WAYNE, Pa., Feb. 15 /PRNewswire-FirstCall/ -- Escalon Medical Corp. today announced results for its fiscal second quarter and six months ended December 31, 2006.
For the second quarter of fiscal 2007, the Company reported net revenue of $7,636,740, a 4.5% increase from the $7,310,290 reported in the prior year period. Product revenue at the Company’s Sonomed and Medical/Trek/EMI business units increased approximately 36% and 69%, respectively, during the second quarter ended December 31, 2006, when compared with the same period last fiscal year. This growth was offset by decreases in the Company’s Drew and Vascular business units. Revenue at Drew and Vascular decreased 22% and 10%, respectively, during the three-month period ended December 31, 2006 when compared with the same period last fiscal year.
Product revenue increased approximately 2.8% to $7,034,000 for the three- month period ended December 31, 2006, compared with $6,846,000 for the same period last fiscal year. For the second quarter of fiscal 2007, the Company reported a net loss of $(470,103), or $(0.07) per diluted share, compared with a net loss of $(981,801) or $(0.16) per diluted share, in the second quarter of fiscal 2006.
For the six-month period ended December 31, 2006, the Company reported net revenue of $14,804,900 compared with $14,743,160 in the prior period and product revenue of $13,577,446 compared with $13,608,849 in the prior year six-month period. The decrease was primarily related to decreases in the Drew and Vascular business units. The Company reported a net loss for the six months ended December 31, 2006 of $(1,184,220), or $(0.19) per diluted share, compared with a net loss of $(267,454), or $(0.04) per diluted share, in the prior year period. During July 2005, the Company sold 58,555 shares of IntraLase common stock that had originally been received by the Company in connection with the license of its laser properties to IntraLase in 1997. The stock was sold at a price of $19.8226 per share and yielded net proceeds of $1,157,336 after the payment of brokers’ commissions and other fees. The net proceeds were recorded as other income in the six-month period ended December 31, 2005.
The Company continues to execute its previously announced changes to the Drew business model, with the goal of stabilizing and increasing Drew’s revenue base while enhancing operational efficiency, increase operating margins, lowering infrastructure costs and rationalizing facilities.
Recap of Fiscal Second Quarter 2007
“Our operating results reflect the integration of MRP’s retinal imaging systems with EMI’s existing ophthalmic photography product portfolio and the continued reorganization of the Drew business, which we believe will be instrumental in returning Escalon to profitability and ultimately add value to our organization,” said Richard J. DePiano, Chairman and Chief Executive Officer. “Our target for cost reductions is annualized savings of $1,900,000, with approximately $700,000 of these cost reductions to be realized in fiscal 2007.”
Mr. DePiano added, “Looking at our operating performance for the second quarter of fiscal 2007, product revenue increased approximately 2.8%, to $7,034,000, for the three-month period ended December 31, 2006, compared with the same period last fiscal year. As expected, product revenue in our Drew business unit decreased $773,000, or 22.2%, compared with the same period last fiscal year, primarily due to the aging of Drew’s product line and delays in bringing its new products to market. We anticipate that sales at Drew will continue to decline until the new products become available for sale and currently expect that Drew will release two new products for sale in the fourth quarter of the current fiscal year.”
“At our Sonomed business unit, product revenue increased $729,000, or 36.4%, compared with the same period last fiscal year as we realized an increase in sales, both domestically and internationally, of the Company’s new VuMax II ultrasound systems along with continued demand for Sonomed’s existing product line. In our Vascular business unit, product revenue decreased $90,000, or 10.2%, to $796,000, primarily due to a decrease in direct sales to end users by the Company’s domestic sales team and lower revenue from our domestic distributor network. Additionally, anticipated sales in Europe and Latin America did not materialize due to price point pressures on Vascular’s product offering.”
“In our Medical/Trek/EMI unit, product revenue increased $322,000, or 69%, to $789,000, primarily attributable to strong sales of digital imaging systems from the Company’s MRP division, which was acquired in January 2006. As our business unit results show, the integration of MRP’s retinal imaging systems has clearly strengthened our position in the ophthalmic marketplace. With this integration largely behind us, we expect to realize continued benefits of this strategic acquisition in the coming year.”
Mr. DePiano concluded, “Overall, we continue to execute on our strategy of maximizing our assets, improving our operational performance in our newer operations and generating greater cost efficiencies in our organization. We intend to continue this focus while making additional headway in our legacy businesses throughout the remainder of 2007.”
