Audiotech Announces Fourth Quarter Results and Record Earnings for Fiscal 2011
Kamloops, British Columbia CANADA, January 31, 2012 /FSC/ - Audiotech Healthcare Corporation (AUD - TSX Venture),is pleased to report record revenues and earnings for the year ended September 30, 2011. Total revenues for the year ended September 30, 2011, were $5,421,848, an increase of 6.3% over the $5,100,082, reported during the prior fiscal year. Net income for fiscal 2011 totaled a record $493,531 or $0.037 per share, an increase of 39.4% over fiscal 2010. Pre-tax net income for the year ended September 30, 2011, was $654,060 compared to $352,723 during fiscal 2010, an increase of 85%.
Total revenues for the fourth quarter ended September 30, 2011, were $1,385,166, an increase of 5.1% over the sales posted during the same period a year earlier. Revenues from the Canadian operations posted an increase of 4.4%, rising from $933,238 during the fourth quarter of fiscal 2010 to $973,979 in the current quarter. Sales from the U.S. clinics during the fourth quarter were $411,187, an increase of 6.9% over the same quarter in the prior fiscal year. For the fiscal year, revenue growth in the Canadian and U.S. operations were 8.1% and 1.9%, respectively.
Statement of Income - Annual Data (Audited) - Years Ended September 30
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2011 2010
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Canadian Revenues $ 3,931,694 $ 3,637,031
U.S. Revenues 1,490,154 1,463,051
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Total Revenues $ 5,421,848 $ 5,100,082
OPERATING CASH FLOW 598,098 489,575
Net Earnings 493,531 354,075
EPS * basic 0.037 0.027
EPS * fully diluted 0.036 0.026
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Gross margins of 71.6% during the fourth quarter, and 70.1% for fiscal 2011, were slightly higher than the long-term historical average due to a favorable product mix. This compares to 69.7% in fiscal 2010 and the long-term (5 year) average of 68.9%. Management expects gross margins to range from roughly 68% to 71% during fiscal 2012.
Direct clinic costs, which include selling and advertising costs, rent and clinic overheads, clinic labour costs, and amortization of audiology equipment, increased by 1.6% during the fourth quarter of fiscal 2011 as compared to the same quarter a year ago. Selling expenses decreased by 7.9% as the company benefited from slightly higher marketing expenditures during the third quarter that continued to provide sales activity in the fourth quarter. Salaries and benefits increased 1.5% while rent and clinic overheads increased by a modest 2.0%. Amortization increased significantly by 23.2% as a result of the reclassification of assets related to the sale / leaseback transaction as discussed below which led to an increase in amortization on the building. Direct clinic costs as a percentage of sales were 48.6% versus 50.2% in the same quarter a year earlier. For fiscal 2011, direct clinic costs declined by 1.4% on an overall basis. Selling expenses declined 13.4% on a year-over-year basis while all other categories changed by less than 1%. For fiscal 2011, direct clinic costs as a percentage of sales were 48.3% versus 52.0% in fiscal 2010.
General and administrative expenses totaled $99,610 for the quarter, well below the historical average due to a $28,801 foreign exchange gain recorded during the quarter. For the year ended September 30, 2011, general and administrative costs decreased 3.1% as compared to the prior year. As a percentage of sales, general and administrative costs were 9.7% as compared to 10.7% a year earlier. Increases in general expenses and head office salaries were offset by decreases in all major expense categories including professional fees, interest costs and foreign exchange.
Operating income before other items and income taxes totaled $219,159 for the quarter, an increase of 55.6% over the fourth quarter of fiscal 2010. For the fiscal year ended September 30, 2011, operating income before other items and income taxes was $657,270, up 84.9% from the $355,483 reported during fiscal 2010.
In late June 2011, the company's U.S. operating subsidiary entered into a sales/leaseback transaction whereby it sold its land and building in Idaho Falls for gross proceeds of $435,000 (U.S.) The subsidiary has entered into a long-term agreement to lease the building from the purchaser and will continue its operations in the location. The proceeds from the sale were used to repay the outstanding balance remaining on the original building loan of $230,533 (U.S.). The company recorded a pre-tax gain on the sale of the building in the amount of CDN$52,257 during the third quarter. During the third quarter of fiscal 2010, this new lease was recorded as an operating lease. During the year-end audit, it was determined that the lease should be recorded as a capital lease. Accordingly, the pre-tax gain on the sale of the building recorded during the third quarter was reversed in the fourth quarter and the land and building were re-capitalized and a capital lease obligation was recorded under long-term debt.
After the adjustment for the reversal of the gain on the sale of the building during the fourth quarter, pre-tax net income was $164,387 for the fourth quarter, an increase of 19.0% on a year-over-year basis. Pre-tax net income for the year ended September 30, 2011, was $654,060 compared to $352,723 during fiscal 2010, an increase of 85.4%.
