UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 3, 2000 Commission file number 1-11479
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E-Z-EM, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 11-1999504
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 Main Street, Westbury, New York 11590
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 333-8230
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Securities registered pursuant to Section 12(b) of the Act: Class A Common
Stock, par value $.10 and Class B Common Stock, par value $.10
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's voting Class A and non-voting
Class B Common Stock held by non-affiliates on August 4, 2000 was $42,804,000.
On August 4, 2000, there were 4,014,641 shares of the registrant's Class A
Common Stock outstanding and 5,898,686 shares of the registrant's Class B Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for registrants 2000 Annual Meeting of
Stockholders to be held October 24, 2000 are incorporated by reference in Part
III of this Form 10-K Report.
Page 1 of 81
Exhibit Index on Page 33
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E-Z-EM, Inc. and Subsidiaries
INDEX
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Page
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Part I:
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Item l. Business 3
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Part II:
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Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 15
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 21
Item 8. Financial Statements and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
Part III:
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Item 10. Directors and Executive Officers of the Registrant 23
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial Owners
and Management 29
Item 13. Certain Relationships and Related Transactions 32
Part IV:
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Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 33
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Part I
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Item 1. Business
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(a) General Development of Business
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E-Z-EM, Inc. (the "Company" or "E-Z-EM"), organized in Delaware in 1983,
together with its predecessors, has been in business for over 38 years, and has
its corporate offices located at 717 Main Street, Westbury, N.Y. 11590. The
Company is primarily engaged in developing, manufacturing and marketing
diagnostic products used by radiologists and other physicians during
image-assisted procedures to detect anatomic abnormalities and diseases. The
Company also designs, develops, manufactures and markets, through its
wholly-owned subsidiary, AngioDynamics, Inc. ("AngioDynamics"), a variety of
therapeutic and diagnostic products, for use principally in the diagnosis and
treatment of peripheral vascular disease. Interventional radiologists primarily
use these products during minimally invasive diagnostic and therapeutic surgical
procedures.
E-Z-EM's products consist of specially developed powdered and liquid barium
sulfate formulations and consumable medical devices, which function together as
a system ("contrast systems"), for examination of the various parts of the
gastrointestinal ("G.I.") tract. Contrast systems are used in X-ray, CT-scanning
and other imaging examinations. The G.I. tract is commonly referred to as the
digestive system and consists of the pharynx, esophagus, stomach, small
intestine (or small bowel) and colon. E-Z-EM manufactures a broad spectrum of
barium sulfate products for different uses in G.I. tract examinations. Each
E-Z-EM barium sulfate formulation is tailored to that portion of the G.I. tract
to be examined, and to the procedures employed by radiologists in each
examination. Based upon sales, the Company believes that it is the leading
worldwide producer of barium sulfate contrast systems for use in G.I. tract
examinations.
The Company also competes in areas related and complementary to its basic
contrast systems business, categorized as non-contrast systems. Non-contrast
systems include: radiological medical devices, custom contract pharmaceuticals,
gastrointestinal cleansing laxatives, X-ray protection equipment, and
immunoassay tests. See "Narrative Description of Business".
The Company's sales of contrast and non-contrast systems, collectively the
diagnostic ("Diagnostic") products industry segment, net of intersegment
eliminations, increased 6% during 2000 as compared to 1999 due to price
increases and increased demand.
The Company manufactures and markets, through AngioDynamics, six
differentiated product groups for use during interventional radiology
procedures: angiographic products, thrombolytic products, image-guided vascular
access products, angioplasty products, stents, and drainage products.
Collectively these products are classified as the AngioDynamics products
industry segment. See "Narrative Description of Business".
During 2000, AngioDynamics product sales, net of intersegment eliminations,
decreased 1%. International sales decreased 32% due, in large part, to a
continued decline in stent sales. Domestic sales increased 5% as a result of the
introduction of several new products, namely Abscession(TM) fluid drainage
catheters, VistaFlex(TM) platinum biliary stents, and Workhorse(TM) PTA balloon
catheters, in the second quarter of 2000.
