Angeion Corporation 2010 third quarter revenue increases to $7.1 million

Angeion Corporation (NASDAQ: ANGN) today reported results for its fiscal third quarter ended July 31, 2010.

“From a top- and bottom-line perspective, we are pleased with the Company's performance in the fiscal third quarter. We delivered strong increases in revenue, gross margin and profitability over fiscal 2009”

For the 2010 third quarter, Angeion posted a net profit of $126,000, or $0.03 per diluted share, on revenues of $7.1 million. Compared to the prior-year third quarter, which generated a net loss of ($173,000), or ($0.04) per diluted share, current-year earnings increased $299,000, or $0.07 per diluted share, due to $727,000 in improved gross margin partially offset by a $423,000 increase in operating expenses, which included $245,000 of one-time charges related to the previously disclosed financial executive transition.

Gross margins rose as a result of:

• Increased manufacturing efficiencies from increased sales volume and right sizing activities earlier in the year;
• Higher margins on a successful MedGraphics Certified^TM sales campaign promoted in the quarter; and
• Reduced provisions for obsolete inventories required due to improved materials management.

Operating expenses rose $423,000, with a $279,000 increase in selling and marketing, and a $163,000 increase in general and administrative. This was partially offset by a $77,000 reduction in amortization expense. The higher selling and marketing expense included key staffing additions early in the year and promotional activities surrounding new product launch initiatives, as well as sales commissions on $888,000 in incremental year-over-year third-quarter revenue.

Revenue from international customers in the 2010 third fiscal quarter was 23.4% of total sales, up from 20.8% for the third quarter of fiscal 2009. Driving international revenue growth were strong performance gains in Europe and Latin America.

"From a top- and bottom-line perspective, we are pleased with the Company's performance in the fiscal third quarter. We delivered strong increases in revenue, gross margin and profitability over fiscal 2009," said Rodney A. Young, Angeion's President and Chief Executive Officer. "We believe the attractiveness of our marketing and sales programs and pent-up demand for our MedGraphics systems, as well as a slight loosening of hospital capital budgets, contributed to our third quarter performance.

"During the quarter we capitalized $101,000 in an ongoing research and development project to migrate the software platform on which our MedGraphics products operate to next-generation technologies. As we have discussed previously, while this spending affects our cash flow and to a lesser extent our bottom line, we believe that these investments provide the foundation for a future product pipeline of new integrated patient care and consumer health programs that will deliver sustained growth."

For the nine months ended July 31, 2010, Angeion reported a net loss of ($1.3 million), or ($0.30) per diluted share, on revenues of $20.6 million. This compares to a net loss of ($1.0 million), or ($0.25) per diluted share, on revenues of $18.9 million for the 2009 nine-month period. On a year-over-year basis, the majority of the nine-month $1.7 million, or 9.1%, increase came from improved international shipments which were up $1.1 million, or 27.8%, again primarily from business in Europe and Latin America. Particularly strong in this period were international shipments of high-value plethysmographs, coupled with an extended successful promotion related to the Company's Ultima^TM product line. Gross margin for the 2010 nine months was 53.7% versus the prior-year rate of 53.0%.

Operating expenses for the first three quarters of the year were $12.3 million, up $1.3 million from the prior year spending level of $11.0 million. Consistent with the third-quarter discussion above, primarily accounting for this change was a $641,000 increase in R&D spending, the majority of which related to software development initiatives, a portion of which we began to capitalize in the third quarter. Excluding R&D increases, year-over-year nine-month operating expenses increased $642,000, with a $709,000 increase in selling and marketing, offset by reduced amortization expense. Nine-month 2010 general and administrative expenses were essentially flat on a year-over-year basis after excluding one-time third-quarter charges.

On a pro-forma basis, after adding back non-cash charges for depreciation, amortization and stock-based compensation expense, the Company achieved pro-forma profit of $470,000 for the quarter and a ($167,000) pro-forma net loss for the trailing 12-month period ended July 31, 2010. Angeion continues to believe that this pro-forma information is helpful in an analysis of its operating results by eliminating the non-cash items noted in the table below. A reconciliation of GAAP basis net income / (loss) to pro-forma net income / (loss) follows:

As the table indicates, although the Company generated a loss for the trailing 12-month period, Angeion has shown meaningful improvement on a sequential quarterly basis in fiscal 2010.

