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Atrium Innovations Announces 2011 Fourth Quarter and Full Year Financial Results

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Continued Growth and Record Results in 2011

QUEBEC CITY, Feb. 29, 2012 /PRNewswire/ - Atrium Innovations Inc. (TSX: ATB), a globally recognized leader in the development, manufacturing, and commercialization of innovative, science-based dietary supplements endorsed by health professionals, today released its 2011 full year and fourth quarter results for the period ended December 31, 2011.

2011 and Subsequent Year-End  Highlights:
(All amounts are in US dollars.)

  • Revenue growth of 16.3% over previous year to reach $414.7 million
  • EBITDA of $91.0 million or 21.9% of revenues, an increase of 8.5% compared to last year
  • Adjusted diluted EPS of $1.70 for the year, an increase of 18.1% over last year
  • Cash flows before working capital and interest were up 22.3% to $75.1 million
  • Closing of CAN$100 million issue of 7-year convertible debentures
  • Renewal of bank credit facility for a period of 3 years
  • German Court ruled in favour of maintaining OTC drug status of Phlogenzym®
  • US District Court ruled in favour of GOL in its proceeding against FTC

"We are generally pleased with Atrium's results in 2011 which have reached record levels.  Our branded business performed particularly well in the U.S. in both the Healthcare Practitioner and Health Food Store markets.  We completed the restructuring of our Direct to Consumer business, an important component for our organic growth going forward.  Our Canadian and Dutch operations expanded modestly as growth in those respective markets was restrained in 2011. Last December, in Germany, the Federal Administrative Court ruled in favour of maintaining the OTC drug status of Phlogenzym®, part of the Wobenzym family of products.  As a result, more marketing emphasis will be placed on our animal enzymes OTC drug product going forward.  We have stabilized our revenue base in Germany and are confident that we can gradually rebuild from the current level with this recent decision" said President and Chief Executive Officer, Pierre Fitzgibbon.

"2011 proved to be a year of important changes for Atrium.  After completing a series of strategic acquisitions in the last few years, the time was right to alter our management structure and thereby optimize our business platform with increased emphasis on organic growth.  We appointed a Head of Operations in both North America and Europe, and welcomed new corporate executives. This team will provide us with a structure precisely tailored to maximize our synergies and build an effective platform.  Atrium's new ERP system implementation will be central to the new platform in North America.  In this era of enhanced regulation, Atrium is advantageously positioned to reap the benefits of an industry which is increasingly gaining legitimacy and credibility," concluded Mr. Fitzgibbon.

For the fiscal year ended December 31, 2011, Atrium recorded revenues of $414.7 million representing an increase of 16.3% compared to revenues of $356.6 million in 2010. This increase is mainly attributable to the acquisition of Seroyal, as well as to organic growth of North American branded business and to the favourable impact of exchange rates.

EBITDA increased by 8.5% to $91.0 million or 21.9% of revenues compared to $83.9 million or 23.5% of revenues for the same period in 2010. This EBITDA increase came largely from the acquisition of Seroyal.

Net earnings attributable to shareholders were $55.9 million in 2011 compared to $47.9 million in 2010, representing an increase of 16.7%. Net earnings per share ("EPS") on diluted basis rose to $1.61 per share, as compared to $1.44 per share for the same period in 2010. Without giving the dilutive effect of the potential conversion of the convertible debentures, the adjusted diluted EPS would have been $1.70 in 2011 compared to diluted EPS of $1.44 in 2010.

Cash flows from operating activities before changes in non-cash working capital items and interest expenses were $75.1 million, an increase of 22.3% compared to $61.4 million in 2010. As at December 31, 2011, the Company had a total debt of $283.3 million and a cash position of $22.8 million. During the year, the Company announced the closing of a 7-year convertible debenture offering of CAN$100 million.  The net proceeds were used to reduce the Company's outstanding indebtedness.

