PITTSBURGH, Aug. 31, 2011 (GLOBE NEWSWIRE) -- DynaVox (Nasdaq:DVOX), the world's leading provider of communication and education products for individuals with significant speech, language and learning disabilities, today announced results for the fourth quarter and fiscal year ended July 1, 2011.
For the fourth quarter ended July 1, 2011, net sales were $32.3 million, a decrease of 2% compared to net sales of $33.1 million for the fourth quarter ended July 2, 2010. Sales of the Company's speech generating devices were substantially flat at $26.7 million, and sales of its special education software decreased 9% to $5.6 million from the prior year.
Gross profit for the fourth quarter of fiscal year 2011 declined 10% to $22.6 million, compared to $25.2 million in the fourth quarter of the prior year. The Company's gross margin for the fourth quarter was 70.0%, compared to 76.1% in the prior year's comparable quarter. The gross margin decline was due mainly to an unfavorable device product mix, slightly lower margin on the Company's software sales and reduced royalty revenue.
Operating income was $5.5 million in the fourth quarter of fiscal year 2011, compared to operating income of $8.0 million in the same period a year ago. Operating expenses for the fourth quarter of fiscal year 2011 were essentially flat compared to the prior year and included $0.7 million related to R&D projects and an impairment loss that the Company believes are not reflective of its quarterly run rate. Operating expenses for the fourth quarter of the prior year included $1.7 million of accelerated equity-based compensation expense related to the Company's April 2010 initial public offering.
Fourth quarter GAAP net income was $0.9 million, or $0.10 per share. Adjusted pro forma net income and adjusted pro forma net income per share, as defined below, were $3.6 million, or $0.12 per share, for the fourth quarter of fiscal year 2011, compared to $2.8 million, or $0.09 per share, in the prior year's fourth quarter.
Adjusted EBITDA, as defined below, declined 34% in the fourth quarter of fiscal year 2011 to $8.1 million from $12.1 million in the previous year.
"Fiscal 2011 was a challenging year for DynaVox. To mitigate the very dynamic and changing operating environment we revised our strategies and reallocated our resources," said Ed Donnelly, DynaVox's Chief Executive Officer. "We believe that the progress we have made in the second half of the year, especially in the fourth quarter, is directly attributable to these new strategies and that they will continue to serve us well."
"Looking forward, we will focus on managing our operating expenses and optimizing our investments in the areas of greatest opportunities. We believe that the proven value proposition of our products and our deep knowledge of customer needs will help us continue to position DynaVox for market share expansion and growth in fiscal year 2012 and beyond."
Fiscal Year 2011 Results
For the fiscal year ended July 1, 2011, net sales declined 5% to $108.1 million, compared to $114.3 million in the same period last year.
Gross profit for fiscal year 2011 declined 12% to $75.9 million, compared to $86.4 million in the same period last year. The Company's gross margin decreased to 70.2% from 75.6% in the same period last year. Excluding the inventory obsolescence charge of $500,000 recorded in the third quarter, the Company's gross margin was 70.6% for fiscal year 2011.
Operating income for fiscal year 2011 was $10.2 million, compared to $23.2 million in the prior year period. Excluding the inventory obsolescence charge of $500,000 and the $1.3 million impairment loss, recorded primarily in the third quarter, operating income for fiscal year 2011 was $12.0 million.
GAAP net income for fiscal year 2011 was $1.2 million, or $0.13 per share. Adjusted pro forma net income, as defined by the Company, was $5.8 million, or $0.19 per share.
Adjusted EBITDA for fiscal year 2011 was $19.3 million, compared to $32.9 million in the same period last year.
Fiscal Year 2012 Guidance
For fiscal year 2012, the Company projects net sales to grow in the range of 3% to 7%, compared to fiscal year 2011. The Company expects Adjusted EBITDA for fiscal year 2012 to be in the range of $23 million to $27 million and adjusted pro forma net income per share to be in the range of $0.28 to $0.36.
Conference Call
The conference call is scheduled to begin at 4:45 p.m. EDT on August 31, 2011. The call will be broadcast live over the Internet, hosted at the Investor Relations section of DynaVox's website at http://ir.dynavoxtech.com/index.cfm, and will be archived online through September 14, 2011. In addition, listeners may dial (877) 312-5529 in North America, and international listeners may dial (253) 237-1147. Participants from the Company will be Ed Donnelly, Chief Executive Officer, and Ken Misch, Chief Financial Officer.
