IMATRON ANNOUNCES 1997 RESULTS
Scanner Sales and Revenues Reach Record Levels
SO. SAN FRANCISCO, Calif.--(BUSINESS WIRE)--April 15, 1998-- Imatron Inc. (Nasdaq: IMAT - news) today reported record consolidated revenues of $39.4 million on sales of 18 scanners for the fiscal year ended December 31, 1997, versus revenues of $25.8 million on sales of 11 scanners for the prior year. Net losses were reported to be $11.4 million, or $0.15 per share, for the 1997 fiscal year versus net losses of $13.7 million, or $0.18 per share, for the prior year. As of December 31, 1997, Imatron's consolidated balance sheet has $26.0 million in working capital and a current ratio of 3.2 to 1.0.
The Company also announced that it has begun direct distribution efforts for its Ultrafast CT(R) scanner in the United States and Canada. On April 1, 1998, Imatron officially regained worldwide distribution rights for its scanner in the United States, Canada, Europe, and India, markets that were previously served exclusively by Siemens Medical Systems.
According to S. Lewis Meyer, Imatron's President and CEO, ''We said at the beginning of 1997 that we were going to focus our efforts on increasing sales and building an infrastructure that would enable us to capitalize on our technology and its market potential. I am pleased to report that we achieved both of these objectives.''
Imatron's consolidated results reflect primarily the following four factors. First, the increased sales of scanners worldwide. Despite the impact of the Asian crisis and the resulting delay of three shipments from the fourth quarter of 1997, Imatron's scanner sales improved by 64% over 1996 scanner sales. Imatron's consolidated operating losses improved to $10.1 million in 1997 from $12.4 million in 1996.
Second, Imatron's revenues also improved as a result of the Company's efforts to consolidate and expand its customer service requirements around the world. As a result, Service revenues for 1997 were $4.5 million versus $3.5 million in 1996, an increase of 30%. Service operating profits increased to $0.6 million in 1997 from $0.3 million in 1996, an increase of 100%.
Third, HeartScan's operating results showed the impact of five Coronary Artery Disease Risk Assessment Centers being open for the entire year. While HeartScan's 1997 revenues of $2.5 million were $1.2 million better than 1996 revenues of $1.3 million, the net loss in 1997 also increased to $8.2 million from the 1996 net loss of $7.8 million in 1996 reflecting the full year impact of the ramp-up costs at the Washington, D.C. and Pittsburgh centers.
Fourth, certain non-operating results for 1996 and the first three quarters of 1997 have been restated as a result of the retroactive application of the Emerging Issues Task Force (EITF) topic No. D-60 discussed later in this release.
Mr. Meyer added, ''During the past year Imatron continued to receive increasing support from the medical research community, as well as tremendous public awareness for our electron beam tomography (EBT) technology. Ultrafast CT scanning is now recognized by institutions around the world as the most effective, non-invasive way to assess an individual's risk of heart attack. In addition, our proprietary technology is also being hailed as a cost-effective, non-invasive alternative to invasive coronary angiography for follow-up of implanted bypass grafts after heart-bypass surgery and for follow-up of coronary arteries after balloon angioplasty.
''We reached a new business arrangement with Siemens Medical Systems whereby Imatron regained the right to directly distribute our Ultrafast CT scanner worldwide on April 1, 1998. Anticipating this event, we established a direct sales team for the United States and Canada which complements our already existing international sales force. Based on leads and interest thus far, we are confident we will achieve significantly greater scanner sales, especially in the domestic market, as a result of our direct distribution efforts.
''Despite our record scanner sales in 1997, HeartScan continued to experience operating losses which negatively impacted Imatron's bottom line. HeartScan's operating performance has been the focus of significant management attention during the past year. We implemented a variety of marketing programs to improve center operations, and as a result of these efforts, we have seen a dramatic improvement in patient volumes in our centers in San Francisco, Houston, and Washington, D.C. We plan to re-deploy scanners from markets such as Seattle that have failed to respond to these demonstrably successful marketing and professional education programs.