During the year, primarily under its NCIB (Normal Course Issuer Bid) program, the Company repurchased and cancelled 697,794 common shares for a total consideration of $9.3 million (401,386 common shares and $4.8 million in the fourth quarter of 2011). Furthermore, 79,510 shares were repurchased in January 2012.

"In 2011, we increased our financial flexibility and further optimized our capital structure via a convertible debenture financing and a new bank credit facility in place for a period of three years. In addition, considering our solid cash flow, we continue to repurchase our shares at levels which we consider very attractive for the long-term benefit of our shareholders," said Mario Paradis, Vice President and CFO.

Financial Results for the Fourth Quarter of 2011

For the fourth quarter ended December 31, 2011, Atrium recorded revenues of $104.8 million representing an increase of 13.3% compared to $92.5 million for the corresponding period in 2010.  The increase is mainly attributable to the acquisition of Seroyal and to organic growth of branded products.

EBITDA for the fourth quarter of 2011 was $21.7 million or 20.7% of revenue compared to $21.2 million or 22.9% of revenues for the same period in 2010.  Net earnings attributable to shareholders were $14.0 million in 2011 compared to $10.5 million in 2010, representing an increase of 33.3%.  EPS for the quarter was $0.37 per diluted share compared to $0.31 per diluted share in 2010.  Without giving the dilutive effect of the potential conversion of the convertible debentures, the adjusted diluted EPS would have been $0.43 in 2011 compared to $0.31 in 2010.

Cash flows from operating activities before changes in non-cash working capital items and interest expenses were $21.1 million in 2011 compared to $13.8 million in 2010.

About Atrium

Atrium Innovations Inc. is a globally recognized leader in the development, manufacturing , and commercialization of innovative, science-based dietary supplements endorsed by health professionals. The Company distributes its extensive portfolio of products mainly in the healthcare practitioner and health food and specialized store channels, with a primary focus in North America and Europe.  Atrium is at the forefront of science, innovation and education in the dietary supplement industry. The Company has over 1,100 employees and operates eight manufacturing facilities. Additional information is available at www.atrium-innovations.com.

Conference Call and Webcast

Atrium will hold its quarterly conference call and webcast to discuss its 2011 fourth quarter and full year results on March 1, 2012 at 9:00 a.m., Eastern Time.  Participants may access the call by using the following numbers: 514-807-9895 (Montreal Area), 888-231-8191 (Toll Free) or 647-427-7450 (Toronto area and overseas). A live webcast is also available via the Company's website at www.atrium-innovations.com in the News Center section.  A replay of the webcast will also be available on our website for a period of 30 days.  A copy of Atrium's financial statements will also be available on the Company's website.

Caution Regarding Non-IFRS Financial Measures

The Company provides non-IFRS financial measures (Gross profit*, EBIT*, EBITDA*, and Adjusted EPS*) as supplemental information regarding its operational performance. These non-IFRS financial measures are directly derived from the Company's financial statements and are presented in a consistent manner. The Company uses these measures for the purposes of evaluating its historical and prospective financial performance, as well as its performance relative to competitors. These measures also help the Company to plan and forecast for future periods as well as to make operational and strategic decisions. The Company believes that providing this information to investors, in addition to IFRS measures, allows them to see the Company's results through the eyes of management, and to better understand its historical and future financial performance.

The presentation of this additional information is not prepared in accordance with IFRS. Therefore, the information may not necessarily be comparable to that of other companies and should be considered as a supplement to, not a substitute for, or superior to, the comparable measures calculated in accordance with IFRS.

*Gross profit means sales less cost of sales. EBIT means earnings before interest and tax. EBITDA means earnings before interest, tax, depreciation, amortization and acquisition costs.

