter of $652,000, or $0.16 per diluted share, compared to a net loss of $133,000, or ($0.03) per diluted share in the 2012 third quarter. Represents the highest net income result since the fiscal 2007 first quarter; oThird quarter service revenue increased 29% on a year-over-year basis, while service gross margin improved to 70.8%, compared to 65.3% in the fiscal 2012 third quarter; oThird quarter gross margin improved 170 basis points to 55.4%, compared to 53.7% in last year's third quarter; oThe third quarter Attachment Rate of point-of-sale extended service contracts improved to 26%, compared to 3% in last year's third quarter; oThird quarter 2013 recurring revenue (service and supplies revenues) totaled $3.0 million, or 38% of total third quarter revenue; oStrong balance sheet with $8.8 million in cash and cash equivalents, $13.6 million of working capital and no long-term debt; oAt October 31, 2012, the Company had federal net operating loss carry forwards of approximately $14.5 million that may be used to offset a portion of the Company's future tax liability. Third quarter fiscal 2013 total revenues increased 15% to $7.9 million, compared to $6.9 million in the fiscal 2012 third quarter. Domestic 2013 third quarter sales increased 12% to $6.3 million, compared to $5.6 million in the 2012 third quarter, while international sales increased 29% to $1.6 million from $1.3 million in last year's third quarter, due primarily to sales improvements in Canada and Latin America. Third quarter Group Purchasing Organization ("GPO") sales increased 21% to $4.3 million, compared to $3.6 million in the prior year's third quarter. Third quarter equipment, supplies and accessories sales totaled $6.6 million, an increase of 12.5%, compared to $5.9 million during last year's third quarter. Service revenues for the third quarter totaled $1.3 million, compared to $1.0 million during last year's third quarter. The Attachment Rate, which reflects the percentage of Extended Service Contracts added at the point of sale to customer equipment purchases, was 25.7% for the fiscal 2013 third quarter, compared to 2.7% for the same period last year. Backlog at July 31, 2013 was $709,000, and has steadily improved over the past nine months from $541,000 at the end of the 2013 second quarter and $415,000 at the end of the 2012 fourth quarter. Gross margin for the quarter was 55.4%, compared to 53.7% in the 2012 third quarter. Gross margin for equipment, supplies and accessories was 52.3% for the quarter, compared to 51.8% in the prior year's quarter. Gross margin for services increased to 70.8% for the quarter, compared to 65.3% for the prior year's quarter, primarily as a result of improved pricing and service mix. Third quarter 2013 general and administrative expenses totaled $973,000, or 12.3% of revenue, compared to $913,000, or 13.2% of revenue in the comparable quarter last year. Sales and marketing expenses were $2.2 million, or 27.1% of revenue, compared to $2.1 million, or 30.9% of revenue in the 2012 third quarter. Research and development expenses were $591,000, or 7.5% of revenue, compared to $825,000, or 12.0% of revenue in last year's third quarter. This decrease is due primarily to expense reductions attributed to management level personnel changes and the conversion of consultant services to full-time, internal personnel. Year to date, the Company has invested approximately $1.3 million in new research and product development initiatives. During the quarter, the Company capitalized $153,000 of software development expenses, compared to $216,000 for the same quarter last year. Even though research and development expenses have decreased, the Company continues to invest in new product development to ensure that its future product pipeline remains robust. Third quarter operating income improved to $669,000, compared to an operating loss of $276,000 in the 2012 third quarter. For the 2013 third quarter, the Company reported net income of $652,000, or $0.16 per diluted share, versus a net loss of $133,000, or ($0.03) per diluted share, in the 2012 third quarter. Gregg O. Lehman, Ph D., president and chief executive officer of MGC Diagnostics, said, "I am pleased to report that we generated solid double-digit revenue growth and achieved the highest quarterly profit since the first quarter