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Medical Action Industries Inc. (MDCI)

Q3 2013 Earnings Call

February 11, 2013 9:00 am ET


Paul Meringolo – President, Chief Executive Officer

John Sheffield – Chief Financial Officer

Brian Baker – Corporate Controller


Matt Dolan – Roth Capital Partners

Steve Friedman – Wells Fargo Advisors

Jack Wallace – Sidoti & Company



Good morning. My name is Amy and I will be your conference operator today. At this time, I would like to welcome everyone to the fiscal year 2013 third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key.

Thank you. I would now like to turn the call over to Mr. John Sheffield, Chief Financial Officer. You may begin your conference.

John Sheffield

Thank you, Amy. Good morning and thank you everyone for holding. With me today are Paul Meringolo, Chief Executive Officer and President of Medical Action; and Brian Baker, our Corporate Controller. The primary purpose of this call is to discuss our results for the third quarter of fiscal 2013 which were released this morning.

In the course of our discussion, reference may be made to projections, anticipated events or other information which are not purely historical. Please be aware that statements made during this call which are not purely historical may be considered forward-looking statements. We caution you that all forward-looking statements involve risks, unanticipated events, uncertainties and other factors that could cause our actual results to differ materially from those anticipated in such statements. Many of these risks, events, uncertainties and other factors are disclosed in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and other reports and filings with the Securities and Exchange Commission which are made available on our website. To the extent any forward-looking statements are made during this call, such statements are made only as of today’s date and we do not assume any obligation to update any such statements.

It’s now my pleasure to turn it over to Paul Meringolo. Paul?

Paul Meringolo

Thanks John. Good morning and thank you for joining us today. On behalf of all the teammates and stockholders of Medical Action, I am proud to speak to you today about our record quarterly gross profit results, the implementation of various cost savings initiatives, and the overall success of the strategic actions the management and board of directors have implemented over the last nine months. Without a doubt, the company experienced some challenges around this time last year; however, the management team and the board set out about creating a deliberate strategic plan to refocus the company and return to profitability.

Over the last nine months, the management team has been actively implementing this strategy which involved a number of important structural, managerial and operational changes. As the CEO of this company and one of its longest tenured employees and largest individual stockholder, I am excited about our success to date and I am confident that this quarter is among the first steps in many that will return this company to the success and growth that we have seen in prior years.

I’m sure you read this morning’s press release in which we outlined our significant operational improvements in gross profit and earnings. We also reported a non-cash goodwill impairment charge in conjunction with our annual goodwill impairment test. While a required accounting adjustment, it also masks some significant improvements in the company’s profitability, such as our growth profit, which is the highest quarterly amount in the company’s 36-year history. We will be happy to provide more discussion and detail on this goodwill impairment charge, but I suspect you will be more interested in our significant operational improvements.

Within our press release and throughout this call, references are made to adjusted earnings which will exclude the reported impact of the goodwill impairment charge as well as other one-time events. Management believes that these adjusted earnings references are meaningful indicators of our performance and will provide useful information to investors and employees regarding our financial condition and results of operations.

Later during the call, we will provide an update on some of the projects and initiatives that have yielded the year-over-year and sequential operational improvements we reported today; but for now, I’d like to turn it back over to John to discuss our results for the third quarter of fiscal 2013.

John Sheffield

Thanks Paul. Yes, I too am very pleased to speak today about these record profits and the continued success with our strategic plan to improve our operations and profitability. As we noted on our press release earlier this morning, Medical Action reported net sales for the third quarter of fiscal 2013 of 109.4 million and gross profit of 19.1 million, which as Paul said is the highest in company history, and it also is 17.5% of net sales. The company generated non-GAAP net income before the goodwill impairment charge and certain professional fees of $1.6 million or $0.10 per diluted share, and EBITDA as adjusted of 6.1 million. These gross profit, non-GAAP net income and EBITDA results represent significant increases versus the comparable adjusted results for the same period of fiscal 2012.

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