Cautionary Note and Forward-Looking Statements

This press release contains certain forward-looking statements with respect to the Company.  These forward-looking statements, by their nature, require the Company to make certain assumptions and necessarily involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements.  Forward-looking statements are not guarantees of performance. These forward-looking statements, including financial outlooks, may involve, but are not limited to, comments with respect to the Company's business or financial objectives, its strategies or future actions, its targets, expectations for financial condition or outlook for operations and future contingent payments.  Words such as "may", "will", "would", "could", "expect", believe", "plan", "anticipate", "intend", "estimate", "continue", or the negative or comparable terminology, as well as terms usually used in the future and the conditional, are intended  to identify forward-looking statements.  Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances. The Company considers theses assumptions to be reasonable based on information currently available to it, but cautions the reader that these assumptions regarding future events, many of which are beyond its control, may ultimately prove to be incorrect since they are subject to risks and uncertainties that affect the Company and its business.

For additional information with respect to these and other factors and assumptions underlying the forward-looking statements made in this press release, see the Company's quarterly and annual Management Discussion and Analysis for the fiscal year ended December 31, 2011 filed with the Canadian securities commissions.  The forward-looking information set forth herein reflects the Company's expectations as at the date of this press release and is subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.

Attachments :  Financial Summary
Balance sheet, results and cash flow statement

Atrium Innovations Inc.
Financial Summary (unaudited)
(in millions of US dollars except per share amounts)

Consolidated results for the year ended December 31,

  2011
$
  2010
$
  Change
           
Revenues 414.7   356.6   16%
           
Gross profit (1) 224.9   203.0    
  54.2%   56.9%    
           
EBITDA (2) 91.0   83.9   8%
  21.9%   23.5%    
           
Net earnings attributable to shareholders 55.9   47.9   17%
           
Net earnings per share          
  Diluted 1.61   1.44   12%
  Adjusted diluted (3) 1.70   1.44   18%
 
 
Reconciliation to non IFRS Financial Data          
Net earnings attributable to shareholders 55.9   47.9    
  Acquisition-related costs and interest expenses
for acquisition-related contingent liabilities (after-tax)
0.4   2.8    
Net earnings 56.3   50.7   11%
           
Net diluted earnings per share 1.62   1.53   6%
Adjusted diluted earnings per share (3) 1.71   1.53   12%

(1) Gross profit means sales less cost of goods sold.
(2) EBITDA means earnings before interest, taxes, depreciation, amortization and acquisition-related costs.
(3) Without giving the dilutive effect of the convertible debentures.


Atrium Innovations Inc.
Financial Summary (unaudited)
(in millions of US dollars except per share amounts)

Consolidated results for the quarters ended December 31,

  2011
$
  2010
$
  Change
           
Revenues 104.8   92.5   13%
           
Gross profit (1) 57.0   53.4    
  54.4%   57.7%    
           
EBITDA (2) 21.7   21.2   2%
  20.7%   22.9%    
           
Net earnings attributable to shareholders 14.0   10.5   33%
           
Net earnings per share          
  Diluted 0.37   0.31   19%
  Adjusted diluted (3) 0.43   0.31   39%
 
 
Reconciliation to non IFRS Financial Data          
Net earnings attributable to shareholders 14.0   10.5    
  Acquisition-related costs and interest expenses
for acquisition-related contingent liabilities (after-tax)
0.2   2.9    
Net earnings 14.2   13.4   6%
           
Net diluted earnings per share 0.37   0.40   (8%)
Adjusted diluted earnings per share (3) 0.43   0.40   8%

(1) Gross profit means sales less cost of goods sold.
(2) EBITDA means earnings before interest, taxes, depreciation, amortization and acquisition-related costs.
(3) Without giving the dilutive effect of the convertible debentures.


