Atrium Innovations Announces 2011 Third Quarter Financial Results

Continued growth reported in the quarter

QUEBEC CITY, Nov. 9, 2011 /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 third quarter results for the period ended September 30, 2011.

Third Quarter Highlights:
(All amounts are in US dollars.)

  • Revenue growth of 9.1% over previous year to reach $97.0 million
  • EBITDA of $22.4 million or 23.1% of revenues, an increase of 5.6% compared to last year
  • Diluted EPS of $0.41 for the quarter, an increase of 8% over last year
  • Cash flow before working capital was up 12% to $19.2 million
  • Closing of CAN$100 million of convertible debentures
  • Vertical acquisition of Enzimas SA well in progress

"Our branded organic growth was 3.5% for the quarter, when adjusted for the shipment lag to our distributor in Eastern Europe. This organic growth was affected by the completion of our repositioning of our Direct to Consumer business which should allow us to report higher global branded organic growth in the future. We are satisfied with our sequential improvement in the EBITDA margin which should continue to improve throughout 2012 in each segments, as we complete our various improvement programs including our Pittsburgh manufacturing facility," said Pierre Fitzgibbon, President and Chief Executive Officer.

"With the appointment of Mr. Hannema, the new management structure will allow us to solidify our foundation and thoroughly implement our operating efficiencies and synergies. We now have the operating platform to generate strong results and confirm our leadership position in the industry and we will continue our acquisition program on a selective basis,'' concluded Mr. Fitzgibbon.

For the quarter ended September 30, 2011, Atrium recorded revenues of $97.0 million representing an increase of 9.1% compared to revenues of $88.9 million in 2010. This increase is mainly attributable to the acquisitions of Seroyal and Minami.

EBITDA increased by 5.6% to $22.4 million, or 23.1% of revenues, compared to $21.2 million, or 23.8% of revenues, for the same period in 2010. The acquisitions of Seroyal and Minami contributed to the increase in EBITDA.

Net earnings attributable to shareholders were $13.4 million in 2011 compared to $12.7 million in 2010, representing an increase of 5.4%. Net earnings per share ("EPS") on a diluted basis rose to $0.41 per share, as compared to $0.38 per share for the same period in 2010.

Cash flows from operating activities before changes in non-cash working capital items were $19.2 million compared to $17.1 million in 2010. As at September 30, 2011, the Company had a total debt of $190.8 million and a cash position of $13.7 million. During this quarter, the Company announced the closing of a convertible debenture public offering of CAN$75 million and a concurrent private placement of CAN$25 million. The net proceeds were used to reduce the Company's outstanding indebtedness.

New Management Structure Completed
Recently, Paul Hannema was appointed to the position of Executive Vice President, Head of European Operations. Mr. Hannema has been President and Chief Executive Officer of MCO Health since June 2010 and will continue to hold that position. Other key changes to the executive team include the addition at the corporate level of David Torralbo as Vice President, Corporate and Legal Affairs, and Annie Blanchette as Vice President, Human Resources, a new position at Atrium. With these appointments, the new management structure, initiated at the beginning of 2011 was completed. The Atrium Executive Committee is now comprised of the following individuals:

  • Pierre Fitzgibbon, President and CEO
  • Carmen Fortino, President, North American Operations
  • Paul Hannema, Executive Vice President, Head of European Operations
  • Annie Blanchette, Vice President, Human Resources
  • Mario Paradis, Vice President and CFO
  • Barry W. Ritz, Vice President, Scientific and Regulatory Affairs
  • David Torralbo, Vice President, Corporate and Legal Affairs
  • Serge Yelle, Executive Vice President, Strategy and Business Development

Renewed NCIB Program

The Company also announced today that it has filed with the Toronto Stock Exchange ("TSX"), and the TSX has accepted, a Notice of Intention to make a Normal Course Issuer Bid. Under its normal course issuer bid, Atrium intends to purchase up to 813,970 of its common shares, representing approximately 2.5% of the 32,558,816 common shares issued and outstanding as of October 31, 2011. The average daily trading volume for the 6-month period preceding October 31, 2011 represents 31,531 common shares.  In accordance with the TSX requirements, a maximum daily purchase of the greater of 25% of this average or 1,000 shares may be made, which represents a total of 7,882 common shares.

