IRVINE, Calif., May 23, 2011 /PRNewswire/ -- Patient Safety Technologies, Inc. (the "Company", OTCQB:PSTX) today announced financial results for its first quarter of 2011 ended March 31, 2011.
Financial HighlightsDuring the first quarter of 2011 the number of institutions using the Company's SurgiCount Safety-Sponge® System surpassed 65 and the Company lost no customers. This compares to approximately 49 institutions using the solution at the end of the first quarter of 2010. Although not necessarily proportional to reported revenue, the number of hospitals using our products is a good indicator of our underlying business.
Total revenue for the quarter ended March 31, 2011 was $2.0 million, which included $0.6 million of revenue from the delivery to the Company's exclusive distributor as part of a $10.0 million inventory stocking order. Excluding the effect of this inventory stocking arrangement, revenue for the quarter ended March 31, 2011 would have been $1.3 million. This compares with total revenue for the quarter ended March 31, 2010 of $2.4 million, which included approximately $1.0 million of revenue from the delivery under the same inventory stocking order. Excluding the effect of this inventory stocking order, revenue for the first quarter of 2010 would have been $1.3 million. Despite the considerable growth in the number of hospitals using the Safety-Sponge® System at the end of the first quarter of 2011 as compared to the first quarter of 2010, and losing no customers during that time period, total reported revenue did not grow proportionally for a number of factors, including: 1) the larger amount of revenue from the inventory stocking order in the first quarter of 2010 as compared to the first quarter of 2011, 2) the negative effect on our reported revenue during the first quarter of 2011 caused by the temporary shutdown of our contract manufacturer during the end of the quarter to accommodate an upgrade to their IT system and 3) the effect of certain inventory management practices of our exclusive distributor during the first quarter of 2011.
Reported gross profit was $0.9 million in the first quarter of 2011 as compared to $1.3 million during the same period in 2010. The primary factor for the decrease in reported gross profit was the lower revenue recognized from the inventory stocking order in the first quarter of 2011 as compared to the same period in 2010. Reported gross margins were 47% and 54% for the first quarter of 2011 and 2010, respectively. This decline in reported gross margin was primarily attributable to 1) higher non cash depreciation expense in our cost of revenue in the first quarter of 2011 as compared to the first quarter of 2010 as the result of a larger amount of hardware purchased by the Company to support new hospital implementations, and 2) a larger than normal level of lower margin hardware purchases by certain hospital customers during the first quarter of 2011 who implemented our solution during the quarter. The gross margins realized from the sale of recurring disposable products (i.e. sponges and towels that make up the vast majority of our revenue), were 55% and 56% during the first quarters of 2011 and 2010, respectively.
As a result of a comprehensive restructuring program focused on a number of initiatives including reducing cash operating expenses, our operating expenses in the first quarter of 2011 were reduced significantly as compared to the first quarter of 2010. Reported operating expenses were $1.8 million and $2.7 million for the first quarters of 2011 and 2010, respectively, a decrease of $0.9 million or 34%. Excluding the effects of non-cash and certain one-time expenses, operating expenses were $1.4 million and $2.2 million, a decrease of $0.8 million or 36%. The Company generated an Adjusted Operating Loss (defined as reported operating income adjusted to exclude certain non-cash expenses) of $0.6 million and $0.9 million during the first quarter of 2011 and 2010, respectively, a decrease of 39%.
The Company ended the first quarter of 2011 with $6.3 million of cash and cash equivalents.
Expanded customer base, competitive conversionsCurrent users of the SurgiCount Safety-Sponge® System include over 65 hospitals, including five of the 14 hospitals named to the U.S. News and World Report 2010-11 Honor Roll. Further, during the first quarter of 2011 the Company continued to add to the hospitals now using the Safety-Sponge® System who converted from competitive products.
"I am pleased to see the continued growth of our user base, especially additional competitive conversions, while maintaining our lowered cost structure. We will continue to keep a focus on our spend levels while also opportunistically putting the capital we recently raised to work in high expected return areas," said Brian E. Stewart, President and Chief Executive Officer of Patient Safety Technologies.
The Company's first quarter 2011 financial statements are included in its Quarterly Report on Form 10-Q filed by the company on May 23rd, 2011 and available at the SEC's website at www.sec.govReconciliation of GAAP to Non-GAAP Results (Unaudited)Non-GAAP Measures($ in 000's)Q1 2010Q1 2011Reported Operating Income / (Loss)$ (1,403.4)$ (830.8)Plus:Stock based compensation
149.7Depreciation and amortization
122.3Adjusted Operating Income / (Loss)$
(916.9)$ (558.9)To supplement the Company's presentation of operating income measured in accordance with GAAP, we also use a non-GAAP measure of operating income, herein defined as Adjusted Operating Income. Reconciliation to GAAP operating income from Adjusted Operating Income is included immediately above in this press release.