Non-GAAP Measures
To supplement the Company’s consolidated financial statements presented in accordance with GAAP, the Company has begun providing certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP net loss and non-GAAP loss per fully diluted share.
The Company’s reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results. These non-GAAP measures are provided to enhance investors overall understanding of the Company’s current financial performance and provide further information for comparative purposes due to the adoption of the new accounting standard FAS 123R.
Specifically, the Company believes the non-GAAP measures provide useful information to both management and investors by isolating certain expenses, gains and losses that may not be indicative of its core operating results and business outlook. In addition, the Company believes non-GAAP measures that exclude stock-based compensation expense enhance the comparability of results against prior periods. The non-GAAP measures and the reconciliation to the most directly comparable GAAP measure of all non-GAAP measures are as follows:
Three Months Ended Six Months Ended December 31, December 31, 2006 2005 2006 2005 Net Loss $(470,103) $(1,032,201) $(1,184,220) $(267,454) Non-GAAP adjustments: Stock based compensation $123,772 $- $123,772 $- Depreciation and amortization $135,279 $107,752 $282,082 $217,944 Total adjustments $259,051 $107,752 $405,854 $217,944 Non-GAAP adjusted loss $(211,052) $(924,449) $(778,366) $(49,510) Shares used in computing basic and fully diluted earnings per share 6,347,972 6,070,477 6,346,315 6,017,384 Non-GAAP adjusted loss per fully diluted share $(0.03) $(0.15) $(0.12) $(0.01)
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. The Company 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 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 the Company’s future prospects. They are based on the Company’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 the Company is able to implement its growth and marketing strategies, improve upon the operations of the Company’s business units, including the integration of Drew’s and MRP’s operations and any acquisitions it may undertake, if any, of which there can be no assurance, implement cost reductions, generate cash and identify, finance and enter into business relationships and acquisitions, uncertainties and risks related to new product development, 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 the Company’s report on Form 10- K, and its other filings with the Securities and Exchange Commission, all of which are available from the Commission as well as other sources.
ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended December 31, December 31, 2006 2005 2006 2005 Net revenues: Product revenue $7,033,860 $ 6,846,159 $13,577,446 $13,608,849 Other revenue $ 602,880 $ 464,131 $ 1,227,454 $ 1,134,311 Revenues, net $7,636,740 $ 7,310,290 $14,804,900 $14,743,160 Costs and expenses: Cost of goods sold $3,878,214 $ 3,883,395 $ 7,508,594 $ 7,628,384 Research and development $1,080,950 $ 661,870 $ 1,794,555 $ 1,418,030 Marketing, general and administrative $3,144,611 $ 3,827,839 $ 6,700,511 $ 7,111,890 Total costs and expenses $8,103,775 $ 8,373,104 $16,003,660 $16,158,304 (Loss) from operations $ (467,035) $(1,062,814) $(1,198,760) $(1,415,144) Other income and (expense): Gain on sale of available for sale securities $ - $ - $ - $ 1,157,336 Equity in Ocular Telehealth Management, LLC $ (12,155) $ (33,035) $ (30,698) $ (51,464) Interest income $ 13,498 $ 72,877 $ 58,934 $ 77,724 Interest expense $ (5,654) $ (9,229) $ (14,939) $ (19,906) Total other income and (expense) $ (4,311) $ 30,613 $ 13,297 $ 1,163,690 Net (loss) before taxes $ (471,346) $(1,032,201) $(1,185,463) $ (251,454) Provision for income taxes $ (1,243) $ (50,400) $ (1,243) $ 16,000 Net (loss) $ (470,103) $ (981,801) $(1,184,220) $ (267,454) Basic net (loss) per share $ (0.07) $ (0.16) $ (0.19) $ (0.04) Diluted net (loss) per share $ (0.07) $ (0.16) $ (0.19) $ (0.04) Weighted average shares - basic 6,347,972 6,070,477 6,346,315 6,017,384 Weighted average shares - diluted 6,347,972 6,070,477 6,346,315 6,017,384 ESCALON MEDICAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS December 31, June 30, 2006 2006 Cash, cash equivalents and Investments $1,628,270 $2,429,930 Total current assets $14,661,881 $14,911,249 Total assets $38,117,067 $38,644,767 Current liabilities $4,668,729 $4,295,109 Long-term debt $1,153,894 $1,249,551 Total shareholders’ equity $32,294,444 $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
