News

 

SG&A expenses for the third quarter were $4.5 million, or 23.6% of revenue, compared with $3.7 million, or 25.4% of revenue, in the prior year’s third quarter.  The increase in SG&A expenses was primarily due to increased costs associated with service and support of OnDemand machines, costs associated with European operations and increased research and development expenses.

 

Operating profit for the third quarter was $970,000, or 5.0% of net sales, compared with $1.2 million, or 8.1% of net sales, in the prior year’s third quarter.  Lower operating margins result primarily from higher SG&A costs and depreciation expense, as well as lower gross margins. 

 

The effective income tax rate for the third quarter was 19.9% compared with 39.1% in the prior year third quarter.  The decrease results primarily from adjustments made to the estimated liability for uncertain tax positions in both periods.  In addition, the income tax expense has been reduced to account for certain federal income tax credits for manufacturing expenditures that are being made this fiscal year.

 

Segment Reporting

 

Consumables

 

                                                           Three Months Ended December 31,

2008                                                    2007

                                                                         (In Thousands)

Net Sales                                        $     13,527              $        13,054

Gross Margin                                           40.7%                         42.9%

Operating Profit                             $       1,874              $          2,363

Operating Margin                                    13.9%                         18.1%

 

 

Net sales for consumables in the third quarter increased $473,000, or 3.6%, primarily due to sales in the U.S. long-term care market.  The growth in the U.S. is primarily attributable to new sales to pharmacies servicing nursing homes and assisted living facilities, as well as an increase in the number of long-term care customers served.  The European growth is primarily the result of increased penetration of both community and nursing home markets, although currency fluctuations have significantly impacted net sales growth in Europe when net sales are translated to U.S. dollars.

 

Operating margins declined in the third quarter primarily due to: (a) increases in raw material costs compared to the previous year; (b) additional costs added and allocated to this segment based on revenue; (c) higher depreciation expense related to new assets acquired in this segment; and (d) foreign currency fluctuations.

 

 

 

 

Packaging Automation

 

 

                                                           Three Months Ended December 31,

2008                           2007      

                                                                         (In Thousands)

Net Sales                                        $        5,546                $       1,642

Gross Margin                                           12.9%                          5.0%

Operating Profit                             $        (455)              $           (863)

Operating Margin                                     (8.2%)                       (52.6%)

                                                     

 

Net sales for packaging automation in the third quarter increased $3.9 million, or 237.8%, primarily as a result of the acceptance of OnDemand machines under an agreement with Omnicare.  During the third quarter, MTS recorded $3.6 million of revenue associated with 5 machines that were accepted by Omnicare.

 

Operating margin during the third quarter improved over the prior year as a result of the realization of additional gross profit on increased net sales, which offset a portion of the indirect costs attributed to this segment.

 

Medication Administration Systems

 

 

                                                           Three Months Ended December 31,

2008                           2007      

                                                                         (In Thousands)

Net Sales                                        $          161                $             24

Gross Margin                                           (15.3)%                       (150.0)%

Operating Loss                               $        (271)              $            (149)

Operating Margin                                    (168.3%)                      (620.8%)

 

 

Net sales for medication administration systems in the third quarter consisted of MedLocker® installations.

 

Operating loss this quarter increased over the prior year because of increased R&D expenditures and new personnel added to support MedTimes product and market development.

 

Nine Months

 

Net sales for the nine months increased 35.8% to $59.3 million from $43.7 million in the prior year period.  Net income was $1,616,000 or $0.24 per diluted common share, compared with $1,919,000, or $0.28 per diluted common share, in the prior year.  Net sales associated with consumables in the U.S. long-term care market increased approximately 7%.  Net sales through European operations increased approximately 10%.  However, net sales in Europe increased approximately 22% when expressed in the functional currency in which the sales are made.

Gross margin for the nine months was 31.8% compared with 38.9% in the prior year.  The decrease in gross profit margin percentage was due primarily to the difference in gross margins between OnDemand machines and those of consumables and pre-pack machines.  Approximately $12.8 million of revenue was recorded during this year as a result of the installation and acceptance of 21 OnDemand machines related to the agreement with Omnicare. 

