EX-99.1 2 a5326929ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 PolyMedica Reports Results for Fiscal 2007 Third Quarter WAKEFIELD, Mass.--(BUSINESS WIRE)--Feb. 5, 2007--PolyMedica Corporation (NASDAQ:PLMD): Highlights: -- Earnings per share, including stock-based compensation expense of $0.08 per diluted share, were $0.43, representing a 26% sequential increase over the second quarter; -- Revenues for the third quarter of fiscal 2007 were $177.2 million, a 34% increase over the prior year quarter and an increase of 8% over the second quarter; -- Diabetes revenue increased 10% year over year and 5% over the second quarter; -- Pharmacy revenue increased 157% year over year and 16% over the second quarter; -- The Company dispensed 566,000 prescriptions in the third quarter, a 17% sequential increase over the second quarter; and -- The Company generated $21 million in operating cash flow and reduced its outstanding debt by $26 million in the third quarter. PolyMedica Corporation (NASDAQ: PLMD) today reported revenue growth of 34% to $177.2 million in the third fiscal quarter of 2007 compared with $131.9 million for the same period last year. Income from continuing operations, net of taxes, for the quarter was $9.8 million, or $0.43 per diluted share, compared sequentially with $8.0 million, or $0.34 per diluted share, in the second quarter. In accordance with Statement of Financial Accounting Standards (SFAS) No. 123R, "Share-Based Payment," the Company recognized $3.0 million of pre-tax stock-based compensation expense ($1.9 million after taxes, or $0.08 per diluted share) during the third quarter of fiscal 2007. Excluding the impact of stock-based compensation expense, earnings per share for the quarter were $0.51 compared with $0.42 in the second quarter of fiscal 2007. Earnings per share in the third quarter of fiscal 2006 were $0.40. Commenting on the Company's quarterly results, President and Chief Executive Officer Patrick Ryan said, "We continue to be pleased by the performance in our core diabetes business and our success to date in building our pharmacy business. The Company's focus on meeting the comprehensive needs of people suffering from diabetes has been well received by our patients. Overall, it was a strong quarter for the Company and yielded solid revenue and earnings growth. Operating cash flow for the third quarter was $21 million and provided us with the opportunity to reduce outstanding debt by $26 million." Mr. Ryan continued, "We are now processing prescriptions under the Medco pharmacy fulfillment agreement, and we expect to complete the transition to Medco by March 31st. The Medco agreement allows us to leverage the Liberty brand and our call center expertise to reach and serve patients, and it provides world class fulfillment services to our patients." Results of Operations for the Third Quarter Net revenues: Three Months Ended --------------------- Dec. 31, Dec.31, $ % (in thousands) 2006 2005 Change Change -------- ---------- -------- ------ Diabetes $122,047 $ 110,481 $11,566 10% Pharmacy 55,168 21,450 33,718 157% -------- ---------- ------- ------ Net revenues $177,215 $ 131,931 $45,284 34% ======== ========== ======= ====== Net revenues in the third quarter of fiscal 2007 increased 34% to $177.2 million compared with $131.9 million for the same period last year. Diabetes revenue increased $11.6 million, or 10%, from last year, primarily due to the 7% increase in diabetes patients and an increase in revenue generated from the Company's diabetes commercial business. Pharmacy revenue increased $33.7 million, or 157%, from last year, primarily due to the increase in patients served through the Company's Medicare Part D drug benefit program. The Company dispensed 566,000 prescriptions in the third quarter compared with 174,000 dispensed prescriptions in the prior year period. The provision for sales returns and allowances in the third quarter of 2007 was $2.9 million, or 1.6% of gross revenues, compared with $4.2 million, or 3.1% of gross revenues, in last year's third quarter. The decrease in the amount and the percentage of sales returns and allowances to gross revenues in the third quarter ended December 31, 2006, was attributable to the revenue growth of the Pharmacy segment, which generates a lower rate of sales returns and allowances; a reduction in sales returns of diabetes products during the quarter; and, the fiscal 2006 acquisition of IntelliCare, which does not have sales returns. Gross Margin: Three Months Ended -------------------- Dec. 31, Dec.31, $ % (in thousands) 2006 2005 Change Change ------- --------- ------- ------ Diabetes $68,918 $ 60,941 $7,977 13% Pharmacy 9,363 7,991 1,372 17% ------- --------- ------ ------ Gross margin $78,281 $ 68,932 $9,349 14% ======= ========= ====== ====== Gross margin dollars in the third quarter increased 14% to $78.3 million from $68.9 million for the same period last year. Diabetes gross margin dollars increased $8 million and Pharmacy gross margin dollars increased $1.4 million from last year. Overall, the Company's gross margin was 44.2% of net revenues in the third quarter compared with 52.2% last year and 46.3% in the second quarter of fiscal 2007. Diabetes gross margin was 56.5% in the third quarter compared with 55.2% last year and 57.3% in the second 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 reduction in Diabetes gross margin from the second quarter was due to an increase in the Diabetes commercial business and insulin pump supply business, which generate lower gross margin rates. Pharmacy gross margin was 17.0% in the third quarter ended December 31, 2006, compared with 37.3% in the prior year and 19.2% in the second quarter. The decrease in Pharmacy gross margin from last year and the second 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. Selling, general and administrative expenses: Three Months Ended ---------------------- Dec. 31, Dec. 31, (in thousands) 2006 2005 ------- ----------- Employee compensation $23,499 $ 22,261 Direct-response advertising amortization 12,540 10,828 Depreciation expense 2,492 1,964 Amortization of intangible assets 4,061 2,389 Provision for doubtful accounts 4,495 4,952 Stock-based compensation 3,001 565 Other 10,952 9,369 ------- ----------- Selling, general and administrative expenses $61,040 $ 52,328 ======= =========== As a percentage of net revenues 34.4% 39.7% ======= =========== The $8.7 million increase in selling, general and administrative expense from last year related primarily to the $2.4 million increase in stock-based compensation as a result of the implementation of SFAS 123R in fiscal 2007 and the $1.7 million increase in the amortization of direct-response advertising. In addition, there were increases in the amortization of intangible assets, headcount and other costs associated with the 13 diabetes companies acquired since September 30, 2005, and the fiscal 2006 acquisition of IntelliCare. Other SG&A expense primarily includes legal, accounting, communications cost and marketing expense. SG&A expense, in dollars, was similar to the amount reported in the second quarter of 2007. As a percentage of revenue, SG&A expense in the third quarter was 34.4% compared with 39.7% last year and 36.7% in the second quarter. Other income and expense: Other income and expense of $1.7 million increased $282,000 from last year due to the higher level of debt outstanding during the period. Compared with the second quarter, other income and expense decreased $1.5 million, or 46%, primarily due to the reduction in the overall interest rate as a result of the Company's issuance of 1% coupon convertible notes in the second quarter and the $26 million reduction in debt outstanding under the Company's credit facility during the quarter. The average borrowing rate under the credit facility was 6.3% in the third quarter compared with 6.9% in the second quarter and the overall weighted average interest rate on all debt was 2.7% in the third quarter compared with 6.1% in the second quarter and 5.2% in last year's third quarter. Results of Operations for the Nine Months Ended December 31, 2006 Net revenues: Nine Months Ended --------------------- Dec.31, Dec.31, $ % (in thousands) 2006 2005 Change Change -------- ---------- --------- ------ Diabetes $352,527 $ 288,997 $ 63,530 22% Pharmacy 144,687 61,889 82,798 134% -------- ---------- -------- ------ Net revenues $497,214 $ 350,886 $146,328 42% ======== ========== ======== ====== Net revenues for the nine months ended December 31, 2006, increased 42% to $497.2 million compared with $350.9 million for the same period last year. Diabetes revenue increased $63.5 million, or 22%, from last year, due to the increase in patients and the fiscal 2006 acquisitions of NDP and IntelliCare. Pharmacy revenue increased $82.8 million, or 134%, 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: Nine Months Ended --------------------- Dec.31, Dec.31, $ % (in thousands) 2006 2005 Change Change -------- --------- -------- ------ Diabetes $199,392 $ 167,558 $31,834 19% Pharmacy 27,180 21,802 5,378 