Message #8 From:
NewsBot Date: August 15, 2005 04:26:00 AM
DSCI News Derma Sciences Announces Second Quarter 2005 Results; Multi-Year Canadian Wound Care Supply Contract Results in Quarterly Net Profit and Strengthening Financials; Conference Call to Be Held Monday, August 15, 2005 at 4:30 pm ET
PRINCETON, N.J.--(BUSINESS WIRE)--Aug. 15, 2005--Derma Sciences, Inc. (OTC Bulletin Board: DSCI.OB), a manufacturer and full line supplier of wound and skin care products, today reported financial results for the second quarter ended June 30, 2005.
Net sales for the second quarter of 2005, increased $2,020,207, or 41% to $6,934,218 compared to $4,914,011 in 2004. This increase stems from a 70% increase in wound care sales partially offset by a 29% decrease in wound closure and a 26% decrease in skin care sales. The increase in wound care sales consisted of an 87% increase in basic wound care sales primarily attributable to implementing a new exclusive distribution agreement for the Company's products in Canada in the second quarter coupled with organic growth and a 25% increase in advanced wound care sales due principally to growth of the Company's U.S. private label business. The expected Wound Closure decrease in sales stems from the loss of the exclusive distribution rights to a product in 2004.
Company-wide gross margins for the quarter were 31.3% from 28.4%, due principally to the realization of the company's ongoing manufacturing and sourcing cost reduction initiatives, as well as from the one-time benefit related to the Canadian Wound Care unit, lower costs of certain materials as negotiated by the company in 2004, and by the non-recurrence of certain one-time startup costs incurred in the second quarter of 2004. Operating expenses increased 13.2% due principally to one-time costs associated with implementing the new Canadian exclusive distribution agreement and effects of foreign exchange rates. The Company generated net income of $158,184, or $0.01 income per share (basic and diluted) in the second quarter 2005 compared to a $330,299 loss, or $0.03 loss per share (basic and diluted) in 2004.
Net sales for the first half 2005, increased $1,884,232, or 19% to $11,827,665 compared to $9,943,433 in 2004. This increase stems from a 38% increase in wound care sales partially offset by a 32% decrease in wound closure and a 21% decrease in skin care sales. Gross margins increased to 30.1% in the first half 2005 from 28.4% in 2004. Excluding one-time items and foreign exchange, operating expenses were essentially flat period-to-period. Interest costs increased in 2005 due to higher borrowing levels, interest rates and fees versus 2004. Other income/expense benefited in 2005 in comparison to 2004 from the recording of a distribution upset fee gain compared to obsolete equipment write-off expense in 2004. The Company incurred a net loss of $54,868, or $0.00 loss per share (basic and diluted) in the first half 2005 compared to a $1,306,765 loss, or $0.14 loss per share (basic and diluted) in 2004.
Working capital increased $188,159 to $3,037,755 at June 30, 2005 from the beginning of the year, principally reflecting the positive cash flow associated with implementing the new Canadian distribution agreement.
Edward J. Quilty, President and CEO of Derma Sciences commented, "I am pleased that we were able to report a profit in the second quarter and that our margins continued to improve. Our ability to reduce our cost structure through manufacturing efficiencies and renegotiating more favorable supply terms during the past two challenging years has put us in the position to cost-effectively supply our customers with the highest quality wound care products for some of their key product lines. The contract we signed with Source Medical was a monumental event for us as it substantially expands our reach into the Canadian healthcare markets and provides a great opportunity to bolster our sales and profit growth for the next several years. The contract's impact on our financials this quarter were a very positive factor for us, as it directly added $1.8 million to our top line and $2.7 million to our cash flow, as Source purchased our inventory and placed orders for future delivery of our products.
"Beyond this year, the contract specifies a minimum of double-digit growth each year, which we expect will be achieved through Source's extensive sales network throughout Canada, which goes beyond acute care-which is where we've traditionally been-and extends to home care, nursing homes, physicians' offices, and elsewhere. Furthermore, we will be supplying Source with several products in the advanced wound care category. Lastly, included in the contract's terms is that we will be taking over the manufacturing for two of their branded product lines, testament to their confidence in our manufacturing capabilities. Our Canadian base business was roughly $CAN 12 MM ($US 9 MM) in annual revenues, so it is easy to see why this contract gives us more cause for optimism here at Derma Sciences.
