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Conmed Healthcare Management Reports Revenues For First Quarter 2012

“Conmed has again generated record net revenues for the quarter,” says Chairman and CEO, “We continue to execute our growth strategy on all fronts...

First Quarter Revenue Increased 16.1% to a Record $18.9 Million

HANOVER, Md.--(BUSINESS WIRE)-- Conmed Healthcare Management, Inc. (NYSE Amex: CONM) today announced financial results for its first quarter ended March 31, 2012.

First Quarter Financial Highlights

  • Net revenue increased 16.1% to $18.9 million, versus $16.3 million in the first quarter of 2011.
  • Gross profit increased 6% to $3.2 million, compared to $3.0 million in the first quarter of 2011.
  • Operating expenses as a percentage of revenue increased to 13.9% versus 13.5% in the first quarter of 2011.
  • Operating income was $0.5 million, compared to $0.8 million in the first quarter of 2011.
  • Net income was $0.1 million ($0.01 per basic and diluted share) compared to $0.4 million ($0.03 per basic and diluted share) in the first quarter of 2011.
  • Generated approximately $1.3 million in positive cash flow in the first quarter of 2012.
  • Cash and cash equivalents were $16.9 million at March 31, 2012.

Other Events:

  • Entered two new states—Kentucky and Texas, bringing total number to ten.
  • Contracted with Galveston County (Texas), valued at $5.8 million during initial 20-month term, effective February 1, 2012.
  • Acquired Panhandle Correctional Care, enlarging presence in Texas.
  • Announced contract with Marion County (Kentucky), expected to generate approximately $0.3 million in first year of full-service contract, effective April 1, 2012;
  • Early extended the contract with Pima County (Arizona), a client since 2008, for one year.
  • Hired Cantor Fitzgerald as an independent financial advisor to assist in evaluation of strategic alternatives.

“Conmed has again generated record net revenues for the quarter,” said Richard Turner, Chairman and Chief Executive Officer. “We continue to execute our growth strategy on all fronts, including expanding our geographic footprints, approaching it with vigor and passion.”

Dr. Turner concluded, “As of March 31, 2012, Conmed has 69 agreements with county governments, many of them renewals from within our current client base, as well as new contracts with new jurisdictions. Our continued growth and success stem, we believe from our commitment to excellence in the delivery of healthcare as well as the soundness of our business model.

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We are working hard to win new contracts, penetrate new markets, and enter new states, and we are confident that the ongoing consistency of Conmed’s product offering and a robust new business pipeline fortify these efforts.”

First Quarter Financial Results

Net revenue for the three months ended March 31, 2012, increased 16.1% to $18.9 million as compared to $16.3 million in the first quarter of 2011. The revenue improvement resulted primarily from the addition of service contracts signed with new jurisdictions since January 1, 2011. Revenues also increased as a result of the expansion of services under existing contracts as well as price increases related to existing services and an increase associated with higher inmate populations at certain facilities partially offset by lower stop/loss reimbursements.

Total healthcare expenses for the quarter ended March 31, 2012, were $15.8 million compared to $13.3 million in the year-ago period. The increase primarily reflects increased salaries and benefits for healthcare employees related to new contracts, as well as cost-of-living and wage and benefit adjustments for existing employees plus the addition of an extra day of wages in the quarter due to leap year.

Gross profit increased to $3.2 million from $3.0 million in the prior year period, while gross margin declined to 16.8% from 18.3% in the first quarter of 2011 due to lower initial margins associated with the new contract wins.

Selling and administrative expenses for the first quarter were $2.5 million, or 13.3% of revenue, compared to $2.0 million, or 12.4% of revenue, for the 2011 quarter. The increase reflects investments in additional management and administrative personnel required to support the new contracts and services added since January 2011, partially offset by lower travel expense, consulting and accounting fees.

Depreciation and amortization was $0.12 million in the first quarter of 2012 compared to $0.17 million in the 2011 period. The approximately $50,000 decrease primarily reflects lower amortization expense related to acquired contracts that have become fully amortized offset, in part, by an increase of approximately $10,000 in depreciation costs related to additional property and equipment.