of fiscal 2007. We grew across most revenue categories and geographies, with domestic and international revenue increasing 12% and 29%, respectively. Equipment, supplies and accessories revenue increased 12% and service revenue increased 29%. Gross margins improved for all revenue sources and operating expenses as a percent of revenue fell to 46.9% compared to 57.8% for last year's third quarter. These results are in line with our internal expectations and we look forward to continued improvements during the quarters ahead." "Our initiative to obtain new sales from accounts held by our competition gained additional traction during the third quarter," continued Dr. Lehman. "For the first nine months of the fiscal year, we have converted 71 accounts that previously used equipment provided by our competitors, representing approximately $3.9 million of revenue. We are pleased with this result because a large part of our growth strategy was to gain market share." "We were also happy with the Attachment Rate of new extended service contracts during the quarter. These contracts, which have terms ranging from one to five years, will result in higher service revenue in future periods once the initial twelve month warranty expires." "We have been successful in increasing our cash flow. For the nine months, net cash provided by operating activities was $1.3 million, compared to $222,000 for the first nine months of fiscal 2012. Our cash position remains strong, even after payment of the special, one-time dividend in the 2013 second quarter. We are pleased with the financial results of the first nine months, and we expect to complete the year on a strong note," concluded Dr. Lehman. Discontinued Operations On August 28, 2012, the Company completed the sale of the assets of its New Leaf business to Life Time Fitness, Inc. for $1.235 million. As a result, the Company has reclassified its results for prior periods to eliminate from its statement of comprehensive income (loss) all fiscal 2012 revenues and expenses associated with its New Leaf business and presented the income from New Leaf activities as "discontinued operations." Net Operating Loss Carry Forward At October 31, 2012, the Company had federal net operating loss carry forwards of approximately $14.5 million, not subject to IRC annual limitations on use. These loss carry forwards will expire in years 2018 through 2032. Conference Call The Company has scheduled a conference call for Thursday, August 29, 2013 at 4:30 p.m. ET to discuss its financial results for the third quarter of fiscal year 2013. 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 code10032923, through September 5, 2013. 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), (formerly Angeion Corporation), is a global medical technology company dedicated to cardiorespiratory health solutions. The Company, through its subsidiary Medical Graphics Corporation, 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, that 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, 2012, and any updates in subsequent filings on Form 10-Q or Form 8-K under the Securities Exchange Act of 1934. Contact: Wesley W. Winnekins Joe Dorame, Robert Blum, Joe Diaz MGC Diagnostics Corporation Lytham Partners, LLC Chief Financial Officer (602) 889-9700 (651) 484-4874 firstname.lastname@example.org (Financial Tables to Follow) MGC DIAGNOSTICS CORPORATION AND SUBSIDIARY Consolidated Balance Sheets July 31, 2013 and October 31, 2012 (In thousands, except share and per share data) July 31, October 31, 2013 2012 Assets (Unaudited) Current Assets: Cash and cash equivalents $ 8,831 $ 9,665 Accounts receivable, net of allowance for doubtful 6,723 5,710 accounts of $102 and $98, respectively Inventories, net of obsolescence reserve of $310 and 3,896 3,850 $373, respectively Prepaid expenses and other current assets 626 568 Total current assets 20,076 19,793 Property and equipment, net of accumulated 832 578 depreciation of $4,047 and $3,876, respectively Intangible assets, net 2,071 1,492 Other non-current assets — 85 Total Assets $ 22,979 $ 21,948 Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 1,510 $ 2,094 Employee compensation 1,517 1,749 Deferred income 2,696 1,927 Warranty reserve 146 91 Other current liabilities and accrued expenses 575 442 Total current liabilities 6,444 