Non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance, prospects for the future and as a means to evaluate period-to-period comparisons. The Company believes that the use of non-GAAP operating income provides meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of recurring core business operating results. The Company believes this non-GAAP measure, which excludes the non-cash expenses of depreciation, amortization and stock based compensation, when viewed with GAAP results and the accompanying reconciliation, enhances the comparability of results against prior periods and allows for greater transparency of financial results. The Company believes this non-GAAP measure facilitates management's internal comparison of the Company's financial performance to that of prior periods as well as trend analysis for budgeting and planning purposes. The presentation of this non-GAAP measure is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
About Patient Safety Technologies, Inc. and SurgiCount MedicalPatient Safety Technologies, Inc., through its wholly-owned operating subsidiary SurgiCount Medical, Inc., provides the Safety-Sponge® System, a solution proven to improve patient safety and reduce healthcare costs by preventing one of the most common errors in surgery, retained foreign objects. For more information, contact SurgiCount Medical, Inc. at (949) 387-2277 or visit www.surgicountmedical.com.
Forward Looking Statements
Statements in this press release regarding our business that are not historical facts are "forward-looking statements" (within the meaning of Section 21E of the Securities Exchange Act of 1934) that involve risks and uncertainties. Forward-looking statements reflect our management's current views with respect to future events and financial performance; however, you should not put undue reliance on these statements. When used, the words "anticipates," "believes," "expects," "intends," "future," and other similar expressions, without limitation, identify forward-looking statements. Forward-looking statements are not guarantees of future performance and are inherently subject to uncertainties and other factors which could cause actual results to differ materially from the forward-looking statements. These factors and uncertainties include but are not limited to: the early stage of adoption of our Safety-Sponge® System and the need to expand adoption of our Safety-Sponge® System; the impact on our future revenue and cash flows from the ordering patterns of our exclusive distributor Cardinal Health; our need for additional financing to support our business; our reliance on third-party manufacturers, some of whom are sole-source suppliers, and on our exclusive distributor; and any inability to successfully protect our intellectual property portfolio. In light of the risks and uncertainties, there can be no assurance that any forward-looking statement will in fact prove to be correct.
Forward-looking statements can be affected by many other factors, including, those described in the "Business", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Factors Affecting Future Results" sections of our Annual Report on Form 10-K for 2010, our Quarterly Reports on Form 10-Q and in our other public filings. These documents are available online through the SEC's website, www.sec.gov. Forward-looking statements are based on information presently available to senior management, and we have not assumed any duty to update any forward-looking statements.
PATIENT SAFETY TECHNOLOGIES, INC.Consolidated Balance SheetsMarch 31, 2011(unaudited)December 31, 2010AssetsCurrent assetsCash and cash equivalents$
1,896,034Restricted cash223,630223,630Accounts receivable457,153772,381Inventory, net927,6771,110,832Prepaid expenses62,404104,628Total current assets7,760,2594,107,505Property and equipment, net930,474979,833Goodwill1,832,0271,832,027Patents, net2,707,8472,789,083Other assets43,98839,038Total assets$
9,747,486Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable$
2,605,669Warrant derivative liability781,420991,682Deferred revenue869,1631,477,720Accrued liabilities864,679942,472Total current liabilities3,133,5146,017,543Stockholders' equity Total stockholders' equity10,141,0813,729,943Total liabilities and stockholders' equity $
9,747,486PATIENT SAFETY TECHNOLOGIES, INC.Consolidated Statements of OperationsFor the Three months Ended March 31,2011 (unaudited)2010 (unaudited)Revenues$
2,364,819Cost of revenue1,041,1011,088,887Gross profit929,5551,275,932Operating expenses:Research and development29,46233,331Sales and marketing659,036994,116General and administrative1,071,8961,651,861Total operating expenses1,760,3942,679,308Operating loss(830,839)(1,403,376)Other incomeInterest expense(4,192)(6,333)Gain on change in fair value of warrant derivative liability210,2621,718,738Other income—51,944Total other income206,0701,764,349Income (loss) before income taxes(624,769)360,973Income tax (provision) benefit(3,773)32,573Net income (loss)(628,542)393,546Preferred dividends(123,959)(19,163)Net income (loss) applicable to common shareholders$
374,383Income (loss) per common shareBasic$
0.01Weighted average common shares outstanding:Basic 24,200,78523,456,063Diluted24,200,78525,199,632
|SOURCE Patient Safety Technologies, Inc.|
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