As a result, total operating expenses were $2.6 million in the first quarter of 2012 compared to $2.2 million in the first quarter of 2011. Operating expenses as a percentage of revenue increased 40 basis points to 13.9% from 13.5% in the year-ago period.

Conmed reported operating income of $0.5 million in the first quarter of 2012 compared to $0.8 million in the first quarter last year. Net income was approximately $0.1 million, or $0.01 per basic and diluted share, compared to net income of $0.4 million, or $0.03 per basic and diluted share, in the year-ago period.

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For the first quarter of 2012, adjusted EBITDA*, a non-GAAP measure, was approximately $0.86 million compared to approximately $1.07 million in the prior year first quarter.

Cash and Equivalents

The Company generated approximately $1.3 million in operating cash flow in the quarter ended March 31, 2012. Cash and cash equivalents were $16.9 million at March 31, 2012, compared to $16.4 million at December 31, 2011. Stockholders’ equity increased to $22.1 million at March 31, 2012, compared to $19.3 million at December 31, 2011. Days Sales Outstanding (DSO) as of March 31, 2012, was approximately 19 days. The Company remains debt-free.

During the three months ended March 31, 2012, warrants to purchase 31,763 shares of common stock were exercised generating $22,362 of net proceeds, and warrants to purchase 1,011,320 shares of common stock were exercised by cashless exercise. As a result, a total of 749,281 shares of common stock were issued. As of March 31, 2012, we had outstanding warrants subject to derivative accounting to purchase an aggregate of 80,000 shares of common stock. In addition, stock options to purchase 27,553 shares of common stock were exercised generating $61,182 net proceeds during the three months ended March 31, 2012.

*Use of Non-GAAP Measures

In addition to containing results that are determined in accordance with accounting principles generally accepted in the United States of America (GAAP), this press release also contains non-GAAP financial measures. Adjusted EBITDA, as used in this press release, represents net income (loss) from continuing operations before interest, taxes, depreciation and amortization, adjusted for stock-based compensation and gains or losses on fair value of derivative financial instruments. Adjusted EBITDA is a key indicator used by management to evaluate operating performance. While adjusted EBITDA is not intended to replace any presentation included in the consolidated financial statements under GAAP and should not be considered an alternative to operating performance or an alternative to cash flow as a measure of liquidity, the Company believes this measure is useful to investors in assessing the Company’s capital expenditures and working capital requirements. This calculation may differ in method of calculation from similarly titled measures used by other companies. A reconciliation of adjusted EBITDA to the nearest comparable GAAP financial measure is included in the financial schedules accompanying this press release. The adjusted financial measure, as well as other information inthis press release, should be read in conjunction with the Company’s financial statements filed with the Securities and Exchange Commission.

Conference Call

As previously announced, Conmed will host a conference call as follows:

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    Date     Monday, May 14, 2012
    Time     4:30 PM ET
    U.S. Access     1-877-941-8416
    International Access     1-480-629-9808
    Webcast (Live and replay)    

www.conmedinc.com or directly at http://viavid.net/dce.aspx?sid=0000976B

           

A replay of the conference call will be available by telephone until May 28, 2012, by dialing 1-877-870-5176 if calling within the United States or 1-858-384-5517 if calling internationally. Please use pass code 4537435 to access the replay.

About Conmed

Conmed has provided correctional healthcare services since 1984, beginning in the State of Maryland, and currently serves county and municipal correctional facilities in ten states: Arizona, Kansas, Kentucky, Maryland, New Jersey, Oregon, Tennessee, Texas, Virginia and Washington. For more information, visit us at www.conmedinc.com.

Forward-Looking Statements

This press release may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements with respect to the Company's plans, objectives, expectations and intentions; and (ii) other statements that are not historical facts including statements which may be identified by words such as "may," "could," "would," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "projects," "potentially," or similar expressions. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company's control) including, without limitation, the Company's ability to increase revenue and to continue to obtain new contracts, contract renewals and extensions; inflation exceeding the Company’s projection of the inflation rate of cost of services under multi-year contracts; the ability to obtain bonds; decreases in occupancy levels or disturbances at detention centers; malpractice litigation; the ability to utilize third party administrators for out-of-facility care; compliance with laws and government regulations, including those relating to healthcare; competition; investigation and auditing of our contracts by government agencies; termination of contracts due to lack of government appropriations; material adverse changes in economic and industry conditions in the healthcare market; negative publicity regarding the provision of correctional healthcare services; dependence on key personnel and the ability to hire skilled personnel; influences of certain stockholders; increases in healthcare costs; insurance; completion and integration of future acquisitions; public company obligations; limited liability of directors and officers; the Company’s ability to meet the NYSE Amex continued listing standards; and stock price volatility. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2011. Investors and security holders are urged to read this document free of charge on the SEC's web site at www.sec.gov. The Company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

