Atrium Innovations Announces 2012 Third Quarter Financial Results

Strong Organic Revenue Growth, Best Quarter since 2008

QUEBEC CITY, Nov. 7, 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 September 30, 2012.

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

  • Total revenue growth was all organic: 11% over last year, or 14% on a currency-neutral basis, to reach $107.6 million
  • Total branded revenue recorded solid organic growth of 13%, on a currency-neutral basis
  • EBITDA of $21.3 million or 19.8% of revenue, a decline mostly related to a lower Euro/USD exchange rate
  • Adjusted diluted EPS of $0.42 for the quarter, a slight increase of 2% over last year despite the unfavourable exchange rate
  • Cash flows before working capital and interest remain strong at $18.3 million
  • Closure of British Columbia manufacturing facility completed as planned
  • First time launch of a new brand - Klean Athlete

"The results for the third quarter were in line with Management's outlook and reflect the continued focus and priority placed on organic growth across all our brands. Total branded revenue growth of 13% for the quarter over last year represents our best performance in over 4 years. The exceptional performance of Retail Branded in North America must be highlighted with growth of just over 40% over 2011. While total revenues in Europe were under pressure due to difficult economic conditions in the Netherlands, we continue to be pleased with our of Wobenzym® sales in Germany as Wobenzym® Plus continues to enjoy sell-out increases over last year," said Pierre Fitzgibbon, President and CEO.

"Our EBITDA margin improved slightly over the second quarter of 2012 to 19.8% and stands at 20.0% year-to-date. We expect the EBITDA margin to remain relatively stable in the fourth quarter when compared with the third quarter.

"In the quarter, Douglas Laboratories® introduced a new brand, Klean Athlete, targeting a new high growth category ("sports nutrition") for Atrium. We made the decision to address the sports nutrition market via the development of an internal brand rather than through an acquisition. So far, the market reception has been very positive.

"Our industry continues to grow at a healthy pace. We are well positioned to take advantage of it, and our commitment to improving revenue from organic growth is showing tangible results. We will focus throughout 2013 on optimizing our U.S. manufacturing environment as we complete the implementation of our ERP program", concluded Mr. Fitzgibbon.

For the quarter ended September 30, 2012, Atrium recorded revenues of $107.6 million representing an increase of 11% (14% on a currency-neutral basis) compared to revenues of $97.0 million in 2011. The increase, all organic, is mainly attributable to the solid performance of our branded products with organic growth of 13% including solid momentum of HCP and HFS brands and also to the private label products.

EBITDA for the quarter was $21.3 million or 19.8% of revenues compared to $22.4 million or 23.1% of revenues for the same period in 2011. The EBITDA decreased by $1.1 million year over year largely explained by the unfavourable euro/USD exchange rate with an impact of $0.8 million.

Net earnings attributable to shareholders were $13.4 million for the third quarter in 2012 compared to $13.4 million in 2011, while net earnings per share ("EPS") on a diluted basis were $0.40 per share, as compared to $0.38 per share for the same period in 2011. The adjusted diluted EPS were $0.42 in 2012 compared to adjusted diluted EPS of $0.41 in 2011.

Cash flows from operating activities before changes in non-cash working capital items and interest expenses were $18.3 million compared to $19.2 million in 2011. As at September 30, 2012, the Company had a total debt of $285.0 million and a cash position of $13.7 million.

"Over the past four quarters, we have taken advantage of what we believe is an attractive valuation of our shares to use our Normal Course Issuer bid (NCIB) program and thereby reduce the number of outstanding shares by over 1.2 million to the benefit of our shareholders. Considering our solid and stable cash flows, we remain comfortable with our balance sheet and debt level," said Mario Paradis, Vice President and CFO.

About Atrium Innovations

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 seven 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 third quarter results on November 8, 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 revenue less cost of sales. EBIT means earnings before interest and tax.  EBITDA means earnings before interest, tax, depreciation, amortization, restructuring and acquisition costs. Adjusted EPS means EPS without giving the dilutive effect of the convertible debentures.

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 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,  
  2012
$
  2011
$
  Change
           
Revenues 107.6   97.0   +11%
           
Gross profit (1) 54.5   52.2    
  50.7%   53.8%    
           
EBITDA (2) 21.3   22.4   -5%
  19.8%   23.1%    
           
Net earnings attributable to shareholders 13.4   13.4   -
           
Diluted net earnings per share 0.40   0.38   +5%
           
Reconciliation to non IFRS Financial Data          
           
Net earnings attributable to shareholders 13.4   13.4    
Interest expenses for acquisition-related contingent liabilities -   0.1    
Adjusted net earnings under non-IFRS 13.4   13.5   -
           
Adjusted diluted net earnings per share under non-IFRS (3) 0.42   0.41   +2%
           
(1) Gross profit means revenue less cost of sales.
(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.
Financial Summary (unaudited)
(in millions of US dollars except per share amounts)
           
Consolidated results for the nine-month period ended September 30,  
  2012
$
  2011
$
  Change
           
Revenues 327.0   309.9   +6%
           
Gross profit (1) 169.0   167.9    
  51.7%   54.2%    
           
EBITDA (2) 65.4   69.6   -6%
  20.0%   22.5%    
           
Net earnings attributable to shareholders 37.3   41.9   -11%
           
Diluted net earnings per share 1.09   1.24   -12%
           
Reconciliation to non IFRS Financial Data          
           
Net earnings attributable to shareholders 37.3   41.9    
Provision for restructuring costs, net of related taxes 2.9   -    
Interest expenses for acquisition-related contingent liabilities 0.1   0.2    
Adjusted net earnings under non-IFRS 40.3   42.1   -4%
           