A telephonic playback will be available from 7:45 p.m. EDT, August 31, 2011 through September 14, 2011. To hear the playback participants may dial (855) 859-2056 and international listeners may dial (404) 537-3406. The conference ID number is 91374099.
Explanatory Note and Non-GAAP Financial Measures
DynaVox Inc. completed an initial public offering (IPO) on April 27, 2010. As a result of the IPO and certain other recapitalization transactions, DynaVox Inc. became the sole managing member of and has a controlling interest in DynaVox Systems Holdings LLC and its subsidiaries ("DynaVox Holdings" or "Predecessor"). References to "DynaVox," the "Company," and "Successor" refer, subsequent to the IPO and related transactions, to DynaVox Inc. and its consolidated subsidiaries and these references (other than "Successor") refer, prior to the IPO and related transactions, to DynaVox Holdings.
This release presents adjusted pro forma net income, which as defined by the Company represents net income before non-controlling interest and after pro forma corporate income tax expense applied at an assumed 38.0% rate, which includes a provision for U.S. federal income taxes, assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction and assumes the full exchange of Holdings Units of DynaVox Holdings into Class A Common Stock. Adjusted pro forma net income also excludes the effect of the above-described impairment loss related to intangible assets and fixed assets acquired as part of the Company's previous product acquisition. Adjusted pro forma net income per share consists of adjusted pro forma net income divided by the aggregate number of the Company's Class A Common Stock outstanding, assuming full exchange of Holdings Units of DynaVox Holdings into Class A Common Stock of DynaVox Inc. and giving effect to the dilutive impact, if any, of stock options and restricted stock awards. The Company believes that Adjusted Pro Forma Net Income, when presented together with the comparable measure presented in accordance with GAAP, is useful to investors to assist in their understanding of the effect of the Company's organizational structure on its reported results and also in comparing the Company's results across different periods.
This release also presents Adjusted EBITDA, as defined by the Company as the income before income taxes, interest income, interest expense, depreciation, amortization and other adjustments noted in the table below.
Adjusted EBITDA, adjusted pro forma net income and adjusted pro forma net income per share, however, do not represent and should not be considered as an alternative to net income, net income per share or cash flow from operating activities, as determined in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies.
Forward-Looking Statements
This press release contains forward-looking statements, including the information presented above under the caption "Fiscal Year 2012 Guidance" which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "projects", "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under "Risk Factors" in our Annual Report on Form 10-K, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the Annual Report on Form 10-K and other filings. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. In addition, our expectations with respect to net sales, Adjusted EBITDA and adjusted pro forma net income per share for fiscal year 2012 reflect an assumption that the challenges presented by the current macroeconomic environment continue to exist during fiscal year 2012 but that we expect to report slightly improved results compared to fiscal year 2011 as a result of the strategies deployed during the latter part of fiscal year 2011. Our results may differ from these expectations should the macro-economic conditions change or should our strategies not return the expected results.
About DynaVox Inc.
DynaVox Inc. (Nasdaq:DVOX) is a publicly traded holding Company with its headquarters in Pittsburgh, Pennsylvania, whose primary operating entities are DynaVox Systems LLC and Mayer-Johnson LLC. DynaVox is the leading provider of speech generating devices and symbol-adapted special education software used to assist individuals in overcoming their speech, language and learning challenges. These solutions are designed to help individuals who have complex communication and learning needs participate in the home, classroom and community. Our mission is to enable our customers to realize their full communication and education potential by developing industry-leading devices, software and content and by providing the services to support them. We assist individuals, families, and professionals with an extensive field support organization, as well as centralized technical and reimbursement support. For more information, visit www.dynavoxtech.com.
