-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LtNs7FN61BlSF+qI1Ul215KGqNeK9+WtntwXH5HPiZZgpeAmP6RlMiqP5Icx71m3 0deKrBdO8lsonrVK0/g1vg== 0000891554-99-000732.txt : 19990414 0000891554-99-000732.hdr.sgml : 19990414 ACCESSION NUMBER: 0000891554-99-000732 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990227 FILED AS OF DATE: 19990413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EZ EM INC CENTRAL INDEX KEY: 0000727008 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 111999504 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11479 FILM NUMBER: 99592750 BUSINESS ADDRESS: STREET 1: 717 MAIN ST CITY: WESTBURY STATE: NY ZIP: 11590 BUSINESS PHONE: 5163338230 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 27, 1999 ----------------- Commission file number 1-11479 ------- E-Z-EM, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 11-1999504 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 717 Main Street, Westbury, New York 11590 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (516) 333-8230 -------------------------------------------------- Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ On April 9, 1999, there were 4,035,346 shares of the registrant's Class A Common Stock outstanding and 6,058,977 shares of the registrant's Class B Common Stock outstanding. Page 1 of 19 Exhibit Index on Page 18 E-Z-EM, Inc. and Subsidiaries INDEX Part I: Financial Information Page - ------- --------------------- ---- Item 1. Financial Statements Consolidated Balance Sheets - February 27, 1999 and May 30, 1998 3 - 4 Consolidated Statements of Operations - thirteen and thirty-nine weeks ended February 27, 1999 and February 28, 1998 5 Consolidated Statement of Stockholders' Equity - thirty-nine weeks ended February 27, 1999 6 Consolidated Statements of Cash Flows - thirty-nine weeks ended February 27, 1999 and February 28, 1998 7 - 8 Notes to Consolidated Financial Statements 9 - 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 17 Part II: Other Information - -------- ----------------- Item 6. Exhibits and Reports on Form 8-K 18 -2- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands) February 27, May 30, ASSETS 1999 1998 ------ ------ (unaudited) (audited) CURRENT ASSETS Cash and cash equivalents $ 5,153 $ 4,654 Certificates of deposit with maturities of three to twelve months 802 Debt and equity securities 5,123 3,475 Accounts receivable, principally trade, net 21,051 21,348 Inventories 27,858 26,764 Other current assets 3,441 2,499 ------ ------ Total current assets 63,428 58,740 INVESTMENT IN AFFILIATE 921 1,121 PROPERTY, PLANT AND EQUIPMENT - AT COST, less accumulated depreciation and amortization 21,392 21,917 COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED, less accumulated amortization 419 446 INTANGIBLE ASSETS, less accumulated amortization 2,381 2,546 DEBT AND EQUITY SECURITIES 2,408 2,057 OTHER ASSETS 3,853 3,879 ------ ------ $94,802 $90,706 ====== ====== The accompanying notes are an integral part of these financial statements. -3- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) February 27, May 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 ------ ------ (unaudited) (audited) CURRENT LIABILITIES Notes payable $ 2,069 $ 3,041 Current maturities of long-term debt 234 287 Accounts payable 7,182 6,265 Accrued liabilities 7,445 6,958 Accrued income taxes 711 592 ------ ------ Total current liabilities 17,641 17,143 LONG-TERM DEBT, less current maturities 558 606 OTHER NONCURRENT LIABILITIES 1,888 1,734 COMMITMENTS AND CONTINGENCIES ------ ------ Total liabilities 20,087 19,483 ------ ------ STOCKHOLDERS' EQUITY Preferred stock, par value $.10 per share - authorized, 1,000,000 shares; issued, none - - Common stock Class A (voting), par value $.10 per share - authorized, 6,000,000 shares; issued and outstanding 4,035,346 shares at February 27, 1999 and May 30, 1998 403 403 Class B (nonvoting), par value $.10 per share - authorized, 10,000,000 shares; issued and outstanding 6,063,377 shares at February 27, 1999 and 5,999,073 shares at May 30, 1998 607 600 Additional paid-in capital 21,954 21,643 Retained earnings 53,047 49,090 Accumulated other comprehensive loss (1,296) (513) ------ ------ Total stockholders' equity 74,715 71,223 ------ ------ $94,802 $90,706 ====== ====== The accompanying notes are an integral part of these financial statements. -4- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)