 

SG&A expenses for the nine months were $13.9 million, or 23.5% of revenue, compared with $11.4 million, or 26.0% of revenue, in the prior year.  The increase in SG&A expenses was primarily due to increased costs associated with service and support of OnDemand machines, costs associated with European operations, increased research and development expenses and increased employee benefit costs.

 

Operating profit for the nine months was $2.7 million, or 4.5% of net sales, compared with $3.7 million, or 8.4% of net sales, in the prior year.  Lower operating margins result from higher SG&A costs and depreciation expense, as well as lower gross margins.

 

The effective income tax rate for nine months was 30.1% compared with 39.8% in the prior year nine months.  The decrease results primarily from adjustments made to the estimated liability for uncertain tax positions in both periods. 

 

Segment Reporting

 

Consumables

 

                                                           Nine Months Ended December 31,

2008                           2007      

                                                                         (In Thousands)

Net Sales                                        $        40,358               $         37,719

Gross Margin                                             40.4%                           43.3%

Operating Profit                             $         5,257                 $           6,791

Operating Margin                                      13.0%                          18.0%

 

 

Net sales for consumables in the nine months increased $2.6 million, or 7.0%, primarily due to growth in sales in both the U.S. long-term care market and the European markets.  The growth in the U.S. is primarily attributable to new sales to pharmacies servicing nursing home and assisted living facilities.  The European growth is primarily the result of increased penetration of both community and nursing home markets.

 

Operating margins declined during the nine months ended December 31, 2008 primarily due to: (a) increases in raw material costs and scrap rates; (b) additional costs allocated to this segment based on revenue; (c) higher depreciation expense associated with assets related to this segment; (d) higher employee benefit costs; and (e) foreign currency fluctuations.

 

 

Packaging Automation

 

         Nine Months Ended December 31,

2008                           2007      

                                                                         (In Thousands)

Net Sales                                        $        18,634               $          5,792

Gross Margin                                             13.7%                           10.6%

Operating Loss                               $         (858)                $          (2,112)

Operating Margin                                      (4.6%)                          (36.5%)

 

 

Net sales for packaging automation in the nine months increased $12.8 million, or 221.7%, as a result of acceptance of OnDemand machines under an agreement with Omnicare.  During this period, MTS recorded $12.8 million of revenue associated with 21 machines that were accepted by Omnicare.

 

Operating margin during the nine months improved over the prior year as a result of the realization of additional gross profit on increased net sales, which offset a portion of the indirect costs attributed to this segment. 

 

Medication Administration Systems

 

 

         Nine Months Ended December 31,

2008                           2007      

                                                                         (In Thousands)

Net Sales                                        $          310                  $            147

Gross Margin                                              6.2%                           (15.9%)

Operating Loss                               $         (1,176)             $           (635)

Operating Margin                                     (379.4%)                      (432.0%)

 

 

Net sales for medication administration systems in the nine months increased because more MedLocker systems were sold and installed this year. 

 

Operating loss increased over the prior year primarily because of increased R&D expenditures and new personnel added to support the MedTimes product and market development.

 

Operating income (loss), as presented above, is net sales less the cost of sales and other operating expenses that are directly identifiable to the respective segment or allocated on the basis of sales or manpower.  Operating income (loss) is reconciled to earnings before income taxes in the Consolidated Financial Statements included in the Company’s Form 10-Q filed with the SEC.

 

 

 

Todd Siegel, President and Chief Executive Officer, said, “We are very pleased to achieve increases in both revenue and earnings per share during our third quarter, especially in light of these difficult economic times.  We anticipate continued improvement in margins for our consumables segment due to lower freight costs, reduction in plastic prices, improved manufacturing processes and selective price increase to customers.  We are also encouraged by the growth in revenue in our medication administration segment that resulted from increased sales of our MedLocker product.”

 

“Although the strengthening of the U.S. dollar has adversely affected the financial results of our European operations by approximately $300,000 for the nine month period, we continue to grow our business as we penetrate the nursing home and domiciliary markets in Europe.  We remain encouraged with the growing interest and acceptance of our Multi-Med adherence packaging and our ability to automate the prescription fulfillment process.”

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