"Our U.S. business continued to improve during the quarter as well as we generated traction from certain U.S. distribution contracts we've got in place, and particularly within our advanced wound care business. We also made the decision to shut down our skin care plant in St. Louis, and have already begun to execute a manufacturing contract to outsource that business. Lastly, from a financial standpoint, we were able to reduce our line of credit borrowings by approximately $2.1 million, and we exited the quarter with over $3 million in working capital," concluded Quilty.
Conference Call Information:
---------------------------
What: Derma Sciences First Quarter 2005 Conference Call
When: Monday, August 15, 2005 at 4:30 P.M. ET
Where Webcast address:
www.dermasciences.com, www.streetevents.com
Dial-in numbers: 800-901-5247, (domestic), and 617-786-4501
(international) passcode # 38371263
Contact: Peter Seltzberg, Cameron Associates, 212-554-5487,
peter@cameronassoc.com
If you are unable to participate, an audio digital replay of the call will be available from Monday August 15, 2005, at 6:30pm, ET until Midnight ET on August 22, 2005, by dialing 888-286-8010 (domestic) or 617-801-6888 (international) using confirmation code # 22742689. A web archive will be available for 30 days at www.dermasciences.com and www.streetevents.com
About Derma Sciences, Inc.
Derma Sciences, Inc. provides a full range of skin care, wound management and specialty securement devices that are used primarily in the professional markets, specifically hospitals, nursing homes and home care settings. For more information about Derma Sciences, Inc., visit its home page on the Internet at http://www.dermasciences.com.
Forward-Looking Statement
Statements contained in this release that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" are intended to identify forward-looking statements. Readers are cautioned, that certain important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking statements which may be made in this release or which are otherwise made by or on behalf of the Company. Factors which may affect the Company's results include, but are not limited to, product demand, market acceptance, impact of competitive products and prices, product development, completion of an acquisition, commercialization or technological difficulties, the success or failure of negotiations and trade, legal, social and economic risks. Additional factors that could cause or contribute to differences between the Company's actual results and forward-looking statements include but are not limited to, those discussed in the Company's filings with the Securities and Exchange Commission.
TABLE FOLLOWS
DERMA SCIENCES, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
Consolidated Statements of Operations (Unaudited)
Three months ended
June 30,
2005 2004
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Net sales $6,934,218 $4,914,011
Cost of sales 4,761,611 3,520,187
----------------------------------------------------------------------
Gross Profit 2,172,607 1,393,824
----------------------------------------------------------------------
Operating expenses 1,900,157 1,678,804
Interest expense, net 95,269 51,479
Other expense (income), net 18,997 (6,160)
----------------------------------------------------------------------
Total Expenses 2,014,423 1,724,123
----------------------------------------------------------------------
Income (loss) before provision for income taxes 158,184 (330,299)
Provision for income taxes - -
----------------------------------------------------------------------
Net Income (Loss) $158,184 $(330,299)
----------------------------------------------------------------------
Income (loss) per common share - basic $0.01 $(0.03)
----------------------------------------------------------------------
Income (loss) per common share - fully diluted $0.01 $(0.03)
----------------------------------------------------------------------
Shares used in computing income (loss) per
common share - basic 12,284,007 9,524,007
----------------------------------------------------------------------
Shares used in computing income (loss) per
common share - diluted 14,745,538 9,524,007
----------------------------------------------------------------------
Consolidated Statements of Operations (Unaudited)
Six months ended
June 30,
2005 2004
----------------------------------------------------------------------
Net sales $11,827,665 $9,943,433
Cost of sales 8,267,672 7,116,703
----------------------------------------------------------------------
Gross Profit 3,559,993 2,826,730
----------------------------------------------------------------------
Operating expenses 3,581,212 3,923,859
Interest expense, net 179,853 98,146
Other (income) expense, net (146,204) 111,490
----------------------------------------------------------------------
Total Expenses 3,614,861 4,133,495
----------------------------------------------------------------------
(Loss) before provision for income taxes (54,868) (1,306,765)
Provision for income taxes - -
----------------------------------------------------------------------
Net (Loss) $(54,868)$(1,306,765)
----------------------------------------------------------------------
(Loss) per common share - basic $0.00 $(0.14)
----------------------------------------------------------------------
(Loss) per common share - fully diluted $0.00 $(0.14)
----------------------------------------------------------------------
Shares used in computing loss per common share
- basic 12,147,841 9,166,579
----------------------------------------------------------------------
Shares used in computing loss per common share
- diluted 12,147,841 9,166,579
----------------------------------------------------------------------
