Atrium Innovations Announces 2012 First Quarter Financial Results

Solid Performance of Health Food Stores and Healthcare Practitioners, and Restructuring Being Undertaken to Enhance Profitability in Europe

QUEBEC CITY, May 14, 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 results for the quarter ended March 31, 2012.

First Quarter 2012 Highlights:
(All amounts are in US dollars.)

  • Total revenue growth of 2.0% over last year, or 3.2% on a currency-neutral basis, all organic, to reach $110.0 million
  • Total branded revenue organic growth of 5.1%
  • EBITDA of $22.8 million or 20.8% of revenue, in line with expectations
  • Implementation of a comprehensive restructuring plan totalling $4 million to streamline and optimize European operations, and to align the cost structure to current economic and market conditions
  • Adjusted diluted EPS of $0.46 for the quarter
  • Cash flows before working capital, interest and after-tax restructuring costs were up 5.5% to $19.9 million
  • Repurchased 829,776 shares during the quarter under our NCIB program

"We are pleased with our organic growth for the quarter despite expected lower revenues in some of our business segments year over year. The U.S. market has been particularly strong, reflecting the strength and dynamism of our Healthcare Practitioner (HCP) and Health Food Store (HFS) platforms. In Europe, revenues of Wobenzym in Germany grew by 5.0% following refocused sales and marketing efforts. The first quarter EBITDA margin of 20.8% represented a slight sequential improvement over the fourth quarter of 2011, and we continue to be committed to gradually improve our EBITDA margins. We have taken measures to improve our operating efficiencies in the U.S. and to right-size our resources and facilities in Europe with the comprehensive restructuring plan currently being implemented. The benefits of these initiatives will be progressive throughout the year and will provide a short payback. However the solid growth of our HFS business, which operates in a segment with lower EBITDA margins, will continue to impact our overall margins. Additionally, we are committed to improving organic growth by focusing and leveraging a select group of brands on a world-wide basis and to continue to make acquisitions on a selective basis," said Pierre Fitzgibbon, President and Chief Executive Officer of Atrium.

For the quarter ended March 31, 2012, Atrium recorded revenues of $110.0 million representing an increase of 2.0% (3.2% on a currency-neutral basis) compared to revenues of $107.8 million in 2011. The increase, all organic, is mainly attributable to the solid performance of the HCP and HFS channels in North America, with organic growth of 8% and 15%, respectively, and improved sales in Germany, with a growth of 5%, and is partially offset by revenue decreases in other European regions and CMO business, and also the unfavourable impact of exchange rates.

EBITDA for the quarter was $22.8 million or 20.8% of revenues compared to $23.4 million or 21.7% of revenues for the same period in 2011. The EBITDA margin decreased by 0.9% year over year and is largely explained by a decline in the gross margin related to product mix partly offset by a decrease in selling and administrative expenses, as marketing expenses in Europe were higher last year.

Net earnings attributable to shareholders were $11.7 million for the first quarter in 2012 compared to $14.1 million in 2011, while net earnings per share ("EPS") on a diluted basis were $0.32 per share, as compared to $0.43 per share for the same period in 2011. Adjusted net earnings (without giving effect to the one-time restructuring costs and the dilutive effect of the convertible debenture) were $14.7 million for the first quarter in 2012 compared to $14.2 million in 2011 and adjusted diluted EPS were $0.46 in 2012 compared to diluted EPS of $0.43 in 2011.

Cash flows from operating activities before changes in non-cash working capital items, interest expenses and after-tax restructuring costs were $19.9 million, an increase of 5.5% compared to $18.8 million in 2011. As at March 31, 2012, the Company had a total debt of $301.0 million and a cash position of $14.1 million.

During the quarter, under its normal course issuer bid (NCIB) program, the Company repurchased and cancelled 829,776 common shares for a total consideration of $9.0 million. Furthermore, 61,292 shares were repurchased during the month of April and the number of outstanding shares currently stands at 31,456,478, representing a 4.8% reduction in comparison to when the NCIB program was first launched in November of 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 2012 first quarter results on May 15, 2012 at 8:00 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, restructuring 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 quarters ended March 31,          
           
  2012
$
  2011
$
  Change
           
Revenues 110.0   107.8   2%
           
Gross profit (1) 58.7   60.8    
  53.4%   56.4%    
           
EBITDA (2) 22.8   23.4   -3%
  20.8%   21.7%    
           
Net earnings 11.7   14.1   -17%
           
Diluted net earnings per share 0.32   0.43   -26%
           
Reconciliation to non IFRS Financial Data          
           
Net earnings 11.7   14.1    
Provision for restructuring costs, net of related taxes 2.9   -    
Interest expenses for acquisition-related contingent liabilities 0.1   0.1    
Adjusted net earnings under non-IFRS 14.7   14.2   4%
           