''A key objective for the 1998 fiscal year will be to rationalize the role of our HeartScan subsidiary in supporting Ultrafast CT scanner sales, given Imatron's assumption of worldwide product distribution rights from Siemens. We expect that this strategic refocus will include, among other actions, a search for a corporate or joint venture partner or acquirer for HeartScan.
''Finally, the Asian economic crisis negatively affected our international sales during fourth quarter 1997, resulting in delays and even cancellations of some orders. With the limited availability of capital in Asia at the current time, we do not expect sales in these regions to fulfill their potential until the financial systems and currency fluctuations that have devastated these countries improve,'' Mr. Meyer said.
In March 1997, subsequent to the Company finalizing its 1996 consolidated financial statements, the Securities and Exchange Commission (SEC) announced its position on accounting for the issuance of convertible preferred stock with a non-detachable conversion feature that is deemed ''in the money'' at the date of issue (a ''beneficial conversion feature'') in the form of Emerging Issues Task Force (EITF) topic No. D-60 . The beneficial conversion feature is initially recognized and measured by allocating a portion of the preferred stock proceeds equal to the intrinsic value of that feature to additional paid-in-capital. The intrinsic value is calculated at the date of issue as the difference between the conversion price and the quoted market price of the Company's common stock, into which the security is convertible, multiplied by the number of shares into which the security is convertible. The discount resulting from the allocation of proceeds to the beneficial conversion feature is treated as a dividend and is recognized as a return to the preferred shareholders over the minimum period in which the preferred shareholders can realize that return (i.e. from the date the securities are issued to the date they are first convertible). The accounting for the beneficial conversion feature requires the use of an unadjusted quoted market price (i.e. no valuation discounts allowed) as the fair value used in order to determine the intrinsic value dividend. Additionally, preferred dividends of a subsidiary are included in minority interest as a charge against income.
HeartScan's Preferred Series A Stock contains an exchange feature into Imatron common stock under certain conditions: first, at anytime during the first 24 months at $5 per share and, second, beginning at the end of the 24 month period, at a 27% discount off the Imatron 90 day weighted average closing price subject to a floor of $1.50 per share. The Company views this as a contingent liability due to the possibility of an IPO, the lack of certainty that the HeartScan Preferred shareholders will exchange, the unknown exchange price if exchange occurs and the fact that the instrument exists at a subsidiary level. However, the SEC staff has advised the Company that it believes that Topic No. D-60 applies sufficiently to the HeartScan Preferred A and has instructed Imatron to recognize the additional charge to minority interest expense.
As a result, the financial statements have been restated for 1996 and the first three quarters of 1997 in two components. First, $0.75 per converted share, or $2.4 million, has been recognized as minority interest expense as a result of the market price of Imatron common shares being $5.75 (versus the $5.00 exchange price) on the day of closing of the HeartScan Preferred A private placement. Second, a $3.5 million charge is being amortized over a 24 month period resulting in a charge of $0.9 million in 1996, $1.8 million in 1997, and $0.8 million in 1998. Any future exchange of the HeartScan Preferred A for Imatron common stock will have no impact on Imatron's cash position.
Imatron Inc. is primarily engaged in designing, manufacturing, marketing, and supporting high performance computed tomography (CT) scanners based on the Company's proprietary scanning electron beam technology. Ultrafast CT(R) is a registered trademark of Imatron. Imatron's Ultrafast CT scanner is now in use at major medical centers around the world, including The Mayo Clinic, University of Iowa, National Institutes of Health, UCLA, Stanford University, University of Illinois, The Royal Brompton Hospital in London, Tokyo University Hospital, Beijing Hospital and the National University Hospital of Singapore. Imatron's HeartScan Imaging Inc. subsidiary provides Coronary Artery Disease Risk Assessment diagnostic services in a nationwide network of clinics.