             

CONMED HEALTHCARE MANAGEMENT, INC.

CONSOLIDATED BALANCE SHEETS
             
     

March 31, 2012

    December 31,
      (unaudited)     2011
ASSETS            
CURRENT ASSETS            
Cash and cash equivalents   $ 16,873,376     $ 16,445,938  
Accounts receivable     3,996,265       3,069,622  
Prepaid expenses     984,251       1,215,841  
Taxes receivable     264,292       --  
Deferred taxes     250,000       240,000  
Total current assets     22,368,184       20,971,401  
PROPERTY AND EQUIPMENT, NET     986,465       732,152  
DEFERRED TAXES     1,021,000       1,085,000  
OTHER ASSETS            
Service contracts acquired, net     151,350       129,500  
Non-compete agreements, net     166,001       106,222  
Goodwill     6,349,705       6,263,705  
Deposits     118,792       56,275  
Total other assets     6,785,848       6,555,702  
    $ 31,161,497     $ 29,344,255  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
CURRENT LIABILITIES            
Accounts payable   $ 2,878,649     $ 1,291,951  
Accrued expenses     5,043,330       4,628,827  
Taxes payable     --       532,780  
Deferred revenue     624,322       600,895  
Notes payable     416,740       832,102  
Total current liabilities     8,963,041       7,886,555  
DERIVATIVE FINANCIAL INSTRUMENTS     130,590       2,162,536  
SHAREHOLDERS’ EQUITY            
Preferred stock, no par value; authorized 5,000,000 shares; zero shares issued and outstanding as of March 31, 2012 and December 31, 2011     --       --  
Common stock, $0.0001 par value, authorized 40,000,000 shares; issued and outstanding 13,909,315 and 13,132,481 shares as of March 31, 2012 and December 31, 2011, respectively     1,391       1,313  
Additional paid-in capital     40,248,714       37,609,607  
Accumulated deficit     (18,182,239 )     (18,315,756 )
Total shareholders' equity     22,067,866       19,295,164  
    $ 31,161,497     $ 29,344,255  
See Notes to Unaudited Financial Statements            
             
           
CONMED HEALTHCARE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
           
      For the Three   For the Three
      Months Ended   Months Ended
      March 31,   March 31,
      2012   2011
           
Service contract revenue   $ 18,939,216   $ 16,311,093  
           
HEALTHCARE EXPENSES:          
Salaries, wages and employee benefits     10,975,655     9,295,969  
Medical expenses     3,934,623     3,419,644  
Other operating expenses     851,112     606,931  
Total healthcare expenses     15,761,390     13,322,544  
           
Gross profit     3,177,826     2,988,549  
           
Selling and administrative expenses     2,516,735     2,027,966  
Depreciation and amortization     123,838     172,471  
Total operating expenses     2,640,573     2,200,437  
           
Operating income     537,253     788,112  
           
OTHER INCOME (EXPENSE)          
Interest income     24,505     28,530  
Interest (expense)     (3,917 )   --  
(Loss) on fair value of derivatives     (305,324 )   (129,744 )
Total other income (expense)     (284,736 )   (101,214 )
           
Income before income taxes     252,517     686,898  
Income tax expense     119,000     293,000  
Net income   $ 133,517   $ 393,898  
           
EARNINGS PER COMMON SHARE          
Basic   $ 0.01   $ 0.03  
Diluted   $ 0.01   $ 0.03  
           
WEIGHTED-AVERAGE SHARES OUTSTANDING          
Basic     13,622,268     12,839,656  
Diluted     14,219,865     14,347,571  
See Notes to Unaudited Financial Statements          
           