| DYNAVOX INC. AND SUBSIDIARIES | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
| (Unaudited) | ||||
| (Dollars in thousands, except per share amounts) | ||||
| Successor | Aggregated | Successor | Predecessor | |
| Period from |
Period from |
|||
| Thirteen Weeks | Thirteen Weeks | April 28, | April 3, | |
| Ended | Ended | 2010 | 2010 | |
| July 1, | July 2, | to July 2, | to April 27, | |
| 2011 | 2010 | 2010 | 2010 | |
| NET SALES | $ 32,340 | $ 33,054 | $ 25,803 | $ 7,251 |
| COST OF SALES | 9,704 | 7,903 | 6,178 | 1,725 |
| GROSS PROFIT | 22,636 | 25,151 | 19,625 | 5,526 |
| OPERATING EXPENSES: | ||||
| Selling and marketing | 9,787 | 7,638 | 5,342 | 2,296 |
| Research and development | 2,652 | 2,883 | 2,194 | 689 |
| General and administrative | 4,366 | 6,530 | 5,542 | 988 |
| Amortization of certain intangibles | 111 | 115 | 87 | 28 |
| Impairment loss | 244 | -- | -- | -- |
| Total operating expenses | 17,160 | 17,166 | 13,165 | 4,001 |
| INCOME FROM OPERATIONS | 5,476 | 7,985 | 6,460 | 1,525 |
| OTHER INCOME (EXPENSE): | ||||
| Interest income | 6 | 18 | 12 | 6 |
| Interest expense | (636) | (964) | (440) | (524) |
| Change in fair value and net loss on interest rate swap agreement | -- | (81) | (87) | 6 |
| Loss on extinguishment of debt | -- | (2,441) | (2,441) | -- |
| Other income (expense) — net | 782 | (11) | (10) | (1) |
| Total other income (expense) — net | 152 | (3,479) | (2,966) | (513) |
| INCOME BEFORE INCOME TAXES | 5,628 | $ 4,506 | 3,494 | 1,012 |
| INCOME TAX EXPENSE (BENEFIT) | 1,027 | 592 | (29) | |
| NET INCOME ATTRIBUTABLE TO THE CONTROLLING AND | ||||
| NON-CONTROLLING INTERESTS | $ 4,601 | $ 2,902 | $ 1,041 | |
| Less: net income attributable to the non-controlling interests | (3,671) | (2,397) | ||
| NET INCOME ATTRIBUTABLE TO DYNAVOX INC. | $ 930 | $ 505 | ||
| Weighted-average shares of Class A common stock outstanding: | ||||
| Basic | 9,378,297 | 9,375,000 | ||
| Diluted | 9,378,593 | 9,687,366 | ||
| Net income available to Class A common stock per share: | ||||
| Basic | $ 0.10 | $ 0.05 | ||
| Diluted | $ 0.10 | $ 0.05 | ||
| DYNAVOX INC. AND SUBSIDIARIES | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
| (Unaudited) | ||||
| (Dollars in thousands, except per share amounts) | ||||
| Successor | Aggregated | Successor | Predecessor | |
| Period from | Period from | |||
| Fifty-Two | Fifty-Two | April 28, | July 4, | |
| Weeks Ended | Weeks Ended | 2010 | 2009 | |
| July 1, | July 2, | to July 2, | to April 27, | |
| 2011 | 2010 | 2010 | 2010 | |
| NET SALES | $ 108,103 | $ 114,299 | $ 25,803 | $ 88,496 |
| COST OF SALES | 32,251 | 27,933 | 6,178 | 21,755 |
| GROSS PROFIT | 75,852 | 86,366 | 19,625 | 66,741 |
| OPERATING EXPENSES: | ||||
| Selling and marketing | 35,567 | 34,127 | 5,342 | 28,785 |
| Research and development | 9,888 | 10,106 | 2,194 | 7,912 |
| General and administrative | 18,480 | 17,841 | 5,542 | 12,299 |
| Amortization of certain intangibles | 445 | 1,078 | 87 | 991 |
| Impairment loss | 1,262 | -- | -- | -- |
| Total operating expenses | 65,642 | 63,152 | 13,165 | 49,987 |
| INCOME FROM OPERATIONS | 10,210 | 23,214 | 6,460 | 16,754 |
| OTHER INCOME (EXPENSE): | ||||
| Interest income | 36 | 55 | 12 | 43 |
| Interest expense | (2,650) | (6,801) | (440) | (6,361) |
| Change in fair value and net loss on interest rate swap agreement | (81) | (746) | (87) | (659) |
| Loss on extinguishment of debt | -- | (2,441) | (2,441) | -- |
| Other income (expense) — net | 513 | (95) | (10) | (85) |
| Total other expense — net | (2,182) | (10,028) | (2,966) | (7,062) |
| INCOME BEFORE INCOME TAXES | 8,028 | $ 13,186 | 3,494 | 9,692 |
| INCOME TAX EXPENSE | 1,361 | 592 | 102 | |
| NET INCOME ATTRIBUTABLE TO THE CONTROLLING AND | ||||
| NON-CONTROLLING INTERESTS | $ 6,667 | $ 2,902 | $ 9,590 | |
| Less: net income attributable to the non-controlling interests | (5,438) | (2,397) | ||
