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IOMED, Inc. (IOX) Reports First Quarter Fiscal 2007 Results


11/8/2006 10:30:18 AM

SALT LAKE CITY, Nov. 7 /PRNewswire-FirstCall/ -- IOMED, Inc. today reported financial results for the first quarter of fiscal 2007, which ended September 30, 2006. First quarter net income was $50,000 or $0.01 per diluted share and cash flow from operations was $84,000.

First Quarter Results

For the quarter ended September 30, 2006, sales were $2,511,000 compared with $2,828,000 a year ago. The decreased sales were primarily due to reduced unit sales volume stemming from the loss of Compex Technologies, Inc. as a distributor, partially offset by increased purchases from other large dealers. Gross margin for the first quarter of fiscal 2007 was 59.3% versus 60.7% a year ago.

Total operating expenses of $1,545,000 increased 4% from the prior-year quarter. Selling, general and administrative costs included higher litigation expenses during the period. Increased research and development costs were due to one-time consulting services related to the development of new commercial products.

IOMED reported net income of $50,000, or $0.01 per diluted share, for the first quarter of fiscal 2007 compared with net income of $288,000, or $0.04 per diluted share, for the first quarter of fiscal 2006. The decrease was primarily due to a reduction in gross profit on lower sales levels.

IOMED has reported positive operating cash flow in 11 of the last 12 quarters generating operating cash flow of $84,000 for the first quarter of fiscal 2007. During the quarter ended September 30, 2006, working capital increased to $9.4 million, long-term debt decreased to $241,000 and total equity increased to $10.9 million. Cash and cash equivalents were $8.4 million.

Management Comments

"While sales were down 11% compared to a year ago, they exceeded our internal expectations. Over the last 17 quarters, despite high litigation costs, cumulative operating cash flow has exceeded $5.3 million, leaving the Company with a strong cash position and a solid overall financial condition. The acquisition of Compex Technologies, our second largest customer, by Encore Medical Inc., the parent company of our largest competitor, will likely have a continuing effect on our revenues in fiscal 2007. We believe the impact on the first and second fiscal quarters will be greater as Compex continues to sell-off its inventory of IOMED product. Our efforts to retain and service Compex's end-user customer accounts, both directly and through alternative channels within our distributor network, and the anticipated launch of new commercial products later in fiscal 2007 will bolster our competitive position and should increase our market share," said Robert J. Lollini, President and CEO.

Litigation Update

IOMED previously announced that a seven-person jury issued a unanimous defense verdict in favor of IOMED and its former distributor Compex Technologies, Inc. in a lawsuit filed against them by EEMSO, Inc. "We are very pleased that the jury found the claims against us and our co-defendant to be without merit. While the plaintiffs may appeal the verdict, we believe the jury's decision vindicates our Company with respect to our competitive integrity and the overall manner in which we conduct business," said Mr. Lollini.

"The lawsuit is the last remaining intellectual property action outstanding against the Company. Defense against these claims has been a long, costly process. The expense of the jury trial will have a significant impact on the Company's second quarter fiscal 2007 earnings and cash flow, and will likely result in a net loss for the quarter. However, the conclusion of this litigation should improve our future profitability and facilitate our ability to move forward with our strategic initiatives," concluded Mr. Lollini.

IOMED is a leader in developing, manufacturing and marketing active drug delivery systems used primarily to treat acute local inflammation in the physical and occupational therapy and sports medicine markets. The Company is pursuing opportunities to advance its position as a provider of quality, innovative non-invasive medical products that improve patient healthcare. IOMED seeks to accomplish this by expanding its product line, distributing new products, developing strategic partnerships, and through acquisitions. To find out more about IOMED, Inc. , visit our website at www.iomed.com.

The statements contained in this news release that are not purely historical are forward-looking statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and include IOMED's beliefs, expectations or intentions regarding its future operations and financial condition. All forward-looking statements included in this news release are made as of the date hereof and are based upon information available to IOMED as of such date. IOMED assumes no obligation to update any forward-looking statement. It is important to note that actual outcomes could differ materially from those in such forward-looking statements. Readers should also refer to the risk factors and other disclosures set forth in IOMED's filings with the Securities Exchange Commission, including Forms 10-K, 10-Q and 8-K.

INCOME STATEMENTS Three Months Ended September 30, 2007 2006 (unaudited) Product sales $2,511,000 $2,828,000 Cost of products sold 1,022,000 1,111,000 Gross profit 1,489,000 1,717,000 Operating costs and expenses: Selling, general and administrative 1,247,000 1,267,000 Research and development 298,000 223,000 Total operating costs and expenses 1,545,000 1,490,000 Operating income (loss) (56,000) 227,000 Other income (expense): Interest expense (18,000) (23,000) Interest income and other, net 124,000 84,000 Net income $50,000 $288,000 Income per share: Basic $0.01 $0.04 Diluted $0.01 $0.04 Shares used in the computation of income per share: Basic 7,600,000 6,677,000 Diluted 7,702,000 7,792,000 CONDENSED BALANCE SHEETS September 30, June 30, 2006 2006 (unaudited) (audited) Cash and cash equivalents $8,406,000 $8,426,000 Working capital, net $9,436,000 $9,418,000 Restricted cash $194,000 $275,000 Total assets $12,510,000 $12,673,000 Long-term obligations $241,000 $393,000 Accumulated deficit $(31,082,000) $(31,132,000) Shareholders' equity $10,891,000 $10,816,000 STATEMENTS OF CASH FLOWS September 30, 2006 2005 Cash flows from operating activities (unaudited) Net income $50,000 $288,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 55,000 99,000 Other non-cash charges 25,000 35,000 Changes in operating assets and liabilities: Accounts receivable 23,000 308,000 Inventories 32,000 105,000 Prepaid expenses (7,000) 11,000 Trade accounts payable (64,000) 29,000 Other accrued liabilities (30,000) (331,000) Net cash provided by operating activities 84,000 544,000 Cash flows from investing activities Net purchases of equipment and furniture (41,000) -- Cash flows from financing activities Change in restricted cash balance 81,000 76,000 Proceeds from issuance of common shares -- 154,000 Payments on long-term obligations (144,000) (140,000) Net cash provided by (used in) financing activities (63,000) 90,000 Net increase (decrease) in cash and cash equivalents (20,000) 634,000 Cash and cash equivalents at beginning of period 8,426,000 8,293,000 Cash and cash equivalents at end of period $8,406,000 $8,927,000

IOMED, Inc.

CONTACT: Brian Mower, CFO, +1-801-975-1191, or Betsy Truax, InvestorRelations Consultant, +1-208-241-3704, info@iomed.com, both of IOMED, Inc.


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