Angeion's cash flow statement shows that the Company reported $76,000 in positive operating cash flow in the first three quarters of fiscal 2010. This was partly due to the net loss for the period offset by add-backs for depreciation, amortization and stock-based compensation. Additionally, Angeion's lower inventory levels early in the year contributed to a $327,000 favorable impact on year-to-date results. Increased accounts receivable from the current quarter's revenues used working capital of $319,000 year to date.

At quarter-end, Angeion had no debt and $10.7 million in cash and investments, up from $10.6 million a year ago.

Business Update
Said Young, "During the quarter we continued the successful introduction of our Ultima™ CardiO2 combined metabolic and ECG stress testing system. CardiO2 - which can be used for cardiorespiratory exercise assessment in laboratories of hospitals and clinics, pulmonary and cardiac rehabilitation and physical therapy facilities, and sports medicine centers - is being well received by healthcare professionals. Also, sales of our MedGraphics Certified^TM products have been strong both domestically and internationally in the second and third quarters. Under this program, systems that have had limited use in clinical research studies or product demonstrations, for example, are upgraded and recertified to meet the same performance, quality and value as new MedGraphics Ultimas."

Angeion launched its new TRUcal™ resting metabolic rate system during the third quarter. Part of its New Leaf® product line, TRUcal includes a metabolic analyzer that gently measures breath and provides consumers the true individualized daily calories their bodies require. The TRUcal™ system also includes a compact netbook with Bluetooth® technology, enabling wireless connectivity for health and fitness program management and tracking.

Said Young, "Development of the enhanced TRUcal system reflects marketplace demand for our New Leaf line of products and services which advance a healthier lifestyle. An individual's resting metabolic rate is key to losing weight and maintaining a healthy body, as well as achieving personal fitness goals. TRUcal scientifically captures the metabolic information to empower consumers to take responsibility for their own health, and with wireless connectivity, TRUcal is very easy to use."

Other recent highlights include:

• Angeion partnered with Data Innovations to create MedGraphics BreezeConnect, a software interface that provides interfacing options in one comprehensive solution. BreezeConnect incorporates Data Innovations' Instrument Manager (IM) to provide connectivity between MedGraphics cardiorespiratory diagnostic systems and the hospital's electronic medical records. This gives clinicians the ability to improve workflow, reduce department costs, increase productivity and meet "meaningful use" criteria that could qualify their facility for government grant money. BreezeConnect is currently available in the Unities States and will be launched internationally at the upcoming European Respiratory Society Conference September 18-22, 2010, in Barcelona, Spain.
• The Company was awarded a three-year contract with Amerinet - a leading national healthcare group purchasing organization - for its MedGraphics® cardiorespiratory diagnostic systems. The agreement, effective July 1, 2010, offers Amerinet members and partners access to MedGraphics' systems that diagnose and monitor therapy in a wide spectrum of heart and lung disorders, such as congestive heart failure, asthma and other forms of chronic obstructive pulmonary disease (COPD).
• Angeion also was awarded a three-year contract with Broadlane - another leading end-to-end cost-management partner for healthcare providers - for its MedGraphics® cardiorespiratory diagnostic systems, including related supplies and service.
• During the third quarter, the Company continued active participation in industry trade shows including the American Thoracic Society International Conference where the CardiO₂ was featured, the American College of Sports Medicine Annual Meeting and the Focus on Respiratory Care and Sleep Medicine Conference.

Concluded Young, "We continue to assess the market to expand applications for our existing products, as well as analyze the market need for new products, programs and services to position Angeion for long-term success. Our efforts are gaining momentum and generating positive results. Although erratic economic conditions make it much too early to predict, we're confident that with the team that we have in place and our market position, we can build on the third quarter's success and continue to grow long term."