Thirteen weeks ended Thirty-nine weeks ended ------------------------------ ------------------------------ February 27, February 28, February 27, February 28, 1999 1998 1999 1998 ------ ------ ------ ------ Net sales $26,618 $24,385 $78,791 $74,809 Cost of goods sold 15,426 16,146 45,392 48,114 ------ ------ ------ ------ Gross profit 11,192 8,239 33,399 26,695 ------ ------ ------ ------ Operating expenses Selling and administrative 8,214 8,379 24,291 24,923 Research and development 1,335 1,410 3,566 4,491 Impairment of long-lived assets 4,121 4,121 ----- ------ ------ ------ Total operating expenses 9,549 13,910 27,857 33,535 ----- ------ ------ ------ Operating profit (loss) 1,643 (5,671) 5,542 (6,840) Other income (expense) Interest income 128 248 385 577 Interest expense (66) (206) (189) (572) Equity in losses of affiliate (62) (70) (200) (150) Other, net 26 (179) 408 (235) ----- ----- ----- ----- Earnings (loss) before income taxes 1,669 (5,878) 5,946 (7,220) Income tax provision (benefit) 710 (59) 1,989 (154) ----- ----- ----- ----- NET EARNINGS (LOSS) $ 959 $(5,819) $ 3,957 $(7,066) ===== ===== ===== ===== Earnings (loss) per common share Basic $ .10 $ (.58) $ .39 $ (.71) ===== ===== ===== ===== Diluted $ .09 $ (.58) $ .38 $ (.71) ===== ===== ===== ===== Weighted average common shares Basic 10,094 9,949 10,085 9,934 ====== ===== ====== ===== Diluted 10,321 9,949 10,338 9,934 ====== ===== ====== =====
The accompanying notes are an integral part of these financial statements. -5- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Thirty-nine weeks ended February 27, 1999 (unaudited) (in thousands, except share data)
Class A Class B Accumulated common stock common stock Additional other Compre- ------------------ ------------------- paid-in Retained comprehensive hensive Shares Amount Shares Amount capital earnings loss Total income ------ ------ ------ ------ ------- -------- ------------- ----- ------ Balance at May 30, 1998 4,035,346 $403 5,999,073 $600 $21,643 $49,090 $ (513) $71,223 Exercise of stock options 57,704 6 238 244 Income tax benefits on stock options exercised 34 34 Compensation related to stock option plans 4 4 Issuance of stock 6,600 1 35 36 Net earnings 3,957 3,957 $3,957 Unrealized holding gain on debt and equity securities 248 248 248 Foreign currency translation adjustments (1,031) (1,031) (1,031) --------- --- --------- --- ------ ------ ----- ------ ----- Comprehensive income $3,174 ===== Balance at February 27, 1999 4,035,346 $403 6,063,377 $607 $21,954 $53,047 $(1,296) $74,715 ========= === ========= === ====== ====== ===== ======
The accompanying notes are an integral part of this financial statement. -6- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Thirty-nine weeks ended --------------------------- February 27, February 28, 1999 1998 ------ ------ Cash flows from operating activities: Net earnings (loss) $ 3,957 $(7,066) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities Depreciation and amortization 2,175 2,533 Impairment of long-lived assets 4,121 Provision for doubtful accounts 182 202 Equity in losses of affiliate 200 150 Deferred income tax provision 25 14 Other non-cash items 33 5 Changes in operating assets and liabilities Accounts receivable 115 (1,452) Inventories (1,094) (408) Other current assets (942) 685 Other assets (92) 126 Accounts payable 917 530 Accrued liabilities 487 6 Accrued income taxes 94 70 Other noncurrent liabilities 111 (53) ------ ------ Net cash provided by (used in) operating activities 6,168 (537) ------ ------ Cash flows from investing activities: Additions to property, plant and equipment, net (1,628) (858) Investment in affiliate (1,340) Available-for-sale securities Purchases (18,643) (8,840) Proceeds from sale 16,995 16,408 Increase in certificates of deposit (802) ------ ------ Net cash (used in) provided by investing activities (4,078) 5,370 ------ ------ Cash flows from financing activities: Repayments of debt (1,252) (7,380) Proceeds from issuance of debt 3,436 Proceeds from exercise of stock options, including related income tax benefits 278 222 Proceeds from issuance of stock in connection with the stock purchase plan 7 5 ------ ------ Net cash used in financing activities (967) (3,717) ------ ------ -7- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (unaudited) (in thousands) Thirty-nine weeks ended --------------------------- February 27, February 28, 1999 1998 ------ ------ Effect of exchange rate changes on cash and cash equivalents $ (624) $ (714) ----- ---- INCREASE IN CASH AND CASH EQUIVALENTS 499 402 Cash and cash equivalents Beginning of period 4,654 4,484 ----- ----- End of period $5,153 $ 4,886 ===== ===== Supplemental disclosures of cash flow information: Cash paid (refunded) during the period for: Interest $ 117 $ 580 ===== ===== Income taxes (net of refunds of $4 and $1,314 in 1999 and 1998, respectively $1,827 $(1,031) ===== ===== The accompanying notes are an integral part of these financial statements. -8- E-Z-EM, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS February 27, 1999 and February 28, 1998 (unaudited) NOTE A - CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of February 27, 1999, the consolidated statement of stockholders' equity for the period ended February 27, 1999, and the consolidated statements of operations and cash flows for the periods ended February 27, 1999 and February 28, 1998, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normally recurring adjustments) necessary to present fairly the financial position, changes in stockholders' equity, results of operations and cash flows at February 27, 1999 (and for all periods presented) have been made. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the fiscal 1998 Annual Report on Form 10-K filed by the Company on August 28, 1998. The results of operations for the periods ended February 27, 1999 and February 28, 1998 are not necessarily indicative of the operating results for the respective full years. The consolidated financial statements include the accounts of E-Z-EM, Inc. and all 100%-owned subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated. The Company's approximate 23% interest in an affiliate is accounted for by the equity method. Pursuant to this method, such investment is recorded at cost and adjusted by the Company's share of undistributed earnings (or losses). NOTE B - INVENTORIES Inventories consist of the following: February 27, May 30, 1999 1998 ------ ------ (in thousands) Finished goods $13,071 $13,846 Work in process 2,114 1,474 Raw materials 12,673 11,444 ------ ------ $27,858 $26,764 ====== ====== NOTE C - EARNINGS PER COMMON SHARE Basic earnings per share are based on the weighted average number of common shares outstanding without consideration of potential common stock. Diluted earnings per share are based on the weighted average number of common and potential common shares outstanding. The calculation takes into account the shares that may be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the period. Potential common shares were -9- E-Z-EM, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) February 27, 1999 and February 28, 1998 (unaudited) NOTE C - EARNINGS PER COMMON SHARE (continued) excluded from the diluted calculation for the thirteen and thirty-nine weeks ended February 28, 1998, as their effects were anti-dilutive. The following table sets forth the reconciliation of the weighted average number of common shares:
Thirteen weeks ended Thirty-nine weeks ended ----------------------------- ----------------------------- February 27, February 28, February 27, February 28, 1999 1998 1999 1998 ------ ------ ------ ------ (in thousands) Basic 10,094 9,949 10,085 9,934 Effect of dilutive securities (stock options) 227 253 ------ ----- ------ ----- Diluted 10,321 9,949 10,338 9,934 ====== ===== ====== =====
NOTE D - COMMON STOCK Under the 1983 and 1984 Stock Option Plans, options for 32,727 shares were granted at prices ranging from $5.63 to $6.00 per share, options for 57,704 shares were exercised at $4.22 per share, options for 1,229 shares were forfeited at $5.39 per share, and no options expired during the thirty-nine weeks ended February 27, 1999. Under the 1997 AngioDynamics Stock Option Plan, options for 1.59 shares were forfeited at $40,000 per share, and no options were granted, exercised or expired during the thirty-nine weeks ended February 27, 1999. Under the Employee Stock Purchase Plan, 1,600 shares were purchased at prices ranging from $4.36 to $5.10 per share during the thirty-nine weeks ended February 27, 1999. Total proceeds received by the Company approximated $7,000. NOTE E - COMPREHENSIVE INCOME During the first quarter of fiscal 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of SFAS No. 130 had no impact on the Company's net earnings or stockholders' equity. SFAS No. 130 requires unrealized holding gains or losses on debt and equity securities available for sale and cumulative translation adjustments, which prior to adoption were reported separately in stockholders' equity, to be included in accumulated other comprehensive income (loss). Prior year financial statements have been reclassified to conform to the requirements of SFAS No. 130. -10- E-Z-EM, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) February 27, 1999 and February 28, 1998 (unaudited) NOTE E - COMPREHENSIVE INCOME (continued) The components of comprehensive income, net of related tax, are as follows: Thirty-nine weeks ended --------------------------- February 27, February 28, 1999 1998 ------ ------ (in thousands) Net earnings (loss) $3,957 $(7,066) Unrealized holding gain (loss) on debt and equity securities 248 (29) Foreign currency translation adjustments (1,031) (491) ----- ----- Comprehensive income (loss) $3,174 $(7,586) ===== ===== The components of accumulated other comprehensive loss, net of related tax, are as follows: February 27, May 30, 1999 1998 ------ ------ (in thousands) Unrealized holding gain on debt and equity securities $ 1,592 $ 1,344 Cumulative translation adjustments (2,888) (1,857) ----- ----- Accumulated other comprehensive loss $(1,296) $ (513) ===== ===== NOTE F - NEW PRONOUNCEMENT NOT YET ADOPTED In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which is effective the fourth quarter of the Company's current fiscal year. The statement redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. The Company does not believe that the provisions of SFAS No. 131 will have a significant impact on its segment reporting and disclosures. NOTE G - RECLASSIFICATIONS Certain reclassifications have been made to the prior period amounts to conform to the current period presentation. -11- E-Z-EM, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Quarters ended February 27, 1999 and February 28, 1998 - ------------------------------------------------------ The Company's quarters ended February 27, 1999 and February 28, 1998 both represent thirteen weeks. Results of Operations - --------------------- Segment Overview ---------------- The Company operates in two industry segments: Diagnostic products and AngioDynamics products. The Diagnostic products industry segment includes both contrast systems and non-contrast systems. The AngioDynamics products industry segment includes angiography, therapeutic and stent/angioplasty medical devices used in the interventional medical marketplace.
Diagnostic AngioDynamics Eliminations Total ---------- ------------- ------------ ----- (in thousands) Quarter ended February 27, 1999 - ------------------------------- Unaffiliated customer sales $22,077 $4,541 - $26,618 Intersegment sales 9 129 ($138) - Gross profit (loss) 9,117 2,078 (3) 11,192 Operating profit (loss) 2,059 (416) - 1,643 Quarter ended February 28, 1998 - ------------------------------- Unaffiliated customer sales $19,878 $4,507 - $24,385 Intersegment sales - 82 ($82) - Gross profit (loss) 6,488 1,761 (10) 8,239 Operating loss (406) (5,255) (10) (5,671)
Diagnostic Products ------------------- Diagnostic segment operating results for the current quarter improved by $2,465,000 due primarily to increased sales and improved gross profit. Net sales increased 11%, or $2,199,000, due to increased demand for sales of both contrast systems and non-contrast systems. Price increases accounted for approximately 1% of net sales in the current quarter. Gross profit expressed as a percentage of net sales improved to 41% during the current quarter, versus 33% during the comparable quarter of the prior year due primarily to lower material costs, reduced unabsorbed overhead costs and sales price increases. AngioDynamics Products ---------------------- AngioDynamics segment operating results for the current quarter improved by $4,839,000, of which $4,121,000 resulted from the recording of an impairment charge, of certain long-lived assets, in the comparable period of last year. Excluding the effect of the impairment charge, AngioDynamics operating results improved by $718,000 due to a 1% sales increase, improved gross profit and reduced operating expenses. Gross profit expressed as a percentage of net sales improved to 45% during the current quarter versus 38% during the comparable quarter of the prior year due primarily to increased manufacturing efficiencies at the Queensbury, New York facility and increased production throughput at both the Queensbury and Irish facilities. Decreased operating expenses, before impairment charge, of $401,000 can be attributed to the consolidation of -12- operations, resulting from the closing of its Leocor facility in the third quarter of last fiscal year, coupled with reduced amortization expense, resulting from the impairment charge. Consolidated Results of Operations ---------------------------------- For the quarter ended February 27, 1999, the Company reported net earnings of $959,000, or $.10 and $.09 per common share on a basic and diluted basis, respectively, as compared to a net loss of $5,819,000, or ($.58) per common share on both a basic and diluted basis, for the comparable period of last year. Results for the comparable period of last year were adversely affected by the AngioDynamics impairment charge of $4,121,000, or $.41 per share. Results for the current quarter were favorably affected by increased sales in the Diagnostic segment, improved gross profit in both industry segments, and decreased operating expenses, before impairment charge, in the AngioDynamics segment. Net sales for the quarter ended February 27, 1999 increased 9%, or $2,233,000, as compared to the quarter ended February 28, 1998 due to increased sales of contrast systems of $1,720,000, non-contrast systems of $479,000 and AngioDynamics products of $34,000. Price increases accounted for approximately 1% of net sales in the current quarter. Net sales in international markets, including direct exports from the U.S., increased 3%, or $240,000, in the