Company Contact: | Investor Relations Contacts: |
E-Z-EM, Inc. | Lippert/Heilshorn & Associates, Inc. |
Tom Johnson x3317 | Kim Sutton Golodetz (kgolodetz@lhai.com) |
(800) 544-4624 | (212) 838-3777 |
www.ezem.com | Bruce Voss (bvoss@lhai.com) |
(310) 691-7100 | |
www.lhai.com |
FOR IMMEDIATE RELEASE
E-Z-EM REPORTS RECORD NET SALES
FOR FOURTH QUARTER AND FISCAL YEAR 2006
Conference Call to begin at 4:30pm Eastern Time Thursday, August 10, 2006
LAKE SUCCESS, N.Y. (August 10, 2006) – E-Z-EM, Inc. (NASDAQ: EZEM) today announced financial results for its 2006 fourth quarter and fiscal year. For the quarter ended June 3, 2006, net sales from continuing operations were a record $37.1 million, up 16% compared with net sales of $32.0 million for the quarter ended May 28, 2005. Earnings from continuing operations for both the 2006 and 2005 fourth quarters were $1.3 million, or $0.12 per diluted share.
Sales growth was led by CT imaging products, which collectively grew 17% over the prior-year quarter. Important contributors of sales growth over the prior-year period included CT injector systems (up 30%), and CT contrast, including the Smoothie line of oral CT contrast products (up 10%). Additional significant contributors of sales growth over the prior-year period included X-ray fluoroscopy products (up 9%) and defense decontaminants (up 221%).
Gross profit for the current quarter increased 17% to $15.7 million from $13.4 million for the year-ago quarter due to the increase in sales. Gross profit percentage increased slightly to 42.4% from 42.0%, which the Company attributes to sales price increases and a slightly more favorable sales product mix.
Operating expenses were $13.9 million, up from $12.4 million for the prior-year quarter. The increase was largely due to additional infrastructure expenses of $0.7 million related to continued investment in the Company’s RSDL business, additional compensation costs of $0.5 million due in part to added head count, and $0.3 million in increased selling expenses resulting from higher sales. Operating profit was $1.8 million, up from $1.0 million from the prior-year period.
For the 2006 fourth quarter, the Company’s effective tax rate was 35%, as compared to 18% in the fiscal 2005 fourth quarter. The tax rate for the prior year differed from the statutory Federal rate of 34% due primarily to the reversal of a tax valuation allowance relating to the sale of non-core equity securities recorded in that period.
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During the fourth quarter of fiscal 2006, the Company recorded net sales of $496,000 and pre-tax earnings of $319,000 ($223,000 after-tax or $0.02 per diluted share), relating to an adjustment of sales and related earnings at its subsidiary in the United Kingdom (UK) for the first three quarters of fiscal 2006 (the “UK Subsidiary Adjustment”). The UK Subsidiary Adjustment resulted from misconduct by certain local operational and financial management personnel to misrepresent financial results in order to closely align actual operating results with budget. The Company determined that sales and net earnings in the UK subsidiary were under reported in the first three quarters of fiscal 2006, that the cumulative effect of these adjustments was recorded in the fourth quarter of 2006 (i.e. the UK Subsidiary Adjustment) and that annual results for 2006 were properly reported. It was also determined that a similar irregularity occurred in the second and third quarters of fiscal 2005. However, the annual results for fiscal 2005 were properly reported. The Company believes that all accounting irregularities have been identified, corrective actions taken and that the UK Subsidiary Adjustment captures all necessary adjustments required to reflect the proper accounting treatment. After consideration of the qualitative and quantitative factors, the Company determined that the effects of these accounting irregularities were not material to any prior reporting period.
Net sales from continuing operations for the 12 months ended June 3, 2006 were a record $138.4 million, up 22% from net sales from continuing operations of $113.1 million for the 12 months ended May 28, 2005. Gross profit as a percentage of net sales improved to 43.2% from 42.5% last fiscal year. Operating profit was $10.4 million, compared with $3.5 million last year. Earnings from continuing operations for fiscal 2006 were $9.8 million, or $0.88 per diluted share, up from $5.7 million, or $0.52 per diluted share, for the prior year. A number of unusual and non-recurring items occurred in fiscal years 2006 and 2005 that, in the aggregate, favorably affected operating results and net earnings in both periods. These items, presented in further detail in the attached supplemental schedules, relate to: 1) the closing of facilities in Puerto Rico, the U.S. and Japan, giving rise to closing costs, certain tax benefits and gains from the sales of both operating and non-core assets related to these restructuring projects; 2) the reversal of a tax valuation allowance in fiscal 2006; and 3) a non-core asset impairment charge in 2005. The Company believes these supplemental schedules will provide information to enable a clearer understanding of our ongoing operations.
