WAYNE, Pa., Sept. 29 /PRNewswire-FirstCall/ -- Escalon Medical Corp.
(Nasdaq Capital Market: ESMC) today announced results for its fiscal fourth
quarter and fiscal year ended June 30, 2008.
For the fiscal year ended June 30, 2008, financial results were heavily
affected by the non-recurring, non-cash, goodwill impairment expense of
$9,575,000, recorded in the fourth quarter of fiscal 2008, resulting from
the requirement under SFAS 142 in connection with the Company's impairment
test of intangible assets and goodwill valuations. The revaluation of
goodwill, as required by GAAP, resulted in the Company's goodwill being
revalued to zero, generating a non-cash $9,575,000 impairment charge.
Consolidated product revenue for fiscal 2008 increased approximately
7.5% to $29,988,000, compared with $27,893,000 in the prior fiscal year.
The increase is primarily related to strong sales in the Company's Drew,
Vascular, and EMI business units, which increased approximately 14.7%,
18.8%, and 18.7%, respectively, offset by sales decreases in the Sonomed
and Trek business units of 4.6% and 5.5%, respectively.
Net revenues for fiscal 2008 totaled $30,210,000, compared with
$38,838,000 reported a year ago. Fiscal 2007 net revenue reflected a
previously announced settlement agreement that the Company entered into
with IntraLase Corp. to resolve all outstanding disputes and litigation
between the parties. Under the terms of the settlement agreement, IntraLase
made a lump sum payment to the Company of $9,600,000, and the company
transferred to IntraLase its ownership of patents and intellectual property
formerly licensed to IntraLase by the Company.
The Company reported a fiscal 2008 net loss of $(15,060,000), or
$(2.36) per diluted share, compared with net income of $5,915,000, or $0.92
per diluted share, in the prior year period. The net loss of 2008 includes
a non-cash goodwill impairment of $9,575,000, or $(1.50) per share, as
previously noted. In accordance with Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, the Company tests
goodwill for possible impairment on an annual basis for each of its
operating segments. Based on this analysis, the Company concluded that
$9,575,000 of the goodwill recorded at the Drew business unit was impaired.
This analysis, based on prescribed accounting rules, does not take into
account future growth opportunities, expansion efforts presence in the
reagent segment of the in vitro diagnostics (IVD) market, the delay in the
development of Drew's proposed new diabetes instrument or the value of
intellectual properties. For a more complete discussion of this accounting
rule and the results of the impairment test, please refer to the Company's
Form 10-K filed on September 29, 2008 with the Securities and Exchange
Commission.
For fiscal 2008, cost of goods sold totaled approximately $17,310,000,
or 57.7% of product revenues, compared with $15,771,000, or 56.5% of
product revenue, for fiscal year 2007. Operating expenses increased
approximately 4.2% during the fiscal year ended June 30, 2008 as compared
to the prior fiscal year. This was related to increased research and
development expenses at the Drew, Sonomed and Vascular divisions and
increased consulting expenses related to the implementation of an ERP
system during the current period.
2008 Fourth Quarter Results
For the fourth quarter of fiscal 2008, product revenue increased 2.0%
to $7,566,000, compared with $7,415,000 reported in the same period last
fiscal year. Product revenues were driven by increased sales at the
Company's Drew, Vascular, and EMI business units, offset by decreases at
its Sonomed unit. Net revenue for the fourth quarter of fiscal 2008 totaled
$7,634,000, compared with $7,474,000 reported in the prior year period.
For the fourth quarter of fiscal 2008, the Company reported a net loss
of $(11,649,000), or $(1.82) per diluted share, which includes the goodwill
impairment of $9,575,000, compared with net loss of $(1,173,000), or
$(0.18) per diluted share, in the fourth quarter of fiscal 2007.