Adjusted diluted net earnings per share under non-IFRS (3) 0.46   0.43   7%
           

(1) Gross profit means sales less cost of goods sold.
(2) EBITDA means earnings before interest, taxes, depreciation, amortization, restructuring 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)
 
  As at March 31,    As at December 31,
  2012
$
2011
$
Assets    
     
Current assets    
Cash 14,088 22,800
Accounts receivable 53,777 52,189
Income taxes recoverable 8,120 5,841
Inventory 97,395 93,250
Prepaid expenses 5,518 4,588
  178,898 178,668
     
Property, plant and equipment 24,349 23,296
Deferred charges and others 4,263 4,218
Intangible assets 263,345 257,853
Goodwill 361,677 356,275
Deferred tax assets 3,528 5,634
  836,060 825,944
Liabilities    
     
Current liabilities    
Accounts payable and accrued liabilities 41,623 44,122
Provision 4,000 -
Contingent considerations 499 15,234
Income taxes 574 1,263
Deferred revenues 190 157
Derivative financial instruments 472 704
Current portion of long-term debt 350 292
  47,708 61,772
     
Contingent considerations 494 479
Long-term debt 208,592 191,169
Convertible debentures 92,070 91,819
Deferred revenues 57 75
Deferred tax liabilities 66,869 67,056
     
  415,790 412,370
Equity    
Share capital 89,307 91,658
Stock options reserve 2,574 2,394
Retained earnings 342,220 337,201
Accumulated other comprehensive loss (13,766) (17,706)
  420,335 413,547
Non-controlling interest (65) 27
  420,270 413,574
  836,060 825,944



Atrium Innovations Inc.
Consolidated Statements of Earnings
(tabular amounts in thousands of US dollars, except share and per share data)
 
  Quarters ended March 31,
     
  2012
$
2011
$
     
Revenues 109,952 107,752
     
Operating expenses    
Cost of sales 51,286 46,955
Selling and administrative expenses 37,713 38,595
Research and development costs 667 569
Restructuring costs 4,000 -
  93,666 86,119
     
     
Earnings from operations 16,286 21,633
     
Other revenues (expenses)    
Financial revenues 65 46
Financial expenses (3,632) (1,999)
Foreign exchange gain (loss) 461 (197)
Change in fair value of embedded derivative 1,922 -
     
  (1,184) (2,150)
     
Earnings before income taxes 15,102 19,483
     
Income tax expense 3,481 5,069
     
     
Net earnings for the period 11,621 14,414
     
     
Net earnings for the period attributable to    
Shareholders 11,713 14,115
Non-controlling interest (92) 299
     
Net earnings per share    
Basic 0.37 0.43
Diluted 0.32 0.43
     
Weighted average number of shares outstanding (000's)    
Basic 32,018 32,774
Diluted 36,283 33,203
     

Atrium Innovations Inc.
Consolidated Statements of Cash Flows
(expressed in thousands of US dollars)
  
  Quarters Ended March 31,
     
  2012
$
2011
            $
Cash flows from operating activities    
Net earnings for the period 11,621 14,414
     
Adjustments for:     
  Depreciation and amortization 2,531 1,738
  Deferred charges 213 47
  Deferred revenues 12 (319)
  Change in fair value of embedded derivative (1,922) -
  Stock-based compensation costs 180 89
  Interest expense 3,242 1,611
  Deferred income taxes 1,132 1,269
  Foreign exchange gain on long-term debt (86) -
     
Change in non-cash operating working capital items (5,583) (13,355)
     
Cash flows from operating activities 11,340 5,494
     
Cash flows from financing activities    
Increase in long-term debt 12,090 232,711
Payments on long-term debt (85) (212,903)
Financing costs (24) (189)
Issuance of shares - 188
Shares redeemed and cancelled under a normal course issuer bid     (9,045) (1,589)
Interest paid (4,736) (1,207)
     
Cash flows from (used in) financing activities (1,800) 17,011
     
Cash flows from investing activities    
Business acquisitions, net of cash acquired (14,809) (12,623)
Purchase of property, plant and equipment (1,618) (459)
Additions to intangible assets (1,890) (2,101)
     
Cash flows used in investing activities (18,317) (15,183)
     
  (8,777) (7,322)
     
Effect of exchange rate changes on cash 65 (1,073)
     
Increase (decrease) in cash (8,712) 6,249
     
Cash - Beginning of period 22,800 12,049
     
Cash - Ending of period 14,088 18,298
 

 

SOURCE ATRIUM INNOVATIONS INC.



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