Revenues in the first quarter continued to be impacted by the economy and credit markets, while the full impact of BIOLASE’s revised domestic and international distribution agreement with Henry Schein was not felt because the agreement was signed late in the first quarter. Sales were also impacted by the closure of unprofitable foreign subsidiaries and the start-up timing on new international relationships.
Gross margin as a%age of net revenue for the 2009 first quarter was 27%, as compared with 50% of net revenue for the 2008 first quarter. The decrease was due primarily to a one-time write down of inventories related to the multiple international subsidiary closures and excess inventory created from a sales mix shift toward the new Waterlase MD Turbo and the ezlase diode laser.
BIOLASE chief executive officer David M. Mulder said, Difficult economic conditions hampered our closing rates for lasers during the first quarter. Those economic conditions have not dissipated, but the recent launch of the Waterlase MD Turbo helped improve sales late in the quarter. Given that the last month in any given quarter has generally been the strongest for BIOLASE, we were even more encouraged that April end-user domestic sales exceeded January and February combined. Part of that upswing is also due to aggressive new sales and marketing programs we have recently designed and have only just begun to launch with our partner, Henry Schein. We are very pleased with the minimum purchase agreement with Henry Schein that ensures cash flows during these challenging times, but we are even more pleased with our combined full focus on selling more lasers and spreading the benefits of Waterlase*Dentistry across the world.
As of March 31, 2009, the balance sheet showed cash and cash equivalents of $1.8 million, total assets of $21.9 million and total stockholders’ equity of $4.9 million. The company’s line of credit with Comerica Bank was completely repaid during the quarter with cash on hand and closed, and the company remains bank debt free. The company also paid down some $3.2 million in accounts payable over the quarter and is in good standing with its vendors. The company believes that with its minimum purchase contract with bi-monthly purchases and its lower cost structure that it will have sufficient resources to meet obligations and sustain operations.
Mulder concluded, The old working capital model of BIOLASE focused on high quarter-end stocking purchases that provided large quarter-end cash balances that declined throughout the following quarter when the process was repeated. Our new process consists of steady distributor orders throughout a quarter, providing much more predictability in production and working capital needs. In April, cash balances improved from $1.8 million to $2.6 million. We have survived one of the most difficult quarters in the company’s history and rapidly emerged with a model that we believe can generate cash.