current quarter versus the comparable period of last year due to increased sales of contrast systems of $577,000, partially offset by decreased sales of non-contrast systems of $254,000 and AngioDynamics products of $83,000. Gross profit expressed as a percentage of net sales increased to 42% during the current quarter versus 34% during the comparable quarter of the prior year due to increased gross profit in both industry segments. The improved Diagnostic gross profit was due primarily to lower material costs, reduced unabsorbed overhead costs and sales price increases. The improved AngioDynamics gross profit was due primarily to increased manufacturing efficiencies at the Queensbury facility and increased production throughput at both the Queensbury and Irish facilities. Selling and administrative ("S&A") expenses were $8,214,000 during the quarter ended February 27, 1999 versus $8,379,000 during the quarter ended February 28, 1998. This decline of $165,000, or 2%, in the current quarter was due to decreased AngioDynamics S&A expenses, which can be attributed to the closing of its Leocor facility in the third quarter of last fiscal year, coupled with reduced amortization expense, resulting from the impairment charge recorded in the third quarter of last fiscal year. Research and development ("R&D") expenditures decreased 5% in the current quarter to $1,335,000, or 5% of net sales, from $1,410,000, or 6% of net sales, in the comparable quarter of the prior year. This decline was due primarily to decreases in AngioDynamics project spending. Of the R&D expenditures in the current quarter, approximately 47% relate to contrast systems, 35% to AngioDynamics projects, 2% to immunological projects, 5% to other projects and 11% to general regulatory costs. R&D expenditures are expected to continue at approximately current levels. Other income, net of other expenses, totaled $26,000 of income in the current quarter versus $207,000 of expense in the comparable period of last year. This improvement was due to improved foreign currency exchange gains and losses. For the quarter ended February 27, 1999, the Company's effective tax rate of 43% differed from the Federal statutory tax rate of 34% due primarily to the fact that the Company did not provide for the tax benefit on losses incurred in certain jurisdictions, since, it is more likely than not that such benefits will not be realized, partially offset by earnings of the Puerto Rican subsidiary, which are subject to favorable U.S. tax treatment. The Company's unusually low -13- effective tax benefit rate of 1% during the quarter ended February 28, 1998 differed from the Federal statutory tax rate of 34% due primarily to the fact that the Company did not provide for the tax benefit on losses (including the impairment charge) incurred in certain jurisdictions, since, at that time, it was more likely than not that such benefits would not be realized. Losses incurred in a foreign jurisdiction subject to lower tax rates also contributed to the unusually low effective tax benefit rate. Thirty-nine weeks ended February 27, 1999 and February 28, 1998 - --------------------------------------------------------------- Results of Operations - --------------------- Segment Overview ----------------
Diagnostic AngioDynamics Eliminations Total ---------- ------------- ------------ ----- (in thousands) Thirty-nine weeks ended February 27, 1999 - ----------------------------------------- Unaffiliated customer sales $63,647 $15,144 - $78,791 Intersegment sales 35 383 ($418) - Gross profit (loss) 26,127 7,293 (21) 33,399 Operating profit (loss) 5,697 (152) (3) 5,542 Thirty-nine weeks ended February 28, 1998 - ----------------------------------------- Unaffiliated customer sales $61,080 $13,729 - $74,809 Intersegment sales 59 363 ($422) - Gross profit (loss) 21,918 4,801 (24) 26,695 Operating profit (loss) 669 (7,485) (24) (6,840)
Diagnostic Products ------------------- Diagnostic segment operating results for the current period improved by $5,028,000 due to increased sales, improved gross profit and reduced operating expenses. Net sales increased 4%, or $2,567,000, due to increased demand for sales of both contrast systems and non-contrast systems. Price increases had little effect on net sales in the current period. Gross profit expressed as a percentage of net sales improved to 41% during the current period, versus 36% during the comparable period of the prior year due primarily to reduced unabsorbed overhead costs. Decreased operating expenses of $819,000 can be attributed to a decline in R&D expenditures of $685,000 and severance costs incurred in the comparable period of the prior year. AngioDynamics Products ---------------------- AngioDynamics segment operating results for the current period improved by $7,333,000, of which $4,121,000 