During the first quarter of fiscal 2011, the company's remaining tax loss carryforwards were utilized and applied against taxable income. A provision for current income taxes of $69,973 was recorded during the fourth quarter of fiscal 2011, bringing the total provision for the year to $195,270. As a result of the company's continued strong profitability, during the second quarter, the company recognized a $33,888 future tax asset related to timing differences originating from goodwill and fixed asset amortization rates for accounting and tax purposes. A future income tax recovery of $853 was recorded during the fourth quarter bringing the total to $34,741 for fiscal 2011.
The company is pleased to report net income of $95,267 or $0.007 per share for the fourth quarter of fiscal 2011. This compares to earnings of $139,445 during the corresponding quarter in fiscal 2010. The reduction in net income is due to the reversal of the gain on disposal of capital assets as noted above and the net provision for income taxes of $69,120 (as compared to a net recovery of taxes of $1,352 a year earlier).
Net income for fiscal 2011 totaled a record $493,531 or $0.037 per share, an increase of 39.4% over fiscal 2010 despite the substantial increase in income taxes due to the exhaustion of all remaining tax loss carryforwards in the first quarter.
Operating cash flow for the quarter remained strong at $193,577, bringing the total operating cash flow for fiscal 2011 to $598,098. The represents an increase of 22.2% compared to fiscal 2010.
As a result of a $10,867 cumulative translation adjustment, comprehensive income for fiscal 2011 was $ 482,664 compared to $ 338,483 in fiscal 2010
Details of all expenses can be found in the audited financial statements for the year ended September 30, 2011.
Liquidity
As at September 30, 2011, Audiotech had a cash balance of $1,113,735, an increase of $535,751 since the beginning of the fiscal year. Working capital increased to $1,005,750. Management is confident that the company has sufficient working capital to meet its short and long-term needs, growth requirements, and accelerated debt repayment plans for the foreseeable future.
During fiscal 2012, the company undertook several initiatives aimed at accelerating the repayment of its long term debt.
In late June, the company's United States operating subsidiary entered into a sales/leaseback transaction whereby it sold its land and building in Idaho Falls for gross proceeds of US$435,000 (CDN$422,211). The subsidiary has entered into a long-term agreement to lease the building from the purchaser and will continue its operations in the location. The proceeds from the sale were used to repay the outstanding balance remaining on the original building loan of US$230,533. During the fourth quarter, it was determined that the new lease is a capital lease. Accordingly, the building was recapitalized and a capital lease obligation was recorded in the amount of $463,455.
Including the repayment of the building loan noted above, a total of $511,350 in long-term debt and $18,185 in capital lease obligations were repaid in fiscal 2011. Long-term debt, other than capital lease obligations was reduced from $1,378,515 to $857,413. All of the debt repayment initiatives have been undertaken without compromising working capital available for day-to-day operations and growth initiatives. It should be noted that none of the corporation's debt carries early payment penalties. Management believes that the accelerated debt repayment will not only reduce interest costs, thereby enhancing profitability, but that the resulting enhancement to key financial ratios will be appealing to potential investors and large consolidators in the industry which may wish to acquire the company to expand their market share. Depending on the company's working capital needs to finance further growth initiatives, management intends to use a significant proportion of cash flow from operations to reduce debt in fiscal 2012. Management and the Board of Directors have established a goal of eliminating long-term debt within the next two to three years.
Recent Developments
On November 1, 2011, the company's Canadian operating subsidiary entered into a 6 month sub-lease to rent its unoccupied former southwest Calgary clinic space to a third party for $2,700 per month. The tenant has a 6 month renewal option and also has an option to purchase the space from a company controlled by a director of Audiotech.
In accordance with the company's aggressive debt reduction program, the company repaid a total of $100,000 in promissory notes during the first quarter of fiscal 2012. The notes were scheduled to mature in April 2013.
100,000 common shares were issued in January 2012, upon the exercise of 100,000 stock options at $0.10 per share by an employee and former officer of the company. Audiotech currently has 13,329,825 common shares issued and outstanding with a book value of $1,760,340.
The company's shares are listed and posted for trading on Tier 1 of the TSX Venture exchange under the symbol "AUD." For more information on the company, contact Osvaldo (Ozzie) Iadarola, President & CEO, at (250) 372-5847, or Doren Quinton of QIS Capital, investor relations, at (250) 377-1182, or visit the company's website at www.audiotech.org.
AUDIOTECH HEALTHCARE CORPORATION
First Bank Building
760-175 Second Avenue
Kamloops, B.C. V2C 5W1
Phone: (250) 372-5847
Fax: (250) 372-3859
Email:
info@audiotech.org
Except for historical information contained herein this document contains forward-looking statements. These statements contain known and unknown risks and uncertainties that may cause the company's actual results or outcomes to be materially different from those anticipated and discussed herein.
THE TSX VENTURE EXCHANGE NEITHER APPROVES NOR DISAPPROVES OF THE INFORMATION CONTAINED HEREIN.
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Source: Audiotech Healthcare Corporation (AUD - TSX-V)
http://www.audiotech.org
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