-----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, Dmm8kk8jEy8OVOyTVFysrpiz5vHgKcslcNVERzU4jHM6PHZODNJf1xWi3nQwygHk bUxQhjCx800b5fCRnHTXYw== 0000921895-96-000446.txt : 19961016 0000921895-96-000446.hdr.sgml : 19961016 ACCESSION NUMBER: 0000921895-96-000446 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961015 SROS: AMEX 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: 1934 Act SEC FILE NUMBER: 001-11479 FILM NUMBER: 96643236 BUSINESS ADDRESS: STREET 1: 717 MAIN ST CITY: WESTBURY STATE: NY ZIP: 11690 BUSINESS PHONE: 5163338230 10-Q 1 FORM 10-Q 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 August 31, 1996 --------------- Commission file number 0-13003 ------- 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) Registrant's telephone number, including area code (516) 333-8230 ------------- 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 October 11, 1996, there were 4,035,346 shares of the registrant's Class A Common Stock outstanding and 5,264,632 shares of the registrant's Class B Common Stock outstanding. Page 1 of 15 Exhibit Index on Page 14 E-Z-EM, Inc. and Subsidiaries INDEX PART 1: FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Balance Sheets - August 31, 1996 and June 1, 1996 3 - 4 Consolidated Statements of Earnings - thirteen weeks ended August 31, 1996 and September 2, 1995 5 Consolidated Statement of Stockholders' Equity - thirteen weeks ended August 31, 1996 6 Consolidated Statements of Cash Flows - thirteen weeks ended August 31, 1996 and September 2, 1995 7 - 8 Notes to Consolidated Financial Statements 9 - 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 13 PART II: OTHER INFORMATION Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 -2- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands) August 31, June 1, ASSETS 1996 1996 ---- ---- (unaudited) (audited) CURRENT ASSETS Cash and cash equivalents $ 2,674 $ 3,363 Debt and equity securities 19,426 20,247 Accounts receivable, principally trade, net 16,304 16,152 Inventories 25,974 23,708 Other current assets 3,163 2,936 ------ ------ Total current assets 67,541 66,406 PROPERTY, PLANT AND EQUIPMENT - AT COST, less accumulated depreciation and amortization 21,761 21,823 COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED, less accumulated amortization 542 558 INTANGIBLE ASSETS, less accumulated amortization 750 767 DEBT AND EQUITY SECURITIES 2,081 3,647 OTHER ASSETS 3,474 2,836 ------- ------- $96,149 $96,037 ======= ======= 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) August 31, June 1, LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996 ------ ------ (unaudited) (audited) CURRENT LIABILITIES Notes payable $ 1,407 $ 979 Current maturities of long-term debt 266 268 Accounts payable 5,779 5,095 Accrued liabilities 5,411 6,218 Accrued income taxes 506 338 ------- ------- Total current liabilities 13,369 12,898 LONG-TERM DEBT, less current maturities 616 680 OTHER NONCURRENT LIABILITIES 1,894 1,856 CONTINGENCIES ------ ------ Total liabilities 15,879 15,434 ------ ------ 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 August 31, 1996 and June 1, 1996 403 403 Class B (nonvoting), par value $.10 per share - authorized, 10,000,000 shares; issued and outstanding 5,219,189 shares at August 31, 1996 and 5,199,615 shares at June 1, 1996 522 520 Additional paid-in capital 15,303 15,165 Retained earnings 63,860 63,347 Unrealized holding gain on debt and equity securities 1,348 2,360 Cumulative translation adjustments (1,166) (1,192) ------- ------- Total stockholders' equity 80,270 80,603 ------- ------- $96,149 $96,037 ====== ====== The accompanying notes are an integral part of these financial statements. -4- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) (in thousands, except share and per share data) Thirteen weeks ended -------------------- August 31, September 2, 1996 1995 ---- ---- Net sales $23,355 $21,999 Cost of goods sold 13,490 12,868 ------ ------ Gross profit 9,865 9,131 ------ ------ Operating expenses Selling and administrative 7,835 6,990 Research and development 1,523 1,317 ------ ------ Total operating expenses 9,358 8,307 ------ ------ Operating profit 507 824 Other income (expense) Interest income 213 59 Interest expense (61) (64) Other, net 50 51 ----- ----- Earnings from continuing operations before income taxes 709 870 Income tax provision 196 130 ----- ----- Earnings from continuing operations 513 740 Discontinued operation: Losses from operations, net of income tax provision of $1 in 1995 (171) ----- ------ NET EARNINGS $ 513 $ 569 ===== ===== Earnings from continuing operations per common share Primary and fully diluted $ .05 $ .08 ===== ===== Earnings per common share Primary and fully diluted $ .05 $ .06 ===== ===== Weighted average common shares Primary 10,071,568 9,267,075 ========== ========= Fully diluted 10,071,568 9,473,659 ========== ========= The accompanying notes are an integral part of these financial statements. -5- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Thirteen weeks ended August 31, 1996 (unaudited) (in thousands, except share data)