resulted from the recording of an impairment charge, of certain long-lived assets, in the comparable period of last year. Excluding the effect of the impairment charge, AngioDynamics operating results improved by $3,212,000 due to increased sales, improved gross profit and reduced operating expenses. Net sales increased 10%, or $1,415,000, due to the continued domestic market penetration of angiography products. International sales declined 6% as a result of suspending product shipments to distributors affected by the recent Brazilian economic crisis. Gross profit expressed as a percentage of net sales improved to 47% during the current period versus 34% during the comparable period of the prior year due primarily to increased manufacturing efficiencies at the Queensbury facility, increased production throughput at both the Queensbury and Irish facilities, the consolidation of operations, resulting from the closing of its Leocor facility in the third quarter of last fiscal year and decreased provision for inventory reserves of $243,000. Decreased operating expenses, before impairment charge, of $720,000 can be attributed to the closing -14- of its Leocor facility, coupled with reduced amortization expense, resulting from the impairment charge. Consolidated Results of Operations ---------------------------------- For the thirty-nine weeks ended February 27, 1999, the Company reported net earnings of $3,957,000, or $.39 and $.38 per common share on a basic and diluted basis, respectively, as compared to a net loss of $7,066,000, or ($.71) per common share on both a basic and diluted basis, for the comparable period of last year. Results for the comparable period of last year were adversely affected by the AngioDynamics impairment charge of $4,121,000, or $.41 per share. Results for the current period were favorably affected by increased sales, improved gross profit and decreased operating expenses, before impairment charge, in both industry segments. Net sales for the thirty-nine weeks ended February 27, 1999 increased 5%, or $3,982,000, as compared to the thirty-nine weeks ended February 28, 1998 due to increased sales of contrast systems of $1,423,000, AngioDynamics products of $1,415,000 and non-contrast systems of $1,144,000. Price increases had little effect on net sales in the current period. Net sales in international markets, including direct exports from the U.S., decreased 1%, or $215,000, in the current period versus the comparable period of last year due to foreign currency exchange rate fluctuations which adversely affected the translation of Canadian and Japanese sales to U.S. dollars for financial reporting purposes. Gross profit expressed as a percentage of net sales increased to 42% during the current period versus 36% during the comparable period of last year due to increased gross profit in both industry segments. The improved Diagnostic gross profit is due primarily to reduced unabsorbed overhead costs. The improved AngioDynamics gross profit is due primarily to increased manufacturing efficiencies at the Queensbury facility, increased production throughput at both the Queensbury and Irish facilities, the consolidation of operations, resulting from the closing of its Leocor facility in the third quarter of last fiscal year, and decreased provision for inventory reserves of $243,000. S&A expenses were $24,291,000 during the thirty-nine weeks ended February 27, 1999 versus $24,923,000 during the thirty-nine weeks ended February 28, 1998. This decline of $632,000, or 3%, in the current period was due to decreased AngioDynamics S&A expenses of $499,000 and decreased Diagnostic S&A expenses of $133,000. Decreased AngioDynamics S&A expenses can be attributed to the closing of its Leocor facility in the third quarter of last fiscal year, coupled with reduced amortization expense, resulting from the impairment charge recorded in the third quarter of last fiscal year. Decreased Diagnostic S&A expenses resulted from severance costs incurred in the comparable period of the prior year. R&D expenditures decreased 21% in the current period to $3,566,000, or 5% of net sales, from $4,491,000, or 6% of net sales, in the comparable prior year period. This decline was due primarily to decreases in expenses associated with Diagnostic product validations and clinical trials of $396,000, corporate projects of $321,000, and AngioDynamics projects of $240,000. Of the R&D expenditures in the current period, approximately 45% relate to contrast systems, 34% to AngioDynamics projects, 3% to immunological projects, 6% to other projects and 12% to general regulatory costs. Other income, net of other expenses, totaled $404,000 of income in the current period versus $380,000 of expense in the comparable period of last year. This improvement was due primarily to improved foreign