News
MTS Announces Status of OnDemand Machine Contract
ST. PETERSBURG, Fla. – MTS Medication Technologies, Inc. (“MTS”) (AMEX:MPP) today announced that shipments of OnDemand machines to its largest customer, pursuant to an agreement entered into in May 2007, had resumed in March 2008, and there are currently 13 machines that have been delivered to various locations throughout the country. The customer recently acknowledged the acceptance of the first OnDemand Express II™ upon the equipment meeting its performance specifications.
In December, the Company suspended deliveries of OnDemand machines under the agreement so that resources could be dedicated to development and training in order to demonstrate production performance of both the Express II and AccuFlex™ machines previously installed.
Todd E. Siegel, MTS President and C.E.O., says, “We are very encouraged by the fact that Omnicare has now accepted the first machine. Although the process of installing, debugging, training and working with our customer to achieve mutually agreeable performance criteria for our OnDemand machines has taken longer than we had anticipated, we believe that the acceptance of the first machine will lead to acceptance of the others at a more rapid pace. We are continuing to deliver machines, dedicate significant resources and work cooperatively with our customer to achieve the results we expected when we initiated our agreement for the sale of 24 OnDemand systems.
“We believe Omnicare is committed to this project, and their actions and comments reinforce this belief. We have made great progress with our technology and demonstrated that the system can meet, and at times exceed, the performance specifications in the agreement. The first system installed required significant software enhancements and an extended hardware debug period. We identified and implemented certain improvements and are now delivering these improvements to all machines in the field.”
In February 2008, the Company also announced that its financial results for the fiscal year that ended on March 31, 2008 would be affected by, among other things, the revenue and gross profit associated with OnDemand machines delivered to its largest customer. As a result of the fact that no revenue or gross profit associated with these machines will be recorded for the fiscal year ended on March 31, 2008, as well as other factors, the financial results that the Company previously anticipated will not be achieved. Revenue and earnings per diluted common share for the fiscal year ended March 31, 2008 are now expected to be approximately $57.8 million and $0.30 - $0.32, respectively. Some of the other factors that have contributed to these revised expectations involve lower than anticipated revenue and gross profit associated with other OnDemand machine sales, the timing of orders for consumable products from wholesalers and certain unusual product quality issues related to consumable products sold in Europe.
Looking forward to fiscal year 2009, the core business serving the long-term care market in the U.S. is estimated to grow approximately 9 percent. This growth is primarily the result of the demographics in the U.S., with an aging population and resultant increase in the amount of medication dispensed to residents of skilled nursing and assisted living facilities.
Continued double digit growth in Europe, primarily fueled by more penetration of the long-term care market in the U.K., Germany and France is expected, and overall European revenue is anticipated to increase by 25 - 35 percent as that penetration continues and automation products are introduced. In addition, the top line should benefit from approximately $14 million of revenue associated with the Omnicare OnDemand contract.
Overall gross profit margins are expected to decline in fiscal year 2009 because of the effect that the Omnicare OnDemand contract will have, although gross margins on consumable products are expected to remain stable in fiscal year 2009 versus fiscal year 2008. As investment in automation products, retail pharmacy and nutritional supplements markets continue, SG&A costs will rise.
As a result of the above, earnings per diluted common share are anticipated to increase in fiscal year 2009 by approximately 20 - 25 percent. However, new initiatives in the retail pharmacy market, as well as the launch of the MedTimes system, may begin to provide a benefit toward the end of this fiscal year and potentially provide additional incremental revenue and net income.
Siegel concludes, “Although our financial results for the fourth quarter were impacted by delays in acceptance of OnDemand machines and certain other events, we want to reassure stockholders that our business is healthy and fundamentally sound. The timing of the recognition of revenue and gross profit from the Omnicare contract has been delayed, but we anticipate completing all the installations by the end of our third quarter. In addition, consumable products continue to contribute very stable product margins.”
The Company expects to release the results of operations for the fourth quarter and fiscal year that ended on March 31, 2008 during the week ending June 27, 2008.