Unrealized Class A Class B holding gain common stock common stock Additional on debt Cumulative ----------------- --------------- paid-in Retained and equity translation Shares Amount Shares Amount capital earnings securities adjustments Total ------ ------ ------ ------ ---------- -------- ---------- ------------ ----- Balance at June 1, 1996 4,035,346 $403 5,199,615 $520 $15,165 $63,347 $2,360 $(1,192) $80,603 Exercise of stock options 19,057 2 133 135 Issuance of stock 517 5 5 Net earnings 513 513 Unrealized holding loss on debt and equity securities (1,012) (1,012) Foreign currency translation adjustments 26 26 --------- --- --------- --- ------ ------ ------ ----- ------- Balance at August 31, 1996 4,035,346 $403 5,219,189 $522 $15,303 $63,860 $1,348 $(1,166) $80,270 ========= === ========= === ====== ====== ====== ===== =======
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) Thirteen weeks ended ----------------------- August 31, September 2, 1996 1995 ---- ---- Cash flows from operating activities: Net earnings $ 513 $ 569 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities Depreciation and amortization 690 688 Loss on sale of investments 27 Minority share of subsidiary's operations (164) Deferred income taxes 7 17 Changes in operating assets and liabilities Accounts receivable (152) 1,165 Inventories (2,266) (825) Other current assets (227) 373 Other assets (97) (273) Accounts payable 684 (720) Accrued liabilities (807) (185) Accrued income taxes 161 103 Other noncurrent liabilities 41 40 ----- ----- Net cash (used in) provided by operating activities (1,426) 788 ------- ----- Cash flows from investing activities: Additions to property, plant and equipment, net (593) (961) (Increase) decrease in debt and equity securities 807 (5) ----- ------ Net cash provided by (used in) investing activities 214 (966) ----- ------ Cash flows from financing activities: Proceeds from issuance of debt 750 200 Repayments of debt (377) (313) Proceeds from issuance of loan by minority shareholder 231 Proceeds from exercise of stock options 135 100 Proceeds from issuance of stock in connection with the stock purchase plan 5 2 ----- ----- Net cash provided by financing activities 513 220 ----- ----- -7- E-Z-EM, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (unaudited) (in thousands) Thirteen weeks ended ----------------------- August 31, September 2, 1996 1995 ---- ---- Effect of exchange rate changes on cash and cash equivalents $ 10 $ (119) ------ ------- DECREASE IN CASH AND CASH EQUIVALENTS (689) (77) Cash and cash equivalents Beginning of period 3,363 3,962 ------ ------- End of period $2,674 $3,885 ===== ===== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 20 $ 40 ===== ===== Income taxes (net of $12 and $69 in refunds in 1996 and 1995, respectively) $ 15 $ 127 ===== ===== The accompanying notes are an integral part of these financial statements. -8- E-Z-EM, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS August 31, 1996 and September 2, 1995 (unaudited) NOTE A - CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of August 31, 1996, the consolidated statement of stockholders' equity for the period ended August 31, 1996, and the consolidated statements of earnings and cash flows for the periods ended August 31, 1996 and September 2, 1995, 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 August 31, 1996 (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 1996 Annual Report on Form 10-K filed by the Company on August 30, 1996. The results of operations for the periods ended August 31, 1996 and September 2, 1995 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, as well as the accounts of Surgical Dynamics Inc. ("SDI"), a 51%-owned subsidiary prior to its sale in November 1995 (the "Company"). SDI has been reported as a discontinued operation and, accordingly, the Company's proportionate share of losses from operations of SDI have been classified as a discontinued operation for the thirteen weeks ended September 2, 1995 in the accompanying consolidated statements of earnings. NOTE B - INVENTORIES Inventories consist of the following: August 31, June 1, 1996 1996 ------ ------ (in thousands) Finished goods $14,267 $13,157 Work in process 1,090 1,159 Raw materials 10,617 9,392 ------ ------ $25,974 $23,708 ====== ====== -9- E-Z-EM, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) August 31, 1996 and September 2, 1995 (unaudited) NOTE C - COMMON STOCK Under the 1983 and 1984 Stock Option Plans, options for 19,057 shares were exercised at prices ranging from $4.48 to $5.72 per share, options for 2,455 shares were cancelled at prices ranging from $4.48 to $9.10 per share and no options were granted during the thirteen weeks ended August 31, 1996. Under the Employee Stock Purchase Plan, 517 shares were purchased at $9.67 per share during the thirteen weeks ended August 31, 1996. Total proceeds received by the Company approximated $5,000. NOTE D - CONTINGENCIES The Company is presently a defendant in a product liability action. This suit claims damages based upon alleged injuries resulting from the use of one of the Company's products. The action is in its early stages and while the Company is actively defending against the claim, it is unable to predict its outcome. It should be noted that in this action the Company is one among several defendants and, as such, the Company's liability, if any, is not quantifiable at this time. The Company does not believe that the ultimate outcome in this action will have a material adverse effect on the consolidated financial statements. The Company has