On June 14, Medical Action Industries (MDCI), a manufacturer and distributer of medical and surgical disposable products, reported its fiscal fourth quarter loss per share of 15 cents. This compares with the Zacks Consensus Estimate of an earnings of 4 cents and the year-ago earnings of 7 cents. For fiscal 2012, loss per share of 2 cents also missed both the Zacks Consensus Estimate and fiscal 2011 earnings of 17 cents and 32 cents, respectively.
Net loss for the quarter came in at $2.5 million compared with a net income of $1.1 million in the prior-year quarter. The deterioration resulted from higher resin costs, increased price paid for products from vendors in China and one-time tax valuation allowance.
On a GAAP basis, net income for fiscal 2012 was $0.2 million (or 1 cent a share) versus $4.4 million (or 27 cents a share) for fiscal 2011. Net income for fiscal 2012 includes an extra-ordinary pre-tax gain of $0.7 million (or 3 cents per share) related to the insurance settlement of its inventories damaged in a weather-related flooding in fiscal 2011.
Revenue
Revenues increased 3% year-over-year to $108.2 million for the reported quarter, missing the Zacks Consensus Estimate of $111.0 million.
For fiscal 2012, revenues soared 21% year-over-year to $437.3 million, marginally missing the Zacks Consensus Estimate of $440.0 million. The year-over-year increase can be attributed to the synergies from the AVID Medical Inc. acquisition.
Barring the acquisition, annual sales rose 6% year-over-year to $298.9 million. The higher sales volume contributed $17.0 million as market penetration in the Patient Care and Clinical Care segments contributed $10.5 million and $6.5 million, respectively. On the other hand, contributions from higher average selling price was $0.8 million for the fiscal year. This can be attributed to a $1.4 million rise from increase in net price of certain products, partially offset by a decrease of $0.6 million in the average selling price in the company’s Patient Care market.
Margins
Gross margin for fiscal 2012 came in at 14.8%, compared to 17.6% in the prior year. Operating margin decreased to 1.3% from 3.3% in fiscal 2011. Selling, general and administrative expenses, as a percentage of sales, decreased to 13.6% from the year-ago 14.3%.
Balance Sheet
Medical Action exited fiscal 2012 with cash and cash equivalents of $5.4 million, up more than two-fold from the previous year. The long term debt stood at $75.7 million, up 0.7% year-over-year.
The company entered into the Second Amended and Restated Credit Agreement on June 7, 2012. As of June 2012, Medical Action has outstanding borrowings of $70.7 million, under the Credit Agreement. It plans to allocate available funds for capital expenditures, improving its marketing and product development. The agreement is expected to enable the company to focus on its operating plans.
Medical Action is attempting to enhance profitability through its continued focus on organic growth and improved customer services. It has also realigned its business into strategic business units to increase focus on the target markets. However, the company expects pricing pressure and volatility in raw material prices, especially cotton and resin, to hamper gross profit. Another concern is tough competition from larger players like Becton Dickinson and Company (BDX) and Covidien plc (COV).
The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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