ISOLYSER REPORTS THIRD-QUARTER RESULTS
IN LINE WITH EXPECTATIONS;
TAKES INVENTORY RESERVE
NORCROSS, Georgia (November 13, 1997) -- Isolyser Company, Inc. (Nasdaq/NM:OREX) today reported results for the third quarter and nine months ended September 30, 1997.
Net sales for the third quarter were $41.9 million, compared with $42.0ÿmillion in the year-earlier quarter. Sales increased substantially for procedure trays, specialty drapes and safety products which were offset by decreases in sales of packs and gowns.
Loss from operations for the third quarter was $3.3 million compared with a loss from operations of $500,000 in the year-ago third quarter, in each case before nonrecurring charges. The Company had a third-quarter net loss of $4.2 million, or $0.11 per share, compared with a net loss of $1.0 million, or $0.03 per share, in the year-earlier quarter in each case before nonrecurring charges. The Company recorded a nonrecurring charge of $13 million for potentially excess OREX inventories at September 30, 1997. Including such nonrecurring charges, the Company's operating loss, net loss and net loss per share for third quarter 1997 were $16.3 million, $17.2 million, and $0.44 per share, respectively. The net loss during the third quarter of 1996 was $7.1 million or $0.18 per share, including nonrecurring charges for $1.5ÿmillion in inventory write-offs and reserves, $3.2 million in nonrecurring costs associated with the merger of Microtek Medical and $1.4 million in restructuring charges associated with the merger.
Net sales for the nine-month period increased slightly to $124.3 million from $123.0ÿmillion. For the nine months ended September 30, 1997, Isolyser had a net loss of $11.7ÿmillion, or $0.30 per share, before the aforementioned charges, and $24.7 million or $0.63 per share, including such charges. For the year-earlier period, Isolyser had a net loss of $300,000 before the aforementioned charges or $0.01 per share and $6.4 million including such charges, or $0.17 per share.
Peter A. Schmitt, Chief Financial Officer of Isolyser, said, "The third-quarter loss was primarily attributable to inventory reserves and underutilization of the Company's OREX manufacturing facilities consistent with the Company's previously announced operating plan to synchronize manufacturing to more closely reflect demand and to reduce inventory and thereby improve cash flow. The inventory reserves have been recorded based upon an estimate of excess inventories, and do not indicate that any such inventory is obsolete or second quality. In an effort to improve short-term operating results and cash flow, the Company is exploring the possibilities of converting a portion of our plant capacities to manufacture traditional woven and non-woven products."
"Third-quarter operating results were in line with expectations, with the exception of our inventory reserve," explained Gene R. McGrevin, Chairman and acting President. "We remain fully committed to our OREX products and these reserves have no reflection on the quality and marketability of such inventory. More significant than these nonrecurring charges, we have continued to implement elements of our previously outlined business plan. As an example, the Company generated $2.4 million in cash from operating activities during the third quarter of 1997 as contrasted with an operating cash use of $11.2ÿmillion in 1996's third quarter. In addition, we reduced debt by $2.0 million in this year's third quarter."
Mr. McGrevin pointed out that after reorganizing marketing and sales efforts in the second quarter of 1997, selling and marketing expenses declined to $6.3 million in the third quarter of 1997 from $7.2 million the year before.
"We also significantly increased expenses to support our Synchronous manufacturing process efforts across all Isolyser companies, and began implementing our new management information system throughout the Company," Mr. McGrevin said. "Although these expenditures will negatively impact our short-term operating results, these investments will help reduce inventories and customer response time and will improve our management decision-making process. Although we still have many challenges facing us, we are making progress on our three major priorities established last May: 1) Improve our cash position and reduce our debt, 2) Improve long-term operating results, 3) Appropriately fund the commercialization of our technology."
This press release contains forward-looking information made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be significantly affected by certain risks and uncertainties described in the Company's annual report on Form 10-K and elsewhere. The Company's actual results could differ materially from such forward-looking statements.
ÿIsolyser, based in Norcross, Georgia, has developed and manufactures OREX DegradablesT, a series of ecologically safe products made from a thermoplastic, hot water soluble polymer that can be configured into an array of products such as woven and non-woven fabrics, film and thermoformed and extruded items. These products can be dissolved after use in hot water in a specially designed OREX processor similar to a commercial washing machine, for safe disposal through municipal sewer systems. The Company believes that its products provide protection to people and the environment while providing cost-effective solutions to the problems associated with waste reduction and disposal. The Company also manufactures and markets custom procedure trays and infection control products. The Company's infection control products include personal protective equipment, specialty patient drapes, equipment covers, and liquid waste treatment systems.
ISOLYSER COMPANY, INC.
Unaudited Financial Highlights
(In thousands, except for share data)
Three Months Ended
ÿÿÿÿÿÿÿÿÿÿÿ September 30, ÿÿÿÿÿÿÿÿÿÿÿ
Six Months Ended
ÿÿÿÿÿÿÿÿÿÿÿ September 30, ÿÿÿÿÿÿÿÿÿÿÿ
ÿÿÿÿÿ1997ÿÿÿÿÿ
ÿÿÿÿÿ1996ÿÿÿÿÿ
ÿÿÿÿÿ1997ÿÿÿÿÿ
ÿÿÿÿÿ1996ÿÿÿÿÿ
Net Sales $ 41,877 $ 41,956 $ 124,314 $ 122,981
Net (loss) from operations (16,330) (6,653) (22,083) (5,109)
Net (loss) (17,177) (7,107) (24,652) (6,404)
Net (loss) per share (0.44) (0.18) (0.63) (0.17)
Weighted shares outstanding 39,308 38,484 39,240 38,769
Balance Sheet Data:
September 30,
1997 December 31,
1996
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents $ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ9,477 $ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ20,925
Other current assets 77,242 94,077
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ÿÿÿÿÿTotal current assets 86,719 115,002
Property, plant and equipment,net 74,641 76,010
Other assets 57,399 59,923
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$ÿÿÿÿÿÿÿÿÿÿÿÿ218,759 $ÿÿÿÿÿÿÿÿÿÿÿÿ250,935
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Current liabilities $ ÿÿÿÿÿÿÿÿÿÿÿÿÿ 22,107 24,683
Long-term liabilities 40,894 47,028
Other liabilities 337 420
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ÿÿÿÿÿTotal liabilities 63,338 72,131
Shareholders' equity 155,421 178,804
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$ÿÿÿÿÿÿÿÿÿÿÿÿ218,759 $ÿÿÿÿÿÿÿÿÿÿÿÿ250,935
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) The Company's operating results for the periods ending September 30, 1997, include $13ÿmillion in nonrecurring reserves for excess inventory.
(2) Long-term debt includes $35,491 outstanding on September 30, 1997, under the Company's senior credit facility. At September 30, 1997, the Company was not in compliance with the net income and net worth covenants contained in such credit facility. The Company is in the process of obtaining a waiver of such covenant violations and has accordingly classified such indebtedness as long-term, although no assurances can be provided that the Company will in fact receive such waiver. The failure to obtain such waiver would require that such indebtedness be classified as a current liability. |