Adjusted diluted net earnings per share under non-IFRS (3) 1.26   1.27   -1%
 
(1) Gross profit means revenue less cost of sales.
(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 September 30, As at December 31,
  2012
$
2011
$
Assets    
     
Current assets    
Cash 13,740 22,800
Accounts receivable 55,162 52,189
Income taxes recoverable 5,551 5,841
Inventory 100,698 93,250
Prepaid expenses 7,868 4,588
  183,019 178,668
     
Property, plant and equipment 24,089 23,296
Deferred charges and others 4,052 4,218
Intangible assets 263,120 257,853
Goodwill 358,241 356,275
Deferred tax assets 2,283 5,634
  834,804 825,944
Liabilities    
     
Current liabilities    
Accounts payable and accrued liabilities 35,251 44,122
Provision 1,344 -
Contingent considerations - 15,234
Income taxes 501 1,263
Deferred revenues 214 157
Derivative financial instruments - 704
Current portion of long-term debt 362 292
  37,672 61,772
     
Contingent considerations - 479
Long-term debt 191,573 191,169
Convertible debentures 93,080 91,819
Deferred revenues - 75
Derivative financial instruments 1,270 -
Deferred tax liabilities 66,728 67,056
     
  390,323 412,370
Equity    
Share capital 89,132 91,658
Stock options reserve 2,810 2,394
Retained earnings 367,492 337,201
Accumulated other comprehensive loss (15,001) (17,706)
  444,433 413,547
Non-controlling interest 48 27
  444,481 413,574
  834,804 825,944
     

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,
                 
    2012
$
  2011
$
  2012
$
  2011
$
                 
Revenues   107,621   96,988   327,040   309,901
                 
Operating expenses                
Cost of sales   53,110   44,774   158,043   142,001
Selling and administrative expenses   35,099   31,130   109,216   101,910
Research and development costs   468   902   1,761   2,037
Restructuring costs   -   -   4,000   -
                 
    88,677   76,806   273,020   245,948
                 
Earnings from operations   18,944   20,182   54,020   63,953
                 
Other revenues (expenses)                
Financial revenues   79   92   278   207
Financial expenses   (3,232)   (3,674)   (10,485)   (8,417)
Foreign exchange gain (loss)   549   (102)   988   (344)
Change in fair value of embedded derivative   449   665   2,910   665
                 
    (2,155)   (3,019)   (6,309)   (7,889)
                 
Earnings before income taxes   16,789   17,163   47,711   56,064
                 
Income tax expense   3,324   3,741   10,424   13,538
                 
                 
Net earnings for the period   13,465   13,422   37,287   42,526
                 
                 
Net earnings for the period attributable to                
Shareholders   13,402   13,351   37,266   41,912
Non-controlling interest   63   71   21   614
                 
Net earnings per share                
Basic   0.43   0.41   1.18   1.28
Diluted   0.40   0.38   1.09   1.24
                 
Weighted average number of shares outstanding (000's)                
Basic   31,456   32,622   31,644   32,706
Diluted   35,719   35,675   35,907   33,995

Atrium Innovations Inc.
Consolidated Statements of Cash Flows
(expressed in thousands of US dollars)
 
    Quarters ended September 30,   Nine months ended September 30,
                 
    2012
$
  2011
$
  2012
$
  2011
$
Cash flows from operating activities                
Net earnings for the period   13,465   13,422   37,287   42,526
                 
Adjustments for:                
  Depreciation and amortization   2,373   2,053   7,405   5,438
  Deferred charges   274   399   772   658
  Deferred revenues   (78)   (84)   (26)   (782)
  Change in fair value of embedded derivative   (449)   (665)   (2,910)   (665)
  Stock-based compensation costs   105   208   416   496
  Interest expense   2,892   3,166   9,389   7,224
  Deferred income taxes   512   731   1,854   2,071
  Foreign exchange gain on long-term debt   (799)   -   (50)   -
Change in non-cash operating working capital items   (6,842)   (7,714)   (17,579)   (19,321)
                 
Cash flows from operating activities   11,453   11,516   36,558   37,645
                 
Cash flows from financing activities                
Increase in long-term debt   -   4,078   12,090   236,976
Payments on long-term debt   (2,088)   (101,155)   (10,058)   (326,757)
Proceed from the issuance of convertible debentures   -   101,081   -   101,081
Financing costs   (5)   (4,044)   (89)   (4,472)
Issuance of shares   -   -   -   347
Shares redeemed and cancelled under a normal course issuer bid   -   (1,362)   (9,501)   (4,612)
Interest paid   (4,023)   (1,686)   (10,372)   (4,904)
                 
Cash flows used in financing activities   (6,116)   (3,088)   (17,930)   (2,341)
                 
Cash flows from investing activities                
Business acquisitions, net of cash acquired   (951)   (4,250)   (15,760)   (20,515)
Purchase of property, plant and equipment   (794)   (925)   (4,459)   (2,622)
Proceeds from disposal of property, plant and equipment   -   -   225   -
Additions to intangible assets   (1,433)   (3,151)   (7,053)   (8,182)
                 
Cash flows used in investing activities   (3,178)   (8,326)   (27,047)   (31,319)
                 
    2,159   102   (8,419)   3,985
                 
Effect of exchange rate changes on cash   (57)   (1,485)   (641)   (2,374)
                 
Increase (decrease) in cash   2,102   (1,383)   (9,060)   1,611
                 
Cash - Beginning of period   11,638   15,043   22,800   12,049
                 
Cash - Ending of period   13,740   13,660   13,740   13,660
                 

 

 

SOURCE ATRIUM INNOVATIONS INC.



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