Retractable Technologies, Inc. (NYSE:RVP) ($1.09; $35.5M market cap), a company that designs, develops, manufactures, and markets safety syringes and other medical products for the healthcare industry in the United States and internationally, has been on our radar the last few months as there has been significant insider buying at open market prices, mainly by CEO Thomas Shaw.
Mr. Shaw filed a number of form 4’s over the last several months that show a number of open market purchases. Since March, he has purchased roughly 400,000 shares, adding to his significant stake of over 14 million shares.
In mid August 2019, the Company posted strong Q2 2019 results:
- Sales of $9.5 million vs $7.4 million in the prior year
- EPS of $0.01 vs a loss of $0.03 in the prior year
Both domestic and international sales grew nicely in the quarter with 24.2% and 36.9% growth respectively. (Domestic sales account for ~80% of overall revenues).
The company’s press release offers no comments from management. We plan to reach out to management to determine if Q2’s growth trend can carry forward during the remainder of 2019 and into 2020.
The company recently announced settlement of all existing litigation it was facing in regards to:
“In 2007, Retractable sued BD for violations of antitrust acts, false advertising, product disparagement, tortious interference, unfair competition, and other matters. In 2007, BD and MDC sued Retractable for patent infringement. A settlement agreement, effective May 3, 2019, released all claims by Retractable against BD and MDC arising prior to May 3, 2019 and all claims by BD and MDC against Retractable arising prior to May 3, 2019. As a result, on May 6, 2019, the following actions were taken in each of the two cases: Retractable withdrew its petition before the U.S. Court of Appeals for the Fifth Circuit for an en banc rehearing; and the parties filed for a dismissal with prejudice in the U.S. District Court for the Eastern District of Texas, Texarkana Division. The settlement does not obligate either party to make any payment to the other and each party shall be responsible for its own costs and attorneys’ fees.”
We believe with the lawsuits behind them it could be a positive for the Company as management can focus their attention on resources to grow the company.
There is a specific caveat that we plan to gain a better understanding on as well, beyond what we've already gleaned.
The Company is behind on some preferred stock dividends. RVP has several series of convertible preferred stock, which by itself is not a huge dilution risk, as the total number of shares they would convert into is 781,000 at much higher strike prices from the current price.
The big concern we have is that they are roughly $12 million behind on dividend payment for series 3 through 5. Obviously, a discussion with management to determine how they plan to address this debt is warranted.
With roughly $11 million in cash & debt and equity securities, the company has some funds to address the dividend arrearage. As a medical device company trading at a P/S ratio of near 1, we feel nice upside to the stock is possible if growth momentum can continue and a shareholder friendly move is finalized in regards to the dividend payments.
