WAYNE, Pa., Nov. 14 /PRNewswire-FirstCall/ -- Escalon Medical Corp. today announced results for its fiscal first quarter ended September 30, 2006.
For the first quarter of fiscal 2007, the Company reported net revenue of $7,168,160, compared with net revenue of $7,793,534 for the first quarter of fiscal 2006. The Company experienced strong sales growth in the Company’s Sonomed and Medical/Trek/EMI business units, realizing year-over-year growth of 28% and 100%, respectively. These increases were offset by decreases in the Drew and Vascular business units which decreased 32% and 12%, respectively, year-over-year.
For the first quarter of fiscal 2007, the Company reported a net loss of $(714,117) or $(0.11) per diluted share, compared with net income of $714,347, or $0.12 per diluted share, in the first quarter of fiscal 2006. Fiscal 2007 first quarter income was negatively impacted by a $735,000 loss at the Company’s Drew business. Additionally, first quarter 2007 operating expenses increased approximately 5.5% from the 2006 first quarter arising primarily from a high amount of legal and accounting fees related to IntraLase litigation costs. While the Company expects that legal and accounting expenses will continue to impact earnings in the near term, it does not believe that these expenses will continue in the future at such high levels.
The Company is continuing to implement previously announced initiatives designed to stabilize and increase Drew’s revenue base while reducing operating costs, rationalizing facilities and expanding operating margins at this unit.
“This quarter reflects initial efforts to revamp the Drew business, which is a key component in our efforts to return the Company to profitability and enhance the overall value of our organization. We are well underway in this process and expect to see tangible results over the coming quarters,” said Richard J. DePiano, Chairman and Chief Executive Officer. “Our ultimate target for cost reductions announced last quarter remains annualized savings of $1,900,000, with approximately $700,000 of these cost reductions to be realized in fiscal 2007. Additionally, we also anticipate increased profits in legacy Escalon entities and the continued growth of our IntraLase royalty revenue stream to continue our growth and enhance value for our shareholders.”
Recap of Fiscal First Quarter 2007
Mr. DePiano added, “Turning to our operating performance for the first quarter of fiscal 2007, product revenue decreased approximately $584,000, or 8%, to $6,543,000 during the three-month period ended September 30, 2006 as compared with the same period last fiscal year. In the Drew business unit, product revenue decreased $1,280,000, or 32%, as compared with the same period in 2006. This decrease was primarily due to the aging of Drew’s product line and delays in bringing its new products to market. However, several new product introductions are underway, and we expect to release new products for sale at Drew in both the second and third quarter of our 2007 fiscal year
“Our Sonomed business unit achieved product revenues of $2,293,000, an increase of $495,000, or 28%, compared with the same period last fiscal year. Growth at Sonomed was driven by an increase in sales of the Company’s new Vumax II ultrasound systems and an increase in export sales, which were partially offset by a decrease in domestic sales and in demand for the Company’s pachymeter product. Product revenue at our Vascular unit decreased $114,000, or 12%, to $817,000, primarily due to a decrease in direct sales to end users in Europe, delays in launching sales efforts in Latin America and decreased sales by the Company’s remaining domestic distributor network.”
“In our Medical/Trek/EMI unit, product revenue increased $321,000, or 100%, to $648,000 as compared with last year, primarily attributable to an increase in sales of digital imaging systems. Additionally, the previously announced acquisition of MRP Group, Inc., a privately held ophthalmic technology solutions provider, has integrated MRP’s retinal imaging systems with EMI’s existing ophthalmic photography product portfolio. This integration has strengthened our position in the ophthalmic marketplace, and we are beginning to see the full benefits of this strategic acquisition.”
Mr. DePiano concluded, “While we are pleased with the progress we have made in our legacy businesses, we continue to work towards improving our operational performance at Drew while maximizing our assets and generating greater cost efficiencies throughout all of our business segments. We remain optimistic about our prospects and look forward to continuing to report our progress in fiscal 2007.”
Founded in 1987, Escalon develops markets and distributes ophthalmic diagnostic, surgical and pharmaceutical products as well as vascular access devices. Drew, which operates as a separate business unit, provides instrumentation and consumables for the diagnosis and monitoring of medical disorders in the areas of diabetes, cardiovascular diseases and hematology, as well as veterinary hematology and blood chemistry. Escalon seeks to utilize strategic partnerships to help finance its development programs and is also seeking acquisitions to further diversify its product line to achieve critical mass in sales and take better advantage of the Escalon’s distribution capabilities. Escalon has headquarters in Wayne, Pennsylvania and manufacturing operations in Long Island, New York, New Berlin, Wisconsin, Dallas, Texas, Oxford, Connecticut and Barrow-in-Furness, U.K.
Note: This press release contains statements that are considered forward- looking under the Private Securities Litigation Reform Act of 1995, including statements about Escalon’s future prospects. These statements are based on the Escalon’s current expectations and are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include whether Escalon is able to implement its growth and marketing strategies, improve upon the operations of Escalon’s business units, including the integration of Drew’s operations and any acquisitions it may undertake, if any, of which there can be no assurance, generate cash and identify, finance and enter into business relationships and acquisitions, uncertainties and risks related to new product development and releases, commercialization, manufacturing and market acceptance of new products, marketing acceptance of existing products in new markets, the continuity of royalty revenue, litigation and non- recurring expenses, research and development activities, including failure to demonstrate clinical efficacy, delays by regulatory authorities, scientific and technical advances by Escalon or third parties, introduction of competitive products, third party reimbursement and physician training as well as general economic conditions. Further information about these and other relevant risks and uncertainties may be found in Escalon’s report on Form 10- KSB for the year ended June 30, 2006, and its other filings with the Securities and Exchange Commission, all of which are available from the Commission as well as from other sources.
ESCALON MEDICAL CORP. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, 2006 2005 Product revenue $6,543,586 $7,123,354 Other revenue 624,574 670,180 Revenues, net 7,168,160 7,793,534 Costs and expenses: Cost of goods sold 3,630,380 4,105,653 Research and development 713,605 756,160 Marketing, general and administrative 3,555,900 3,284,051 Total costs and expenses 7,899,885 8,145,864 Loss from operations (731,725) (352,330) Other income and (expenses): Gain on Sale of available for sale securities 0 1,157,336 Equity in Ocular Telehealth Management (18,543) (18,429) Interest income 45,436 4,847 Interest expense (9,285) (10,677) Total other income and (expense) (17,608) 1,133,077 (Loss) income before income taxes (714,117) 780,747 Income taxes 0 66,400 Net (loss) income $(714,117) $714,347 Basic net income per share $(0.11) $0.12 Diluted net income per share $(0.11) $0.11 Weighted average shares - basic 6,344,657 5,964,292 Weighted average shares - diluted 6,344,657 6,372,742 SELECTED BALANCE SHEET DATA: September 30, June 30, 2006 2006 (unaudited) (audited) Cash, cash equivalents and investments $2,149,040 $3,379,710 Total current assets 14,519,573 14,911,249 Total assets 38,371,674 38,644,767 Current liabilities 4,569,889 4,295,109 Long-term debt 1,182,239 1,249,551 Total shareholders’ equity 32,619,546 33,100,107
Escalon Medical Corp.
CONTACT: Richard J. DePiano, Chairman and CEO of Escalon Medical Corp.,+1-610-688-6830; or Joseph Calabrese of Financial Relations Board,+1-212-827-3772