E-Z-EM had cash, cash equivalents and short-term debt and equity securities as of June 3, 2006 of $40.3 million, compared with $28.6 million as of May 28, 2005.
Commenting on the results, Anthony A. Lombardo, president and CEO of E-Z-EM, said, “I am delighted with the continued progress the Company has made on both financial and operational levels during the year. Over this period, we have achieved continued growth in our CT products, delivered a solid performance in our core business, and took further steps to streamline the Company’s operations.
“We are extremely disappointed about the situation in the UK, and in no way believe that it is reflective of the high standards of integrity we demand at E-Z-EM.
“Our overall performance for the fourth quarter was strong. Sales were once again led by our CT imaging and fluoroscopy products, specifically Empower injector systems and our Smoothie oral contrast products. Sales in this area continue to be driven by the growth in CT imaging in general, in terms of both procedures and CT scanner installations. Sales of Volumen® continue on a positive trend, which reflects growing use of the product in CT enterography procedures and other applications. The product has been supported by recent academic papers published detailing the clinical efficacy of CT enterography in conjunction with low Hounsfield contrast agents. The adoption cycle for VoLumen has been somewhat slower than anticipated due to a longer clinical learning curve required for reading Volumetric imaging in CT, as well as the need for increased applications training for CT technologists. However, we believe that VoLumen will continue to benefit from the overall growth in MDCT imaging over time.
“RSDL sales for the quarter were $1.6 million and $3.5 million for the year, up significantly from both prior years’ respective periods. While still a small percentage of our overall sales, the growth is a positive step in the evolution in RSDL. The year was marked by continued support for RSDL within NATO countries and the beginning adoption, while limited, by the U.S. State and Local First Responder market. During the year we continued to work with the DOD on their adoption of the product, and we were pleased with their request for RSDL procurement in the fiscal year 2007 U.S. Federal Budget.
“Virtual colonoscopy product sales for the fourth quarter were $1.2 million and $4.1 million for the year, up from the prior-year’s respective periods on strong growth in Europe. We believe significant growth in this product area is still dependent on a successful outcome of the ACRIN II trial and subsequent reimbursement for screening exams.
Fiscal Year 2007 Financial Guidance
The Company expects net sales to be at least $147 million and net earnings to be at least $7.4 million or $0.66 per diluted share in fiscal 2007. Regarding guidance for fiscal 2007, Mr. Lombardo said, “We are coming off a very strong base year in fiscal 2006 which makes fiscal 2007 a challenging year from a comparative standpoint. Strong double digit growth in our CT imaging products will be mitigated somewhat by the return of Mallinckrodt to the market after almost a year and a half hiatus due to their product recall, and the closure of our Japanese subsidiary. We estimate these latter two items will have a negative effect on sales of about $6 million in 2007. So, while the increase in net sales year over year is 6% in absolute terms, the increase is in the 11% range absent these two items. Also, a number of unusual items positively effected net earnings in fiscal 2006 and 2005, such as the sale of a redundant manufacturing facility in New York and a tax benefit derived from the planned closure of the Japanese operation. In order to assist investors in understanding the impact of these and other items on continuing operations and to clarify the comparison of our net earnings guidance with the prior two year periods, please refer to the attached supplemental schedules.”
Conference Call
E-Z-EM management will host a conference call to discuss these results on Thursday, August 10, 2006 beginning at 4:30 p.m. Eastern Time. To participate in the call, please dial (877) 815-7177 from the U.S., or (706) 679-0753 from outside the U.S. A telephone replay of the call will be accessible for a limited time following completion of the call by dialing (800) 642-1687 or (706) 645-9291, and entering reservation number 4116442. In addition, participants may access the call over the Internet by visiting the Company’s web site atwww.ezem.com. The call will be archived there for a limited period of time.
About E-Z-EM, Inc.
E-Z-EM is a leading manufacturer of contrast agents for gastrointestinal radiology. The Company is the developer of VoLumen®—the next generation low density barium sulfate suspension for use as an oral contrast in Multidetector CT (MDCT) and PET/CT studies. The Company also offers Empower ®—the only family of CT injectors on the market powered by the IRiSCT® Injector Information Reporting System—and offers a complete product set for the virtual colonoscopy practitioner. This product line consists of virtual colonoscopy hardware, software, nutritional prep kits and bowel cleaners, tagging agents and a carbon dioxide colon insufflation system. The Company is also the exclusive manufacturer and marketer of Reactive Skin Decontamination Lotion (RSDL) for first-responder organizations and military services in many countries. RSDL is a liquid skin decontaminant that breaks down chemical agents such as Sarin or VX in seconds, leaving a non-toxic liquid that can be washed away with water.