             
CONMED HEALTHCARE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
             
      For the Three     For the Three
      Months Ended     Months Ended
      March 31, 2012     March 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES            
Net income   $ 133,517     $ 393,898  
Adjustments to reconcile net income to net cash provided by operating activities            
Depreciation     85,216       74,804  
Amortization of service contracts and non-compete agreements     38,622       97,667  
Amortization of long-term customer agreement     43,750       43,750  
Restricted stock compensation     77,559       --  
Stock-based compensation     140,812       104,829  
Loss on fair value of derivatives     305,324       129,744  
Gain on disposal of property     (24,042 )     --  
Deferred income taxes     54,000       35,000  
Changes in working capital components            
(Increase) decrease in accounts receivable     (926,643 )     325,445  
Decrease in prepaid expenses     231,590       240,353  
(Increase) decrease in deposits     (62,517 )     25,201  
Increase (decrease) in accounts payable     1,586,698       (343,340 )
Increase (decrease) in accrued expenses     414,503       (200,076 )
(Decrease) in income taxes payable/receivable     (797,072 )     (151,300 )
Increase in deferred revenue     23,427       70,753  
Net cash provided by operating activities     1,324,744       846,728  
             
CASH FLOWS FROM INVESTING ACTIVITIES            
Purchase of property and equipment     (315,487 )     (149,258 )
Business combination     (250,000 )     --  
Net cash (used in) investing activities     (565,487 )     (149,258 )
             
CASH FLOWS FROM FINANCING ACTIVITIES            
Payments on notes payable     (415,362 )     --  
Proceeds from exercise of warrants and stock options     83,543       16,667  
Net cash provided by (used in) financing activities     (331,819 )     16,667  
             
Net increase in cash and cash equivalents     427,438       714,137  
             
CASH AND CASH EQUIVALENTS            
Beginning     16,445,938       13,270,089  
Ending   $ 16,873,376     $ 13,984,226  
             
NON-CASH INVESTING AND FINANCING ACTIVITIES WERE AS FOLLOWS:            
Reclassification of warrants from derivative financial instruments to additional paid-in capital upon exercise, at fair value.   $ 2,337,270     $ 5,097  
             
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION            
Cash payments for interest     3,917       --  
Income taxes paid   $ 862,073     $ 409,300  
                 

See Notes to Unaudited Financial Statements

               
                 
     
CONMED HEALTHCARE MANAGEMENT, INC.
RECONCILIATION OF NET INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA
     
    For The Three Months Ended
    March 31,
    2012   % Rev   2011   % Rev
                 
Net income (loss)   $133,517     0.7 %   $393,898     2.4 %
                 
Income tax (benefit)   119,000     0.6 %   293,000     1.8 %
                 
Interest income   (24,505 )   -0.1 %   (28,530 )   -0.2 %
                 
Interest expense   3,917     0.0 %   -     0.0 %
                 
Depreciation and Amortization   123,838     0.7 %   172,471     1.1 %
                 
EBITDA   355,767     1.9 %   830,839     5.1 %
                 
Restricted stock compensation   77,559     0.4 %   -     0.0 %
                 
Stock-based compensation   140,812     0.7 %   104,829     0.6 %
                 
Change in fair value of warrants   305,324     1.6 %   129,744     0.8 %
                 
Gain or Loss on Sale of Assets   (24,042 )   -0.1 %   -     0.0 %
                 
Adjusted EBITDA   $855,420     4.5 %   $1,065,412     6.5 %
                 
Adjusted EBITDA EPS   $0.06         $0.08      
                 
                 
Non cash charges   $647,533     3.4 %   $407,044     2.5 %
                 
                 
Basic Weighted Average Shares   13,622,268         12,839,656      
                     

 

Conmed Healthcare Management, Inc.
Thomas W. Fry, 410-567-5529
Chief Financial Officer
tfry@conmed-inc.com
or
In-Site Communications, Inc.
Lisa Wilson, 212-452-2793
lwilson@insitecony.com

Source: Conmed Healthcare Management, Inc.

Copyright:  Copyright Business Wire 2012
Source:  Business Wire, Inc.
Wordcount:  2637



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