| NET INCOME ATTRIBUTABLE TO DYNAVOX INC. | $ 1,229 | $ 505 | ||
| Weighted-average shares of Class A common stock outstanding: | ||||
| Basic | 9,375,824 | 9,375,000 | ||
| Diluted | 9,375,898 | 9,687,366 | ||
| Net income available to Class A common stock per share: | ||||
| Basic | $ 0.13 | $ 0.05 | ||
| Diluted | $ 0.13 | $ 0.05 | ||
| DYNAVOX INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (Unaudited) | ||
| (Dollars in thousands) | ||
| Successor | Successor | |
| As of | As of | |
| July 1, 2011 | July 2, 2010 | |
| ASSETS | ||
| CURRENT ASSETS: | ||
| Cash and cash equivalents | $ 12,171 | $ 20,777 |
| Trade receivables - net | 18,676 | 17,741 |
| Other receivables | 318 | 503 |
| Inventories - net | 4,876 | 6,808 |
| Prepaid expenses and other current assets | 1,298 | 1,210 |
| Deferred taxes | 669 | 728 |
| Total current assets | 38,008 | 47,767 |
| PROPERTY AND EQUIPMENT - Net | 5,517 | 7,065 |
| GOODWILL AND INTANGIBLES - Net | 90,695 | 92,177 |
| DEFERRED TAXES | 40,677 | 41,474 |
| OTHER ASSETS | 2,253 | 2,683 |
| TOTAL ASSETS | $ 177,150 | $ 191,166 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| CURRENT LIABILITIES: | ||
| Current portion of long-term debt | $ -- | $ 3,961 |
| Trade accounts payable | 6,680 | 5,541 |
| Other liabilities | 9,459 | 14,562 |
| Total current liabilities | 16,139 | 24,064 |
| LONG-TERM DEBT | 36,200 | 44,200 |
| OTHER LONG-TERM LIABILITIES | 42,262 | 45,038 |
| Total liabilities | 94,601 | 113,302 |
| STOCKHOLDERS' EQUITY | 82,549 | 77,864 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 177,150 | $ 191,166 |
| DYNAVOX INC. AND SUBSIDIARIES | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (Unaudited) | ||||
| (Dollars in thousands) | ||||
| Successor | Aggregated | Successor | Aggregated | |
| Thirteen | Thirteen | Fifty-Two | Fifty-Two | |
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | |
| July 1, | July 2, | July 1, | July 2, | |
| 2011 | 2010 | 2011 | 2010 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
| Net cash provided by operating activities | $ 8,177 | $ 9,264 | $ 11,829 | $ 21,000 |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Cash used in investing activities | (368) | (1,041) | (3,196) | (8,966) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
| Net cash (used in) provided by financing activities | (7,886) | 2,803 | (17,326) | (3,888) |
| EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 2 | (40) | 87 | -- |
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (75) | 10,986 | (8,606) | 8,146 |
| CASH AND CASH EQUIVALENTS: | ||||
| Beginning of period | 12,246 | 9,791 | 20,777 | 12,631 |
| End of period | $ 12,171 | $ 20,777 | $ 12,171 | $ 20,777 |
| DYNAVOX INC. AND SUBSIDIARIES | |||||||||||
| ADJUSTED EBITDA | |||||||||||
| (Unaudited) | |||||||||||
| (Dollars in thousands) | |||||||||||
| Aggregated | Aggregated | ||||||||||
| Thirteen | Thirteen | Fifty-Two | Fifty-Two | ||||||||
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | ||||||||
| July 1, 2011 | July 2, 2010 | July 1, 2011 | July 2, 2010 | ||||||||
| Other Financial Data | |||||||||||
| Adjusted EBITDA (1) | $ 8,058 | $ 12,126 | $ 19,273 | $ 32,929 | |||||||
| (1) Adjusted EBITDA represents income (loss) before income taxes, interest income, interest expense, impairment loss, depreciation and amortization and the other | |||||||||||
| adjustments noted in the table below. | |||||||||||
| Adjusted EBITDA Reconciliation | |||||||||||
| Aggregated | Aggregated | ||||||||||
| Thirteen | Thirteen | Fifty-Two | Fifty-Two | ||||||||
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | ||||||||
| July 1, 2011 | July 2, 2010 | July 1, 2011 | July 2, 2010 | ||||||||
| Income before income taxes | $ 5,628 | $ 4,506 | $ 8,028 | $ 13,186 | |||||||
| Depreciation | 834 | 724 | 3,377 | 2,871 | |||||||