25% -------- --------- ------- ------ Gross margin $226,572 $ 189,360 $37,212 20% ======== ========= ======= ====== Gross margin dollars for the nine months ended December 31, 2006, increased 20% to $226.6 million from $189.4 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 $31.8 million and Pharmacy gross margin dollars increased $5.4 million from last year. Overall, the Company's gross margin decreased to 45.6% of net revenues compared with 54.0% last year due to a higher percentage of revenues derived from the Pharmacy segment, and the NDP and IntelliCare acquisitions, all of which generate lower gross margins than the Company's historical business. Diabetes gross margin decreased to 56.6% compared with 58.0% last year primarily due to the revenue generated from the NDP and IntelliCare acquisitions. Pharmacy gross margin decreased to 18.8%, compared with 35.2% last year, due to the growth in net revenue attributable to the Liberty Part D drug benefit program that generates a lower gross margin than the historical pharmacy business. Selling, general and administrative expenses: Nine Months Ended --------------------- Dec.31, Dec.31, (in thousands) 2006 2005 -------- -------- Employee compensation $ 70,407 $ 59,812 Direct-response advertising amortization 36,235 31,246 Depreciation expense 7,568 5,757 Amortization of intangible assets 10,198 5,253 Provision for doubtful accounts 15,824 14,477 Stock-based compensation 8,954 1,144 Other 32,333 22,961 -------- -------- Selling, general and administrative expenses $181,519 $140,650 ======== ======== As a percentage of net revenues 36.5% 40.1% ======== ======== The $40.9 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 13 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 nine months ended December 31, 2006, was 36.5% compared with 40.1% in the year earlier period. Other income and expense: Other income and expense of $7.7 million increased $5.7 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 repurchase of the Company's common stock during fiscal 2006 and the completion of several acquisitions during fiscal 2006 and fiscal 2007. Balance Sheet and Cash Flow Highlights The Company's cash flows for the nine months ended December 31, 2006 and 2005, included the following: Nine Months Ended --------------------- Dec.31, Dec. 31, $ 2006 2005 Change --------- --------- ---------- Summary Cash Flow Data: Cash flows from operating activities $ 42,314 $ 11,719 $ 30,595 Cash flows used for investing activities (30,856) (46,021) 15,165 Cash flows from (used for) financing activities (19,232) (31,873) 12,641 --------- --------- --------- Net change in cash and cash equivalents (7,774) (66,175) 58,401 Beginning cash and cash equivalents 9,101 72,246 (63,145) --------- --------- --------- Ending cash and cash equivalents $ 1,327 $ 6,071 $ (4,744) ========= ========= ========= Additional Cash Flow/Balance Sheet Data: Purchase of property, plant and equipment $ (8,143) $ (7,943) $ (200) Purchase of patient lists and other contracts (26,598) (7,051) (19,547) Direct response advertising expenditures (44,145) (40,560) (3,585) Proceeds from convertible note offering 180,000 - 180,000 Net purchase of derivative instruments (26,268) - (26,268) Repurchase of common stock (29,624) (192,210) 162,586 Net cash flow from credit facility (132,400) 167,500 (299,900) A/R days sales outstanding 53 63 Inventory days on hand 41 57 Diabetes Patients: Three Twelve Months Months Ended Ended Dec. 31, Dec. 31, 2006 2006 --------- --------- Diabetes patients, beginning balance 913,000 862,000 New diabetes patients from marketing programs 44,000 191,000 New diabetes patients from acquisitions 16,000 47,000 Patient attrition (48,000) (175,000) --------- --------- Diabetes patients as of December 31, 2006 925,000 925,000 ========= ========= Other Key Operating Metrics: Three Months Ended ----------------------------- Dec.31, Sept.30, Dec.31, 2006 2006 2005 -------- -------- -------- Diabetes: Diabetes shipments 633,000 623,000 608,000 Revenue per shipment $ 180 $ 174 $ 173 Quarterly reorder rate 91.3% 89.7% 91.4% Patient retention from last quarter 94.7% 95.2% 95.0% Acquisition cost per patient - Marketing $ 338 $ 296 $ 266 Other revenue included in Diabetes segment (000s) $ 8,097 $ 8,040 $ 5,625 Pharmacy: Dispensed prescriptions 566,000 483,000 174,000 Patients receiving prescriptions during quarter 91,000 86,000 65,000 Average prescriptions shipped to each patient in quarter 6.22 5.63 2.69 Revenue per dispensed prescription $ 97 $ 98 $ 123 Gross margin per dispensed prescription $ 17 $ 19 $ 46 Brand revenue dollars as % of total Pharmacy revenue 80.4% 82.0% 76.4% Brand prescriptions as % of total Pharmacy prescriptions 50% 52% 49% Conference Call and Replay PolyMedica management will host a conference call and live webcast tomorrow, Tuesday, February 6, 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 1-888-313-1094. 