Atrium Innovations Inc.
Consolidated Balance Sheets
(Expressed in thousands of US dollars)

 
  2011
$
2010
$
Assets    
     
Current assets    
Cash 22,800 12,049
Accounts receivable 52,189 50,070
Income taxes recoverable 5,841 5,860
Inventory 93,250 79,243
Prepaid expenses 4,588 4,384
     
  178,688 151,606
Property, plant and equipment 23,296 21,916
Deferred charges and others 4,218 3,238
Intangible assets 257,853 256,139
Goodwill 356,275      357,199
Deferred tax assets 5,634 8,564
  825,944 798,662
Liabilities    
     
Current liabilities    
Accounts payable and accrued liabilities 44,122 39,768
Provision - 3,351
Contingent considerations 15,234 17,583
Income taxes 1,263 1,471
Deferred revenues 157 944
Derivative financial instruments 704 -
Current portion of long-term debt 292 217
  61,772 63,334
Contingent considerations 479 11,877
Long-term debt 191,169 275,614
Convertible debentures 91,819 -
Deferred revenues 75 218
Derivative financial instruments - 2,256
Deferred tax liabilities 67,056 69,503
     
  412,370 422,802
Equity    
Share capital 91,658 92,664
Stock options reserve 2,394 1,767
Retained earnings 337,201 288,607
Accumulated other comprehensive loss (17,706) (6,576)
  413,547 376,462
Non-controlling interest 27 (602)
  413,574 375,860
  825,944 798,662



Atrium Innovations Inc.
Consolidated Statements of Earnings
(tabular amounts in thousands of US dollars, except share and per share data)

  Years ended December 31,
     
  2011
$
2010
$
     
Revenues 414,660 356,630
     
Operating expenses    
Cost of sales 189,737 153,602
Selling and administrative expenses 139,711 127,330
Research and development costs 2,623 2,021
  332,071 282,953
     
     
Earnings from operations 82,589 73,677
     
Other revenues (expenses)    
Financial revenues 569 451
Financial expenses (12,484) (7,343)
Foreign exchange gain (loss) (394) 331
Change in fair value of embedded derivative 3,013 -
     
  (9,296) (6,561)
     
Earnings before income taxes 73,293 67,116
     
Income tax expense 16,731 19,198
     
     
Net earnings for the year 56,562 47,918
     
     
Net earnings for the year attributable to    
Shareholders 55,933 47,918
Non-controlling interest 629 -
     
Net earnings per share    
Basic 1.71 1.47
Diluted 1.61 1.44
     
Weighted average number of shares outstanding (000's)    
Basic 32,640 32,699
Diluted 34,600 33,208

Atrium Innovations Inc.
Consolidated Statements of Cash Flows
(expressed in thousands of US dollars)

     
  2011
$
2010
$
Cash flows from operating activities    
Net earnings for the year 56,562 47,918
     
Adjustments for:     
  Depreciation and amortization 8,040 6,782
  Deferred charges 998 329
  Deferred revenues (946) (1,367)
  Change in fair value of embedded derivative (3,013) -
  Stock-based compensation costs 692 233
  Interest expense 10,789 5,947
  Deferred income taxes 1,968 1,536
  Change in non-cash operating working capital items (17,833) (23,765)
     
Cash flows from operating activities 57,257 37,613
     
Cash flows from financing activities    
Increase in long-term debt 243,818 139,936
Payments on long-term debt (329,679) (24,124)
Proceed from the issuance of convertible debentures 101,081 -
Financing costs (5,829) (370)
Issuance of shares 887 356
Shares redeemed and cancelled (9,297) -
Interest paid (8,101) (5,029)
     
Cash flows from financing activities (7,120) 110,769
     
Cash flows from investing activities    
Business acquisitions, net of cash acquired (20,515) (144,837)
Purchase of property, plant and equipment (4,594) (3,976)
Additions to intangible assets (11,046) (3,785)
     
Cash flows from investing activities (36,155)      (152,598)
     
  13,982 (4,216)
     
     
Effect of exchange rate changes on cash (3,231) (902)
     
Increase (decrease) in cash 10,751 (5,118)
     
Cash - Beginning balance 12,049 17,167
     
Cash - Ending balance 22,800 12,049

 

  

 

SOURCE ATRIUM INNOVATIONS INC.



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