The statements made in this document contain certain forward-looking statements. Words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates” or variations of such words and similar expressions, are intended to identify such forward-looking statements. The forward-looking
statements contained in this release may involve numerous risks and uncertainties, known and unknown, beyond the Company’s control. Such risks and uncertainties include: the ability of the Company to develop its products; the impact of Mallinckrodt’s return to market on sales; continued growth in CT product sales; continued growth in VC products sales; the results of future research studies, including a positive result from the ACRIN II trial, market acceptance and sales of RSDL, including approval of the DoD budget request and placement of a procurement order by the DoD for RSDL, market acceptance and sales of VoLumen®; future actions by the FDA or other regulatory agencies, overall economic conditions, general market conditions, price increases of raw materials and components, foreign currency exchange rate fluctuations as well as the risk factors listed from time to time in the SEC filings of E-Z-EM, Inc., including but not limited to its Form 10-Q for the quarter ended March 4, 2006 and its Annual Report on Form 10-K for the fiscal year ended May 28, 2005. Consequently, actual future results may differ materially from the anticipated results expressed in the forward-looking statements, and investors are cautioned not to place undue reliance on the forward-looking statements included in this release.
(Tables to follow)
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E-Z-EM, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
June 3, | May 28, | ||||||
2006 |
| 2005 | |||||
| |||||||
Assets | |||||||
| |||||||
Current assets | |||||||
Cash, cash equivalents and debt and equity securities | $ | 40,268 | $ | 28,602 | |||
Accounts receivable, net | 20,909 | 17,677 | |||||
Inventories, net | 27,152 | 22,822 | |||||
Other current assets | 7,052 | 6,149 | |||||
| |||||||
Total current assets | 95,381 | 75,250 | |||||
Property, plant & equipment, net | 13,048 | 13,256 | |||||
Other non-current assets | 15,363 | 13,549 | |||||
Non-current assets held for disposal | 3,593 | ||||||
| |||||||
Total assets | $ | 123,792 | $ | 105,648 | |||
| |||||||
| |||||||
Liabilities and Stockholders’ Equity | |||||||
| |||||||
Current liabilities | |||||||
Accounts payable | $ | 5,721 | $ | 5,069 | |||
Accrued liabilities | 12,515 | 9,916 | |||||
Other current liabilities | 84 | 653 | |||||
| |||||||
Total current liabilities | 18,320 | 15,638 | |||||
| |||||||
Long-term liabilities | 3,630 | 4,290 | |||||
Stockholders’ equity | 101,842 | 85,720 | |||||
| |||||||
Total liabilities and stockholders’ equity | $ | 123,792 | $ | 105,648 | |||
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E-Z-EM, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
(in thousands, except per share data)
Fifty-three | Fifty-two | ||||||||||||
Thirteen weeks ended | weeks ended | weeks ended | |||||||||||
June 3, | May 28, | June 3, | May 28, | ||||||||||
2006 | 2005 | 2006 | 2005 | ||||||||||
| |||||||||||||
Net sales | $ | 37,116 | $ | 32,008 | $ | 138,369 | $ | 113,075 | |||||
Cost of goods sold | 21,375 |
| 18,577 | 78,649 |
| 65,039 | |||||||
| |||||||||||||
Gross profit | 15,741 | 13,431 | 59,720 | 48,036 | |||||||||
| |||||||||||||
Operating expenses | 13,919 | 12,398 | 49,294 | 44,583 | |||||||||
| |||||||||||||
Operating profit | 1,822 | 1,033 | 10,426 | 3,453 | |||||||||
| |||||||||||||
Other income (expense), net | 254 | 603 | 276 | 3,106 | |||||||||
| |||||||||||||
Earnings from continuing operations | |||||||||||||
before income taxes | 2,076 | 1,636 | 10,702 | 6,559 | |||||||||
| |||||||||||||
Income tax provision (1) | 730 | 300 | 936 | 851 | |||||||||
| |||||||||||||
Earnings from continuing operations | 1,346 | 1,336 | 9,766 | 5,708 | |||||||||
| |||||||||||||
Earnings from discontinued operation, | |||||||||||||
net of income tax provision | 1,228 | ||||||||||||
| |||||||||||||
Net earnings | $ | 1,346 | $ | 1,336 | $ | 9,766 | $ | 6,936 | |||||
| |||||||||||||
Basic earnings per common share | |||||||||||||
From continuing operations | $ | 0.12 | $ | 0.12 | $ | 0.90 | $ | 0.53 | |||||
From discontinued operation, | |||||||||||||
net of income tax provision | 0.11 | ||||||||||||
| |||||||||||||
Net earnings | $ | 0.12 | $ | 0.12 | $ | 0.90 | $ | 0.64 | |||||
| |||||||||||||