Except for the historical information contained herein, the matters discussed in this news release may contain forward-looking statements that are based on current expectations and estimates about the industry in which Imatron operates, the estimated impact of certain technological advances, the estimated impact of published research studies on scanner sales and procedures, as well as management's beliefs and assumptions. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. The factors that could cause actual results to differ materially include, among others: failed clinical demonstration of certain asserted technological advantages and diagnostic capabilities; reliance on product distributors; competition in the diagnostic imaging market; failure to improve product reliability or introduce new product models and enhancements; delays in production and difficulty in obtaining components and sub-assemblies from limited sources of supply; inability to meet cash-on-delivery or prepayment terms from vendors; determinations by regulatory and administrative government authorities; patent expiration and denial of patent applications; the high cost of the scanner as compared to commercially available CT scanners; and the risk factors listed from time to time in the Company's Securities and Exchange Commission reports, including their reports on Form 10-K for their current fiscal year.
IMATRON INC.
Consolidated Balance Sheets
(Amounts in thousands)
December 31,
ASSETS 1997 1996
(restated)
Current assets
Cash and cash equivalents $ 14,425 $ 10,862
Short-term investments 180 14,171
Accounts receivable (net of
allowance for doubtful
accounts of $2,758 and $1,110
at December 31, 1997 and 1996)
Trade accounts receivable 8,215 2,940
Accounts receivable from
affiliate 1,438 2,660
Inventories 12,926 10,393
Prepaid expenses 461 1,659
Total current assets 37,645 42,685
Property and equipment, net 10,359 10,102
Other assets 1,219 405
Total assets $ 49,223 $ 53,192
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 2,962 2,461
Other accrued liabilities 7,055 5,994
Capital lease obligations -
due within one year 1,578 1,188
Total current liabilities 11,595 9,643
Deferred income on sale leaseback
transactions 1,376 1,419
Deferred income on service contract 420 --
Capital lease obligations 4,507 4,604
Total liabilities 17,898 15,666
Minority interest 14,255 12,323
Shareholders' equity
Common stock, no par value;
authorized - 150,000 shares;
issued and outstanding 78,815
in 1997 and 77,919 shares in
1996 92,628 89,223
Deferred compensation (232) (116)
Additional paid-in capital 7,390 7,390
Accumulated deficit (82,716) (71,294)
Total shareholders' equity 17,070 25,203
Total liabilities and shareholders'
equity $49,223 $53,192
-0-
IMATRON INC.
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
December 31,
1997 1996
(restated)
Revenues
Product sales $ 26,441 $ 14,236
Product sale - leaseback arrangements 927 1,774
Service 4,513 3,465
Development contracts 5,000 5,000
Clinics 2,542 1,293
Total revenue 39,423 25,768
Cost of revenues
Product sales 18,820 12,617
Product sale - leaseback arrangements 927 1,774
Service 3,898 3,158
Development contracts 5,000 5,000
Clinics 3,234 2,238
Total cost of revenue 31,879 24,787
Gross profit 7,544 981
Operating expenses
Research and development 4,713 3,318
Marketing and sales 6,821 4,676
General and administrative 6,154 5,396
Total operating expenses 17,688 13,390
Operating loss (10,144) (12,409)
Interest and other income 1,044 2,508
Interest expense (578) (564)
Net loss before provision for
income taxes (9,678) (10,465)
Provision for income taxes -- --
Net loss before minority interest
expense (9,678) (10,465)
Minority interest expense (1,744) (3,272)
Net loss $ (11,422) $ (13,737)
Basic and diluted loss
per common share $ (0.15) $ (0.18)
Number of shares used in basic and
diluted per share calculations $ 78,461 $ 74,406
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Contact:
Imatron Inc., So. San Francisco, 650/583-9964
S. Lewis Meyer, President/CEO
Gary Brooks, VP Finance/CF
Lisa Kimberlin, Investor Relations
or
Sitrick And Company
Jeffrey Lloyd /Tony Knight, 310/788-2850
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