Recap of 2008
"While we are disappointed with our results from an income perspective,
the Company realized solid revenue growth and achieved key operational
objectives intended to diversify and expand our product portfolio and have
a potential incremental long-term effect on our financial results. In
addition, staffing and other costs of approximately $2,000,000 in our Drew
business unit incurred during fiscal 2008 have been eliminated and will not
recur in fiscal 2009," Richard J. DePiano, Chairman and Chief Executive
Officer, commented.
"Since July 2007, we successfully secured FDA market clearances for
five new products and also obtained approval from the People's Republic of
China's State Food and Drug Administration to market Sonomed's PacScan(R)
and E/Z-Scan(R) products. We also enhanced our position within the IVD
reagent market with the May 30, 2008 acquisition of JAS Diagnostics. As a
result of our initiatives, Escalon realized product revenue growth of $2.1
million or 7.5% during the year."
"In the Drew business unit, product revenue increased $1,705,000, or
14.7%, year-over-year driven by sales of Drew's D3 instrument, which
received FDA marketing clearance in December 2007, strong demand for the
Primus instrument and continued growth of Drew's reagent sales from its
United Kingdom facility. Drew anticipates introducing its new DS-360
Analyzer in the second half of fiscal 2009. Management believes that the
major investment in Drew's new equipment is substantially completed and
that future research and development will continue, but with a focus on
enhancements of existing products. We believe that Drew will continue to
experience both organic as well as seek acquisitive growth in its equipment
and reagent business units," Mr. DePiano said.
"Regarding the impairment of goodwill, management is committed and does
follow the prescribed regulatory rules which define a methodology of
recording and maintaining the value of assets on the balance sheet of the
Company," Mr. DePiano continued. "I believe the most valuable attributes
acquired more than three years ago in the Drew acquisition, namely the Drew
brand, the installed base and the distribution channel, have each been
enhanced. The required investment in Drew over the past several years has
transformed the company into a more competitive and viable company.
However, the manner in which the investment over this time period is
accounted for on the books and records of the Company, produced losses not
additional value. The investment period through fiscal 2008 has culminated
with several changes that while painful for the Company, its employees and
shareholders to endure, will ultimately allow Drew to operate profitably
and thus return the Company to operating profitability."
Mr. DePiano added, "Within Sonomed, product revenue decreased $456,000,
or 4.6%, to $9,367,000 as a result of the continued migration of revenue to
international markets. The international market is served primarily by
distributors who receive significant discounts as compared to traditional
direct sales in United States. Research and development expenses increased
in fiscal 2008 related to the development of Sonomed's next generation of
ultrasound instruments, which are expected to be introduced throughout
fiscal 2009, and to continued improvements in the existing product
offering."
"Turning to our Vascular unit, we realized year-over-year product
revenue growth of $652,000, or 18.8%, to $4,119,000, as the new
VascuView(TM) Visual Ultrasound System was a source of growth in fiscal
2008," Mr. DePiano continued, "EMI's product revenue continued to grow,
increasing $278,000 or 18.7% to $1,762,000 for the year. We realized
increased sales of EMI's digital imaging systems from the January 2006 MRP
acquisition and are equally excited about the prospects that lie ahead as
EMI's product offering continues to expand and has seen significant market
acceptance during fiscal 2008. Product revenue in the Medical/Trek business
unit decreased $82,000, or 5.5%, to $1,410,000 during the year ended June
30, 2008 as compared to the last fiscal year. Slowing growth within this
unit during 2008 is primarily attributed to Trek's mature product line of
Ispan Intraocular gases and fiber optic sources."
Non-GAAP Measures
To supplement the Company's consolidated financial statements presented
in accordance with GAAP, the Company is 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.
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 Company 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 current financial performance and provide further information for
comparative purposes due to depreciation and amortization and the adoption
of accounting standard FAS 123R.