currency exchange gains and losses of $678,000 and decreased interest expense, resulting from the repayment of AngioDynamics debt. For the thirty-nine weeks ended February 27, 1999, the Company's effective -15- tax rate of 33% differed from the Federal statutory tax rate of 34% due primarily to the utilization of previously unrecorded tax credit carryforwards and earnings of the Puerto Rican subsidiary, which are subject to favorable U.S. tax treatment, partially offset by the fact that the Company did not provide for the tax benefit on losses incurred in certain jurisdictions, since, it is more likely than not that such benefits will not be realized, and non-deductible expenses. The Company's unusually low effective tax benefit rate of 2% during the thirty-nine weeks ended February 28, 1998 differed from the Federal statutory tax rate of 34% due primarily to the fact that the Company did not provide for the tax benefit on losses (including the impairment charge) incurred in certain jurisdictions, since, at that time, it was more likely than not that such benefits would not be realized. Losses incurred in a foreign jurisdiction subject to lower tax rates also contributed to the unusually low effective tax benefit rate. Liquidity and Capital Resources - ------------------------------- During the thirty-nine weeks ended February 27, 1999, capital expenditures and debt repayments were funded primarily by cash provided by operations. The Company's policy has been to fund capital requirements without incurring significant debt. At February 27, 1999, debt (notes payable, current maturities of long-term debt and long-term debt) was $2,861,000 as compared to $3,934,000 at May 30, 1998. The Company has available $5,316,000 under two bank lines of credit of which $935,000 was outstanding at February 27, 1999. During fiscal 1997 and 1998, the Company issued 3% stock dividends. During fiscal 1999, such stock dividends have not been issued. The Company will continue to evaluate its policy on stock dividends on an ongoing basis. Presently, the Company is continuing to look for both new and complementary lines of business for expansion in order to ensure its continued growth. At February 27, 1999, approximately 63% of the Company's assets consist of inventories, accounts receivable, cash and cash equivalents, short-term debt and equity securities and short-term certificates of deposit. The current ratio is 3.60 to 1, with net working capital of $45,787,000 at February 27, 1999, as compared to the current ratio of 3.43 to 1, with net working capital of $41,597,000 at May 30, 1998. The Company is evaluating the impact of the Year 2000 issue on its business and does not expect to incur significant costs associated with Year 2000 compliance or that Year 2000 issues will have a material impact on the Company's business, results of operations or financial condition. The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. The Company's domestic software systems and applications are currently Year 2000 compliant. The Company's international subsidiaries are currently working toward Year 2000 compliance. The Company has also initiated discussions with its significant suppliers and customers with respect to their plans to address Year 2000 issues that may affect the Company's operations. This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the ability of the Company to develop its products, as well as general market conditions, competition and pricing. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Form 10-Q will prove to be -16- accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. -17- E-Z-EM, Inc. and Subsidiaries Part II: Other Information Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits No. Description Page --- ----------- ---- 27 Financial data schedule 19 (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter ended February 27, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. E-Z-EM, Inc. ------------------------------------- (Registrant) Date April 9, 1999 /s/ Howard S. Stern -------------------- ------------------------------------- Howard S. Stern, Chairman of the Board, President, Chief Executive Officer and Director Date April 12, 1999 /s/ Dennis J. Curtin -------------------- ------------------------------------- Dennis J. Curtin, Vice President- Chief Financial Officer -18- EX-27 2 ARTICLE 5 FDS FOR 3RD QUARTER 10-Q
5 This schedule contains summary financial information extracted from the Company's Form 10-Q for the quarter ended February 27, 1999 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS MAY-29-1999 FEB-27-1999 5,153 5,123 22,099 1,048 27,858 63,428 46,772 25,380 94,802 17,641 558 0 0 1,010 73,705 94,802 78,791 78,791 45,392 45,392 27,857 182 189 5,946 1,989 3,957 0 0 0 3,957 .39 .38
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