Purchases will be made on the open market by Atrium through the facilities of the TSX.  The purchases may commence on November 15, 2011 and will terminate on November 14, 2012, or on such earlier date as Atrium will have completed its purchases pursuant to the Notice of Intention to make a Normal Course Issuer Bid filed with the TSX.  Atrium will cancel any common shares purchased pursuant to the normal course issuer bid. Atrium will pay the market price of common shares on the TSX at the time of purchase and no purchases of common shares will be made other than open-market purchases.

Under its previous normal course issuer bid which was announced on November 10, 2010, Atrium repurchased a total of 386,524 common shares as at October 31, 2011 at the weighted average price per share of $14.5620.

Atrium considers that repurchasing its common shares is a sound business and financial decision as shares in circulation will be reduced and the proportionate interest of all remaining shareholders in the share capital of Atrium will be increased on a pro rata basis.

No appraisal or valuation regarding Atrium, its material assets or securities was prepared within the two years preceding the date of the Notice of Intention to make a Normal Course Issuer Bid.

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 third quarter results on November 10, 2011 at 8:30 a.m., Eastern Time. Participants may access the call by using the following numbers: 514-940-2795, 800-589-8577, or 416-644-3423. 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 interim unaudited 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*, and EBITDA*) 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 acquisitions 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 these 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, 2010 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 quarters ended September 30,
(unaudited)
  2011
$
  2010
$
  Change
           
Revenues 97.0   88.9   9%
Gross profit (1) 52.2   49.1    
  53.8%   55.3%    
EBITDA (2) 22.4   21.2   6%
  23.1%   23.8%    
Net earnings attributable to shareholders 13.4   12.7   6%
Net earnings per share          
  Diluted 0.41   0.38   8%
           
           
Reconciliation to non IFRS Financial Data          
           
Net earnings attributable to shareholders 13.4   12.7    
  Acquisition-related costs and interest expenses
for acquisition-related contingent liabilities (after-tax)
0.1   -    
Net earnings 13.5   12.7   6%
Net diluted earnings per share 0.41   0.38   8%

(1) Gross profit means sales less cost of goods sold.
(2) EBITDA means earnings before interest, taxes, depreciation, amortization and acquisition related costs.

           
Atrium Innovations Inc.
Financial Summary (unaudited)
(in millions of US dollars except per share amounts)
           
Consolidated results for the nine-month periods ended September 30,
(unaudited)
  2011
$
  2010
$
  Change
           
Revenues 309.9   264.1   17%
Gross profit (1) 167.9   149.6    
  54.2%   56.6%    
EBITDA (2) 69.6   62.7   11%
  22.5%   23.7%    
Net earnings attributable to shareholders 41.9   37.5   12%
Net earnings per share          
  Diluted 1.27   1.13   12%
           
           
Reconciliation to non IFRS Financial Data          
           
Net earnings attributable to shareholders 41.9   37.5    
  Acquisition-related costs and interest expenses
for acquisition-related contingent liabilities (after-tax)
0.2   0.6    
Net earnings 42.1   38.1   11%
Net diluted earnings per share 1.27   1.15   11%

(1) Gross profit means sales less cost of goods sold.
(2) EBITDA means earnings before interest, taxes, depreciation, amortization and acquisition related costs.

       
Atrium Innovations Inc.
Consolidated Balance Sheets
(Expressed in thousands of US dollars)
       
  As at September 30,   As at December 31,
  2011
$
  2010
$
Assets      
       
Current assets      
Cash 13,660   12,049
Accounts receivable 51,371   50,070
Income taxes recoverable 7,129   5,018
Inventory 87,802   79,243
Prepaid expenses 4,892   4,384
  164,854   150,764
Property, plant and equipment 22,625   21,916
Deferred charges and others 3,196   3,238
Intangible assets 253,478   251,939
Goodwill 359,869   360,963
Deferred tax assets 10,450   8,564
  814,472   797,384
       
Liabilities      
       
Current liabilities      
Accounts payable and accrued liabilities 37,927   38,564
Provisions -   3,351
Contingent considerations 15,415   17,583
Income taxes 1,043   1,148
Deferred revenues 280   944
Derivative financial instruments 1,096   -
Current portion of long-term debt 294   217
  56,055   61,807
Long-term debt 190,502   275,614
Convertible debentures 91,264   -
Deferred tax liabilities 70,390   68,970
Contingent considerations 490   11,877
Deferred revenues 106   218
Derivative financial instruments -   2,256
  408,807   420,742
       
