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MTS Medication Technologies Inc. Reports Operating Results (10-Q)

August 14, 2009 | About:

MTS Medication Technologies Inc. (MTSI) filed Quarterly Report for the period ended 2009-06-30.

MTS Medication Technologies is an international provider of medication compliance packaging systems designed to improve medication dispensing and administration. MTS manufactures automated packaging machines and related consumables for prescription medications and nutritional supplements. The Company serves institutional pharmacies in the long-term care and correctional facility markets both domestically and internationally. MTS Medication Technologies Inc. has a market cap of $36.8 million; its shares were traded at around $5.7 with a P/E ratio of 15.4 and P/S ratio of 0.5.

Highlight of Business Operations:

Net sales for the three months ended June 30, 2009 decreased 10.4% to $17.4 million compared with $19.4 million during the same period of the prior fiscal year. The decline primarily relates to a decline in revenue from sales of OnDemand machines. During the three months ended June 30, 2009, the Company recorded approximately $2.7 million in net sales associated with the sale of three OnDemand machines compared to $5.1 million on sales of nine OnDemand machines during the same period in the prior fiscal year. Net sales for consumables increased approximately $329,000 during the three months ended June 30, 2009 compared to the same period the fiscal prior year. The increase was primarily related to increased sales of punch cards to customers in the U.S.

Cost of sales for the three months ended June 30, 2009 was $11.2 million compared with $13.3 million during the same period in the prior fiscal year. Cost of sales as a percentage of sales decreased to 64.4% from 68.8% during the same period of the prior fiscal year. Cost of sales as a percentage of sales decreased primarily because the proportion of revenue associated with OnDemand machines, which have a higher cost of sales percentage than consumables, was higher during the prior fiscal year.

Selling, general and administration expenses for the three months ended June 30, 2009 increased 13.4% to $5.1 million from $4.5 million in the prior fiscal year primarily due to approximately $421,000 in costs associated with the Merger Agreement, as well as an increase of approximately $232,000 in research and development costs primarily associated with development of new OnDemand machine technology.

Income tax expense decreased 4.7% to $203,000 during the three months ended June 30, 2009 compared with $213,000 during the same period of the prior fiscal year. The decrease results from the fact that our net income before taxes decreased. Our effective tax rate increased to 119.4% from 36.3% due to the fact that $421,000 in costs incurred in the first quarter of this fiscal year associated with the merger agreement are not deductible for tax purposes.

Net sales for the three months ended June 30, 2009 decreased $2.3 million, or 36.8%, from the same period in the prior fiscal year due to a decline in OnDemand sales. During the three months ended June 30, 2009, the Company recorded $2.7 million in revenue associated with the sale of three OnDemand machines compared to $5.1 million in revenue on the sale of nine OnDemand machined during the same period the prior fiscal year.

LIQUIDITY AND CAPITAL RESOURCES During the three months ended June 30, 2009, we had a net loss of $33,000 compared with net income of $374,000 during the same period of the prior fiscal year. Cash provided by operations decreased to $537,000 from $1.08 million during the three months ended June 30, 2009 and 2008, respectively, primarily due to lower net income in the three months ended June 30, 2009 compared to the same period in the prior fiscal year, as well as due to a decline in inventory balances during the prior fiscal year from the sale of nine OnDemand machines. We had working capital of $13.9 million at June 30, 2009 compared to $13.8 million at June 30, 2008.

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