Electromed third quarter net revenues decrease 8.2% to $4,774,000

Electromed, Inc. (NYSE Amex: ELMD) today announced financial results for the three-month period ended March 31, 2012. Management indicated that, while the Company's Sales Team provided an increase in the number of prescriptions for the SmartVest^® System versus the prior year quarter, actual revenue has been negatively impacted by certain reimbursement factors. Among these factors are diagnoses that are not assured of reimbursement and insurance programs with lower allowable reimbursement amounts.    

Net Revenues for the three months ended March 31, 2012, were approximately $4,774,000, an 8.2% decrease compared to Net Revenues of approximately $5,199,000 for the same period last year. The Company also announced Net Income of approximately $95,000, or $0.01 per basic and diluted share, for the three months ended March 31, 2012, compared to Net Income of approximately $487,000, or $0.06 per basic and diluted share, for the same period last year. Management continues to believe that planned increases in the Company's sales force and reimbursement staff, coupled with the expansion of marketing and research and development efforts, will provide strong impetus for continued annual sales growth.

Jim Cassidy, Interim CEO, commented on the Company, saying,

"This past quarter's revenue was adversely impacted by referral source and payer mix. We are encouraged by the effectiveness of our high quality tenured sales representatives and by the early performance of our newly hired representatives."

Gross Profit decreased to approximately $3,369,000, or 70.6% of Net Revenues, for the three months ended March 31, 2012, compared to $3,703,000, or 71.2% of Net Revenue, for the same period in Fiscal 2011. The decrease in gross profit percentage was primarily the result of a change in average reimbursement from the mix of referrals during the three month period. Factors such as diagnoses that are not assured of reimbursement and insurance programs with lower allowable reimbursement amounts (for example, state Medicaid programs) affect average reimbursement received on a short-term basis. These factors tend to fluctuate on a quarterly basis. However, management does not believe the results of the quarter ended March 31, 2012, are indicative of a long-term trend in decreasing margins.

Operating Expenses, which consist of Selling, General, and Administrative Expenses and Research and Development expenses, were approximately $3,143,000 for the three months ended March 31, 2012, an increase of approximately 3.7% over Operating Expenses for the same period last year. This increase primarily resulted from a 14.3% increase in employees in our reimbursement, sales, administrative, and patient services departments.

Total cash and cash equivalents was approximately $1,393,000 as of March 31, 2012. For the three months ended March 31, 2012, cash used in financing activities was approximately $86,000, consisting of payments of long-term debt, capital lease obligations, and deferred financing fees. An aggregate of $120,000 was used for investing activities during the three months ended March 31, 2012, for purchases of property and equipment. The Company used approximately $146,000 in operating activities composed primarily of an increase in the Company's accounts receivable, inventory, and other assets. Accounts receivable increased to approximately $11,092,000, or 3.6% compared to December 31, 2011. In addition to existing cash and cash equivalents the Company had unused availability of $3,435,000 under its line of credit as of March 31, 2012.