been sued by Olympia Holding Corporation p/k/a P-I-E Nationwide, Inc. for $443,830. The suit, filed on October 5, 1992, is presently pending in the U.S. Bankruptcy Court for the Middle District of Florida. The Company is being represented in this action by a law firm which is also representing numerous other defendants being sued by the same plaintiff on the same grounds - recovery for alleged undercharges for freight carriage. It is not possible, at this stage, to determine what, if any, liability exists with respect to the Company in this matter. The Company will vigorously defend against this action; it has been informed by legal counsel that there exist numerous valid defenses to this case. NOTE E - RECLASSIFICATIONS Certain reclassifications have been made to the prior year amounts to conform to the current year presentation. -10- E-Z-EM, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is based on the results of continuing operations of the Company. QUARTERS ENDED AUGUST 31, 1996 AND SEPTEMBER 2, 1995 The Company's quarters ended August 31, 1996 and September 2, 1995 both represent thirteen weeks. RESULTS OF OPERATIONS SEGMENT OVERVIEW The Diagnostic products industry segment includes both contrast systems and non-contrast systems. Diagnostic product sales, which decreased 5% in the quarter, accounted for 80% of sales in the current quarter versus 90% in the comparable period of last year. The AngioDynamics products industry segment includes stent products, angiographic and fluid management products, and thrombolytic products used in the interventional medicine marketplace. AngioDynamics product sales, net of intersegment eliminations, increased 105% in the quarter and represented 20% of sales in the current quarter versus 10% in the comparable period of the prior year. Diagnostic segment results for both the current quarter and comparative quarter of last year were adversely affected by unabsorbed overhead costs associated with the relocation of a portion of the Company's contrast systems manufacturing operations. These costs resulted during the planned construction at the Company's Canadian manufacturing facility. The effects of the relocation will continue to be felt through the third fiscal quarter of the current year, resulting in lower than normal Canadian gross profits. Diagnostic results for the current quarter were also adversely affected by a decline in sales, coupled with increased selling and marketing expenses in the Company's contrast systems business. AngioDynamics segment results for the current quarter were positively affected by sales growth of 105%, resulting from domestic and international market penetration and the introduction of the AngioStentTM. The AngioStent, a device used during coronary procedures as a treatment for atherosclerosis, was introduced in the third quarter of the prior year in certain international markets. AngioDynamics contributed operating profits of $419,000 to E-Z-EM's consolidated operations in the current quarter, an improvement of $868,000 as compared to operating losses of $449,000 in the comparable quarter of the prior year. Approximately $200,000 of this improvement is due to the commercialization, in the second quarter of the prior year, of the Company's CO2JECTTM system, which delivers carbon dioxide gas as a replacement for more expensive iodinated contrast media. CONSOLIDATED RESULTS OF OPERATIONS For the quarter ended August 31, 1996, the Company reported net earnings of $513,000, or $.05 per common share on both a primary and fully diluted basis, as compared to net earnings of $569,000, or $.06 per common share on both a primary and fully diluted basis, for the comparable period of last year. -11- Earnings from continuing operations for the current quarter were $513,000, or $.05 per common share on both a primary and fully diluted basis, as compared to $740,000, or $.08 per common share on both a primary and fully diluted basis, for the comparable period of last year. Results from continuing operations for both the current quarter and comparative quarter of last year were adversely impacted by unabsorbed overhead costs associated with the relocation of a portion of the Company's contrast systems manufacturing operations. Results from continuing operations for the current quarter were also adversely affected by a decline in sales, coupled with increased selling and marketing expenses, in the Company's contrast systems business, partially offset by AngioDynamics sales growth. Net sales for the quarter ended August 31, 1996 increased 6%, or $1,356,000, as compared to the quarter ended September 2, 1995. Net sales in the current quarter were favorably affected by increased AngioDynamics sales of $2,358,000 and price increases, which accounted for nearly 1% of sales in the current quarter. The AngioDynamics sales growth was due to domestic and international market penetration and the introduction of the AngioStent. Net sales in the current quarter were adversely affected by a decline in the Company's sales of contrast systems. Net sales in international markets, including direct exports from the U.S., increased 15%, or $1,149,000, in the current quarter versus the comparable period of last year due to increased sales of AngioDynamics products of $1,816,000, partially offset by decreased sales of non-contrast