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 925,000 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 and September 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 Nine Months Ended --------------------- --------------------- Dec.31, Dec.31, Dec.31, Dec.31, 2006 2005 2006 2005 -------- -------- -------- -------- Net revenues $177,215 $131,931 $497,214 $350,886 Cost of sales 98,934 62,999 270,642 161,526 -------- -------- -------- -------- Gross margin 78,281 68,932 226,572 189,360 Selling, general and administrative expenses 61,040 52,328 181,519 140,650 -------- -------- -------- -------- Income from operations 17,241 16,604 45,053 48,710 Other income and expense (1,746) (1,464) (7,717) (2,039) -------- -------- -------- -------- Income from continuing operations before income taxes 15,495 15,140 37,336 46,671 Income tax provision 5,656 5,526 13,628 17,042 -------- -------- -------- -------- Income from continuing operations, net of income taxes 9,839 9,614 23,708 29,629 Income from discontinued operations, net of income taxes - 264 - 23,904 --------- -------- --------- -------- Net income $ 9,839 $ 9,878 $ 23,708 $ 53,533 ======== ======== ======== ======== Income from continuing operations, net of income taxes, per weighted average share, diluted $ 0.43 $ 0.40 $ 1.01 $ 1.14 Income from discontinued operations, net of income taxes, per weighted average share, diluted - 0.01 - 0.93 --------- -------- --------- -------- Net income per weighted average share, diluted $ 0.43 $ 0.41 $ 1.01 $ 2.07 ======== ======== ======== ======== Weighted average shares, diluted 23,151 24,270 23,419 25,922 POLYMEDICA CORPORATION Consolidated Balance Sheets (In thousands) Dec. 31, March 31, 2006 2006 -------- -------- ASSETS Current assets Cash and cash equivalents $ 1,327 $ 9,101 Accounts receivable, net 104,597 104,013 Inventories 44,638 34,467 Deferred income taxes 4,334 4,334 Income tax receivable - 6,662 Prepaid expenses and other current assets 17,896 9,896 -------- -------- Total current assets 172,792 168,473 Property, plant and equipment, net 61,900 64,678 Goodwill 64,598 64,488 Intangible assets, net 43,593 27,228 Direct response advertising, net 99,488 91,653 Notes receivable 9,641 9,548 Other assets 8,850 3,249 -------- -------- Total assets $460,862 $429,317 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 61,171 $ 47,015 Current portion, capital lease obligations 652 596 -------- -------- Total current liabilities 61,823 47,611 Capital lease and other obligations 1,756 1,144 Convertible notes 180,000 - Credit facility 57,600 190,000 Deferred income taxes 11,035 31,411 -------- -------- Total liabilities 312,214 270,166 Total shareholders' equity 148,648 159,151 -------- -------- Total liabilities and shareholders' equity $460,862 $429,317 ======== ======== POLYMEDICA CORPORATION Statement of Operations - Reconciliation of Non-GAAP Financial Measures (In thousands, except per share amounts) Three Months Ended December 31, 2006 -------------------------------------- Reported Stock- Adjusted GAAP Based Non-GAAP Totals Compensation Totals ---------- ---------------- ---------- Income before income taxes $ 15,495 $ 3,001 $ 18,496 Income tax provision 5,656 1,095 6,751 --------- ------------ --------- Net income $ 9,839 $ 1,906 $ 11,745 ========= ============ ========= Diluted earnings per share $ 0.43 $ 0.08 $ 0.51 ========= ============ ========= Weighted average shares, diluted 23,151 23,151 23,151 Nine Months Ended December 31, 2006 -------------------------------------- Reported Stock- Adjusted GAAP Based Non-GAAP Totals Compensation Totals ---------- ---------------- ---------- Income before income taxes $ 37,336 $ 8,954 $ 46,290 Income tax provision 13,628 3,268 16,896 --------- ------------ --------- Net income $ 23,708 $ 5,686 $ 29,394 ========= ============ ========= Diluted earnings per share $ 1.01 $ 0.24 $ 1.25 ========= ============ ========= Weighted average shares, diluted 23,419 23,419 23,419 The Company believes that referring to these non-GAAP totals facilitates a better understanding of its annual operating results. CONTACT: PolyMedica Corporation Investor Contact: Keith W. Jones, 781-486-8111 Chief Financial Officer