The non-GAAP measures and the reconciliation to the most directly
comparable GAAP measure of all non-GAAP measures are as follows:
Year Ended June 30,
2008 2007
Net (loss) income $(15,059,643) $5,914,603
Non-GAAP adjustments:
Goodwill impairment $9,574,655 $-
Stock based compensation $246,757 $162,576
Depreciation and amortization $582,511 $590,846
Total adjustments $10,403,923 $753,422
Non-GAAP adjusted (loss) income $(4,655,720) $6,668,025
Shares used in computing basic
and fully diluted earnings per
share 6,389,008 6,434,275
Non-GAAP adjusted income (loss)
per fully diluted share $(0.73) $1.04
Founded in 1987, the Company (http://www.escalonmed.com) develops markets and
distributes ophthalmic diagnostic, surgical and pharmaceutical products as
well as vascular access devices. Drew Scientific, 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 the Company 's distribution capabilities, although
such partnerships or acquisitions may not occur. The Company has
headquarters in Wayne, Pennsylvania and operations in Long Island, New
York, New Berlin, Wisconsin, Lawrence, Massachusetts, Dallas, Texas,
Waterbury, Connecticut, Miami, Florida 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. These statements
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 business units, including the ability to make
acquisitions and the integration of any acquisitions it may undertake,
if any, of which there can be no assurance,
-- implement cost reductions,
-- generate cash,
-- identify, finance and enter into business relationships and
acquisitions.
Other factors include uncertainties and risks related to:
-- new product development, commercialization, manufacturing and market
acceptance of new products,
-- marketing acceptance of existing products in new markets,
-- research and development activities, including failure to demonstrate
clinical efficacy,
-- delays by regulatory authorities, scientific and technical advances by
the Company or third parties,
-- introduction of competitive products,
-- ability to reduce staffing and other costs and retain benefit of prior
reductions
-- third party reimbursement and physician training, and
-- 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 for year
ended June 30, 2008, and its other filings with the Securities and Exchange
Commission, all of which are available from the Securities and Exchange
Commission as well as other sources.
ESCALON MEDICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended June 30, 2008 2007
Net revenues:
Product revenue $29,988,386 $27,892,738
Other revenue 222,075 10,945,042
Revenues, net 30,210,461 38,837,780
Costs and expenses:
Cost of goods sold 17,309,671 15,771,254
Marketing, general and
administrative 14,392,004 13,806,399
Research and development 4,058,289 3,461,322
Goodwill impairment 9,574,655 0
Total costs and expenses 45,334,619 33,038,975
(Loss) income from operations (15,124,158) 5,798,805
Other (expense) and income:
Gain on sale of available for
sale securities 0 75,000
Equity in Ocular Telehealth
Management, LLC (88,206) (87,852)
Interest income 299,538 208,457
Interest expense (11,827) (28,753)
Total other (expense) income 199,505 166,852
Net (loss) income before taxes (14,924,653) 5,965,657
Provision for income taxes 134,990 51,054
Net (loss) income $(15,059,643) $5,914,603
Basic net (loss) income per share $(2.36) $0.93
Diluted net (loss) income per share $(2.36) $0.92
Weighted average shares - basic 6,389,008 6,374,929
Weighted average shares - diluted 6,389,008 6,434,275
SELECTED BALANCE SHEET DATA:
Escalon Medical Corp. and Subsidiaries
Selected Financial Data-Balance Sheet
At June 30,
2008 2007
---- ----
(Amounts in thousands)
Cash and cash equivalents $3,708 $8,879
Working capital 10,547 17,238
Total assets 31,896 45,017
Short Term Debt 502 150
Long-term debt, net of current
portion 251 0
Total liabilities 7,364 5,612
Accumulated deficit (43,267) (28,208)
Total shareholders' equity 24,532 39,406
SOURCE Escalon Medical Corp.
 back to top
Related links:
http://www.escalonmed.com
http://www.prnewswire.com/comp/126923.html
CONTACT:
Richard J. DePiano, Chairman and CEO of
Escalon Medical Corp., +1-610-688-6830; or Joseph Calabrese of
Financial Relations Board for Escalon Medical Corp.,
+1-212-827-3772
|