Shareholders' Equity      
       
Share capital 92,190   92,664
Stock options reserve 2,236   1,767
Retained earnings 326,755   288,607
Accumulated other comprehensive loss (16,310)   (6,576)
  404,871   376,462
Non-controlling interest 794   180
  405,665   376,642
  814,472   797,384

               
Atrium Innovations Inc.
Consolidated Statements of Earnings
(tabular amounts in thousands of US dollars, except share and per share data)
               
  Quarters ended
September 30,
  Nine months ended
September 30,
  2011
$
  2010
$
  2011
$
  2010
$
               
Revenues 96,988   88,850   309,901   264,086
               
Operating expenses              
Cost of sales 44,774   39,716   142,001   114,504
Selling and administrative expenses 31,130   29,211   101,910   90,944
Research and development costs 902   331   2,037   1,394
  76,806   69,258   245,948   206,842
Earnings from operations 20,182   19,592   63,953   57,244
               
Other revenues (expenses)              
Financial revenues 92   2   207   263
Financial expenses (3,674)   (1,799)   (8,417)   (5,336)
Foreign exchange gain (loss) (102)   (297)   (344)   362
Change in fair value of embedded derivative 665   -   665   -
  (3,019)   (2,094)   (7,889)   (4,711)
Earnings before the following items 17,163   17,498   56,064   52,533
Income tax expense 3,741   4,835   13,538   15,079
Net earnings for the period 13,422   12,663   42,526   37,454
               
Net earnings for the period attributable to              
Shareholders 13,351   12,663   41,912   37,454
Non-controlling interest 71   -   614   -
               
Net earnings per share              
Basic 0.41   0.39   1.28   1.15
Diluted 0.41   0.38   1.27   1.13
               
Weighted average number of shares outstanding (000's)              
Basic 32,622   32,667   32,706   32,667
Diluted 32,965   33,196   33,092   33,201
               
               
Atrium Innovations Inc.
Consolidated Statements of Cash Flows
(expressed in thousands of US dollars)
               
  Quarters ended
September 30,
  Nine months ended
September 30,
  2011
$
  2010
$
  2011
$
  2010
$
Cash flows from operating activities              
Net earnings for the period 13,422   12,663   42,526   37,454
Adjustments for:              
  Depreciation and amortization 2,053   1,630   5,438   4,819
  Deferred charges 399   189   658   119
  Deferred revenues (84)   (351)   (782)   (970)
  Change in fair value of embedded derivative (665)   -   (665)   -
  Stock-based compensation costs 208   45   496   190
  Interest expense 3,166   1,397   7,224   4,360
  Deferred income taxes 731   1,574   2,071   1,641
Change in non-cash operating working capital items (7,714)   991   (19,321)   (18,704)
Cash flows from operating activities 11,516   18,138   37,645   28,909
               
Cash flows from financing activities              
Increase in long-term debt 4,078   1,204   236,976   27,151
Payments on long-term debt (101,155)   (3,954)   (326,757)   (13,512)
Proceed from the issuance of convertible debentures 101,081   -   101,081   -
Transaction costs (4,044)   (37)   (4,472)   (106)
Issuance of shares -   -   347   48
Redeemed and cancelled under a normal course issuer bid (1,362)   -   (4,612)   -
Interest paid (1,686)   (1,119)   (4,904)   (3,687)
Cash flows from financing activities (3,088)   (3,906)   (2,341)   9,894
               
Cash flows from investing activities              
Business acquisitions, net of cash acquired (4,250)   (124)   (20,515)   (27,761)
Purchase of property, plant and equipment (925)   (742)   (2,622)   (2,423)
Acquisition of intangible assets (3,151)   (2,302)   (8,182)   (2,553)
Cash flows from investing activities (8,326)   (3,168)   (31,319)   (32,737)
               
Net change in cash 102   11,064   3,985   6,066
Effect of exchange rate changes on cash (1,485)   516   (2,374)   (657)
Increase (decrease) in cash (1,383)   11,580   1,611   5,409
Cash - Beginning balance 15,043   10,996   12,049   17,167
Cash - Ending balance 13,660   22,576   13,660   22,576

 

SOURCE ATRIUM INNOVATIONS INC.



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