systems of $379,000 and contrast systems of $288,000. Gross profit expressed as a percentage of sales was 42% during both the current quarter and the comparable quarter of the prior year. During the current and prior year quarter, gross profit was negatively impacted by unabsorbed overhead costs approximating $719,000 and $670,000, respectively. Such costs were associated with the relocation of a portion of the Company's contrast systems manufacturing operations. Selling and administrative ("S&A") expenses were $7,835,000 during the quarter ended August 31, 1996 versus $6,990,000 during the quarter ended September 2, 1995. This increase of $845,000, or 12%, in the current quarter was principally due to increased selling and marketing expenses in the Company's contrast systems business of $384,000 and increased AngioDynamics S&A expenses of $303,000. Investment in new product introductions and marketing initiatives contributed to the increased selling and marketing expenses in both industry segments. The Company realized a gain on the sale of a facility of $143,000 during the quarter ended September 2, 1995 which also affected the quarter-to-quarter comparison. Research and development ("R&D") expenditures increased 16% in the current quarter to $1,523,000, or 7% of sales, from $1,317,000, or 6% of sales, in the comparable quarter of the prior year due to increased contrast systems spending. Of the R&D expenditures in the current quarter, approximately 39% relate to contrast systems, 36% to AngioDynamics projects, 4% to immunological projects, 12% to other projects and 9% to general regulatory costs. R&D expenditures are expected to continue at approximately current levels. Other income, net of expenses, increased $156,000 in the current quarter versus the comparable period of last year due primarily to increased interest income of $154,000, resulting from the investment of proceeds arising from the sale of Surgical Dynamics in the second quarter of the prior year. -12- The Company's effective tax rate of 28% during the quarter ended August 31, 1996 differed from the Federal statutory tax rate of 34% due primarily to earnings of the Puerto Rican subsidiary, which are subject to favorable U.S. tax treatment, tax-exempt interest income, and the utilization of net operating loss carryforwards in a certain jurisdiction. For the quarter ended September 2, 1995, the Company's effective tax rate of 15% differed from the Federal statutory tax rate of 35% due primarily to earnings of the Puerto Rican subsidiary, which are subject to favorable U.S. tax treatment. LIQUIDITY AND CAPITAL RESOURCES During the quarter ended August 31, 1996, increased inventory levels and capital expenditures were funded primarily by cash reserves. In the past, the Company's policy has been to fund capital requirements without incurring significant debt. At August 31, 1996, debt was $2,289,000 as compared to $1,927,000 at June 1, 1996. The Company has available $4,731,000 under two bank lines of credit of which $948,000 was outstanding at August 31, 1996. The Company's current policy is to issue stock dividends. During the third quarter of fiscals 1994, 1995 and 1996, the Company issued 3% stock dividends. 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 August 31, 1996, approximately 67% of the Company's assets consist of inventories, debt and equity securities, accounts receivable, and cash and cash equivalents. Inventories have increased at a greater rate than sales as a result of broadened product lines, and safety stock during the relocation of a portion of the Company's contrast systems manufacturing operations. The current ratio is 5.05 to 1, with net working capital of $54,172,000 at August 31, 1996, as compared to the current ratio of 5.15 to 1, with net working capital of $53,508,000 at June 1, 1996. 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 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. -13- E-Z-EM, Inc. and Subsidiaries Part II: Other Information ITEM 5. OTHER INFORMATION During September 1996, the Company announced that AngioDynamics, Inc., a wholly-owned subsidiary, will offer up to 20% of its equity to the public. The offering is expected to occur in early 1997 and is expected to be a firm commitment underwriting. The offering will be made only by means of a prospectus. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K PAGE (a) Exhibit 27 - Financial data schedule 15 (b) No reports on Form 8-K were filed for the quarter ended August 31, 1996. 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 October 11, 1996 /s/ Daniel R. Martin ------------------ ----------------------------------- Daniel R. Martin, President, Chief Executive Officer and Director Date October 11, 1996 /s/ Dennis J. Curtin ------------------ ----------------------------------- Dennis J. Curtin, Vice President- Chief Financial Officer -14- EX-27 2 ARTICLE 5 FDS FOR 1ST QUARTER 10-Q
5 This schedule contains summary financial information extracted from the Company's Form 10-Q for the quarter ended August 31, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS MAY-31-1997 AUG-31-1996 2,674 19,426 16,861 557 25,974 67,541 41,300 19,539 96,149 13,369 616 0 0 925 79,345 96,149 23,355 23,355 13,490 13,490 9,358 30 61 709 196 513 0 0 0 513 .05 .05
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