6,303 Long-term liabilities: Long-term deferred income and other 2,266 895 Total Liabilities 8,710 7,198 Commitments and Contingencies Shareholders' Equity: Common stock, $0.10 par value, authorized 25,000,000 shares, 4,111,794 and 3,986,350 shares issued and 4,037,300 and 3,885,279 shares outstanding in 2013 403 388 and 2012, respectively Undesignated shares, authorized 5,000,000 shares, no — — shares issued and outstanding Additional paid-in capital 21,885 21,046 Accumulated deficit (8,019) (6,684) Total Shareholders' Equity 14,269 14,750 Total Liabilities and Shareholders' Equity $ 22,979 $ 21,948 MGC DIAGNOSTICS CORPORATION AND SUBSIDIARY Consolidated Statements of Comprehensive Income (Loss) (Unaudited in thousands, except per share data) Three Months ended Nine Months ended July 31, July 31, 2013 2012 2013 2012 Revenues Equipment, supplies and accessories $ 6,611 $ 5,876 $ 18,777 $ 15,738 revenues Service revenues 1,317 1,019 3,722 3,188 7,928 6,895 22,499 18,926 Cost of revenues Cost of equipment, supplies and 3,154 2,835 8,985 7,564 accessories revenues Cost of service revenues 384 354 1,092 1,086 3,538 3,189 10,077 8,650 Gross margin 4,390 3,706 12,422 10,276 Operating expenses: Selling and marketing 2,152 2,132 6,372 5,558 General and administrative 973 913 3,605 2,988 Research and development 591 825 1,878 2,455 Amortization of intangibles 5 112 16 329 3,721 3,982 11,871 11,330 Operating income (loss) 669 (276) 551 (1,054) Interest income — 3 1 7 Income (loss) from continuing 669 (273) 552 (1,047) operations before taxes Provision for taxes 17 7 31 21 Income (loss) from continuing 652 (280) 521 (1,068) operations Income from discontinued operations — 147 — 277 Net income (loss) 652 (133) 521 (791) Other comprehensive loss; net of tax Unrealized loss on securities — — — (2) Comprehensive income (loss) $ 652 $ (133) $ 521 $ (793) Income (loss) per share: Basic From continuing operations $ 0.16 $ (0.07) $ 0.13 $ (0.28) From discontinued operations — 0.04 — 0.07 Total $ 0.16 $ (0.03) $ 0.13 $ (0.21) Diluted From continuing operations $ 0.16 $ (0.07) $ 0.13 $ (0.28) From discontinued operations — 0.04 — 0.07 Total $ 0.16 $ (0.03) $ 0.13 $ (0.21) Weighted average common shares outstanding: Basic 4,015 3,847 3,945 3,808 Diluted 4,083 3,847 4,009 3,808 Dividends declared per share $ — $ — $ 0.45 $ — MGC DIAGNOSTICS CORPORATION AND SUBSIDIARY Consolidated Statements of Cash Flows (Unaudited in thousands) Nine Months Ended July 31, 2013 2012 Cash flows from operating activities: Net income (loss) $ 521 $ (791) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 177 182 Amortization 86 329 Stock-based compensation 332 269 Increase (decrease) in allowance for doubtful 3 (51) accounts (Decrease) increase in inventory obsolescence (63) 70 reserve (Gain) loss on disposal of equipment (3) 1 Changes in operating assets and liabilities: Accounts receivable (1,016) 1,289 Inventories 17 (432) Prepaid expenses and other current assets 27 (315) Accounts payable (584) (435) Employee compensation (232) (114) Deferred income 1,950 32 Warranty reserve 55 (47) Other current liabilities and accrued expenses 22 235 Net cash provided by operating activities 1,292 222 Cash flows from investing activities: Sales of investments — 721 Purchases of property and equipment and intangible (883) (730) assets Net cash used in investing activities (883) (9) Cash flows from financing activities: Dividends paid (1,805) — Proceeds from issuance of common stock under 129 50 employee stock purchase plan Proceeds from the exercise of stock options 485 97 Repurchase of common stock — (66) Repurchase of common stock upon vesting of (52) (46) restricted stock awards Net cash (used in) provided by financing activities (1,243) 35 Net (decrease) increase in cash and cash (834) 248 equivalents Cash and cash equivalents at beginning of period 9,665 8,461 Cash and cash equivalents at end of period $ 8,831 $ 8,709 Cash paid for taxes $ 30 $ 22 Supplemental non-cash items: Current and non-current liabilities issued for 210 — leasehold improvements Common stock issued for long-term liability — 42 Accrued dividends 51 — SOURCE MGC Diagnostics Corporation Website: http://mgcdiagnostics.com
MGC Diagnostics Corporation Reports 2013 Third Quarter Operating Results
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