| Amortization | 287 | 236 | 981 | 1,428 | |||||||
| Interest income | (6) | (17) | (36) | (55) | |||||||
| Interest expense | 636 | 963 | 2,650 | 6,801 | |||||||
| Change in fair value and net loss on interest rate swaps | -- | 81 | 81 | 746 | |||||||
| Loss on extinguishment of debt (a) | -- | 2,441 | -- | 2,441 | |||||||
| Other expense (income), net (b) | (755) | (84) | (530) | (84) | |||||||
| Equity-based compensation | 540 | 2,194 | 2,124 | 2,767 | |||||||
| Employee severance and other costs | 89 | 734 | 397 | 1,355 | |||||||
| Acquisition costs (c) | 116 | 139 | 277 | 484 | |||||||
| Management fees (d) | -- | 75 | -- | 300 | |||||||
| Impairment loss | 244 | -- | 1,262 | -- | |||||||
| Other adjustments(e) | 445 | 134 | 662 | 689 | |||||||
| Adjusted EBITDA | $ 8,058 | $ 12,126 | $ 19,273 | $ 32,929 | |||||||
| (a) Early repayment penalty and related expenses resulting from $31,000 aggregate principal amount of senior subordinated notes repaid with proceeds from IPO. | |||||||||||
| (b) Excludes realized foreign currency gains or losses. | |||||||||||
| (c) Legal, accounting and other external costs related to the purchase of certain assets and liabilities of Blink-Twice Inc. and the purchase of Eye Response | |||||||||||
| Technologies, Inc. including certain post-closing expenses which may be reimbursed to the Company at a later date under the terms of the applicable agreements. | |||||||||||
| (d) Prior to April 21, 2010, we received advisory services from Vestar and certain pre-IPO owners. These arrangements concluded on April 21, 2010. | |||||||||||
| (e) Includes certain amounts related to other taxes, executive recruiting fees, relocation and other costs. | |||||||||||
| DYNAVOX INC. AND SUBSIDIARIES | |||||
| ADJUSTED PRO FORMA NET INCOME | |||||
| (Unaudited) | |||||
| (Dollars in thousands, except share and per share amounts) | |||||
| Aggregate | Aggregate | ||||
| Thirteen | Fifty-Two | Thirteen | Fifty-Two | ||
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | ||
| July 1, 2011 | July 1, 2011 | July 2, 2010 | July 2, 2010 | ||
| Net income attributable to DynaVox Inc. | $ 930 | $ 1,229 | $ 1,546 | $ 10,095 | |
| Adjustments: | |||||
| Net income attributable to the non-controlling interest | 3,671 | 5,438 | 2,397 | 2,397 | |
| Impairment loss | 244 | 1,262 | -- | -- | |
| Income taxes | (1,204) | (2,169) | (1,149) | (4,317) | |
| Total adjustments | 2,711 | 4,531 | 1,248 | (1,920) | |
| Adjusted pro forma net income | $ 3,641 | $ 5,760 | $ 2,794 | $ 8,175 | |
| Pro forma shares outstanding - diluted | 29,804,134 | 29,823,700 | 30,144,887 | 30,144,887 | |
| Adjusted pro forma net income per share - diluted | $ 0.12 | $ 0.19 | $ 0.09 | $ 0.27 | |
| Adjusted pro forma net income, as defined by DynaVox, represents net income before non-controlling interests and after pro forma corporate income tax expense applied at an assumed 38.0% rate, which includes a provision for U.S. federal income taxes, assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction and assumes the full exchange of Holdings Units into Class A Common Stock as described below. Adjusted pro forma net income also excludes the effect of the above-described impairment loss related primarily to intangible assets and fixed assets acquired as part of the Company's previous product acquisition. Adjusted pro forma net income per share consists of adjusted pro forma net income, divided by the aggregate number of the Company's Class A Common Stock outstanding, assuming full exchange of Holdings Units of DynaVox Holdings into Class A Common Stock of DynaVox Inc. and giving effect to the dilutive impact, if any, of stock options and restricted stock awards. | |||||
| The table above provides a reconciliation of net income to adjusted pro forma net income and adjusted pro forma net income per share. | |||||