Diluted earnings per common share | |||||||||||||
From continuing operations | $ | 0.12 | $ | 0.12 | $ | 0.88 | $ | 0.52 | |||||
From discontinued operation, | |||||||||||||
net of income tax provision | 0.11 | ||||||||||||
| |||||||||||||
Net earnings | $ | 0.12 | $ | 0.12 | $ | 0.88 | $ | 0.63 | |||||
| |||||||||||||
Weighted average common shares | |||||||||||||
Basic | 10,860 | 10,793 | 10,849 | 10,762 | |||||||||
Diluted | 11,127 | 10,975 | 11,106 | 10,951 |
(1) | The fifty-three weeks ended June 3, 2006 includes a tax benefit of $2,481,000 associated with the closing of the Company’s Japanese subsidiary, and the reversal of a valuation allowance of $456,000 relating to a previously impaired, non-core equity security. |
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Supplemental Financial Information
The financial information presented in the following tables contains certain non-GAAP financial measures. Management believes the use of the non-GAAP measures improves the investor’s ability to make comparisons between fiscal periods and provide more useful information to investors regarding the Company’s continuing results of operations. The following financial tables reconciles proforma (1) operating profit (2) earnings from continuing operations and (3) diluted earnings per share to the most directly comparable U.S. GAAP measures. The proforma adjustments give effect to the impact of the Company’s Manufacturing Site Relocation (“MSR”) programs including:
• | MSR II project costs F/Y 2006 and F/Y 2005 |
o | Sale of real property (redundant manufacturing facility) - F/Y 2006 |
o | Closing costs and tax benefits related to the planned liquidation of Japanese subsidiary - F/Y 2006 |
o | Sale of non-core equity securities to fund the MSR II project - F/Y 2005 |
o | Tax benefit related to losses and closure of Puerto Rican operations (MSR I) – F/Y 2005 |
• | Change in tax valuation allowance – F/Y 2006 |
• | Impairment of a non-core equity security – F/Y 2005 |
The additional non-GAAP financial information presented should be considered in conjunction with, and not as a substitute for, or superior to, the financial information presented in accordance with GAAP. All dollar amounts are in thousands, except diluted earnings per common share from continuing operations.
___________________________
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E-Z-EM, Inc. and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited)
(in thousands, except per share data)
| Fifty-three | Fifty-two | |||||
weeks ended | weeks ended | ||||||
June 3, |
| May 28, | |||||
2006 | 2005 | ||||||
Operating profit – as reported | $ | 10,426 | $ | 3,453 | |||
Add: | |||||||
MSR II project costs | 105 | 2,917 | |||||
Costs associated with the closing of | |||||||
the Japanese subsidiary | 333 | ||||||
Less: | |||||||
Gain on sale of real property | 1,205 | ||||||
| |||||||
Operating profit – pro forma | $ | 9,659 | $ | 6,370 | |||
| |||||||
| |||||||
Earnings from continuing operations – as reported | $ | 9,766 | $ | 5,708 | |||
Add: | |||||||
MSR II project costs | 69 | 1,925 | |||||
Costs associated with the closing of | |||||||
the Japanese subsidiary | 333 | ||||||
Impairment of non-core equity security |
| 500 | |||||
Less: | |||||||
Gain on sale of real property | 795 | ||||||
Gain on sale of non-core equity securities | 3,270 | ||||||
Tax benefit on losses of Puerto Rican subsidiary | 548 | ||||||
Tax benefit associated with the closing of | |||||||
the Japanese subsidiary | 2,481 | ||||||
Change in tax valuation allowance | 456 | ||||||
| |||||||
Earnings from continuing operations – pro forma | $ | 6,436 | $ | 4,315 | |||
| |||||||
| |||||||
Diluted earnings per common share from | |||||||
continuing operations – as reported | $ | 0.88 | $ | 0.52 | |||
Add: | |||||||
MSR II project costs | 0.00 | 0.18 | |||||
Costs associated with the closing of | |||||||
the Japanese subsidiary | 0.03 | ||||||
Impairment of non-core equity security |
| 0.05 | |||||
Less: | |||||||
Gain on sale of real property | 0.07 | ||||||
Gain on sale of non-core equity securities | 0.30 | ||||||
Tax benefit on losses of Puerto Rican subsidiary | 0.05 | ||||||
Tax benefit associated with the closing of | |||||||
the Japanese subsidiary | 0.22 | ||||||
Change in tax valuation allowance | 0.04 | ||||||
| |||||||
Diluted earnings per common share from | |||||||
continuing operations – pro forma | $ | 0.58 | $ | 0.40 | |||
# # #
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