On July 27, 2000, AngioDynamics entered into two agreements to sell all the
capital stock of AngioDynamics Ltd., a wholly-owned subsidiary, and certain
other assets to AngioDynamics Ltd.'s management. AngioDynamics Ltd., located in
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Ireland, manufactured cardiovascular and interventional radiology products. The
aggregate consideration paid was $3,250,000 in cash. The sale was the
culmination of AngioDynamics' strategic decision to exit the cardiovascular
market and to focus entirely on the interventional radiology marketplace. The
gain resulting from this sale will not be material to the financial position and
results of operations for the quarter ended September 2, 2000. Further,
AngioDynamics entered into a manufacturing agreement, a distribution agreement
and a royalty agreement with the buyer. Under the two-year manufacturing
agreement, the buyer will manufacture certain interventional radiology products
sold by AngioDynamics.
Unless the context requires otherwise, all references herein to a
particular year are references to the Company's fiscal year.
(b) Financial Information About Industry Segments
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The Company is engaged in the manufacture and distribution of a wide
variety of products that are classified into two industry segments: Diagnostic
products and AngioDynamics products. Diagnostic products encompass both contrast
systems, consisting of barium sulfate formulations and related medical devices
used in X-ray, CT-scanning, ultrasound and Magnetic Resonance Imaging ("MRI")
imaging examinations, and non-contrast systems, including radiological medical
devices, custom contract pharmaceuticals, gastrointestinal cleansing laxatives,
X-ray protection equipment, and immunoassay tests. AngioDynamics products
include angiographic, thrombolytic, image-guided vascular access, angioplasty,
stents, and drainage medical devices used in the interventional radiology
marketplace.
Certain financial information, including net sales, depreciation and
amortization, net earnings (loss), assets and capital expenditures attributable
to each operating segment are set forth in Note O to the Consolidated Financial
Statements included herein.
(c) Narrative Description of Business
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Diagnostic Products
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Diagnostic products include both contrast systems, consisting of barium
sulfate formulations and related medical devices used in X-ray, CT-scanning and
other imaging examinations, and non-contrast systems, including radiological
medical devices, custom contract pharmaceuticals, gastrointestinal cleansing
laxatives, X-ray protection equipment, and immunoassay tests.
Contrast Systems
Contrast systems, using barium sulfate formulations as contrast media
together with consumable medical devices, have been E-Z-EM's principal business
since the Company's organization over 38 years ago. For over 80 years, barium
sulfate has been the contrast medium of choice for virtually all G.I. tract
X-ray examinations. It has the longest history of use among all contrast media.
Barium sulfate is preferred among G.I. tract contrast media because it has a
high absorption coefficient for X-rays. In addition, it is biologically inert,
insoluble in water and chemically stable. Barium sulfate for suspension is
listed in the U.S. Pharmacopeia. The use of properly formulated barium sulfate
suspensions permits the visualization of the entire G.I. tract.
The Company's contrast systems are designed for a variety of radiologic
procedures. In single contrast procedures, a portion of the G.I. tract is filled
with barium sulfate to produce a diagnostic image of the tract's contours. In
double contrast procedures, CO2 or air is used to distend the G.I. tract after
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coating with a high density barium sulfate suspension. This produces a
significantly clearer diagnostic image of the tract's surface than that
obtainable through the use of single contrast procedures. In computed tomography
procedures, known as "CT-scanning", a specially formulated low density barium
sulfate product is used to fill and thus identify the G.I. tract.
Contrast systems provide radiologists with a range of effective and
convenient powdered and liquid product formulations tailored to single contrast,
double contrast or CT-scanning procedures. Many of the Company's products are
functionally packaged in disposable dispensing containers. The Company believes
that it currently has the broadest barium sulfate product line of any worldwide
manufacturer and is continuing to develop additional formulations for modern
X-ray techniques. E-Z-EM also sells accessory medical devices for use in
contrast system procedures, including empty enema administration kits and
components. Sales of contrast systems increased 8% during 2000 as compared to
1999.
Non-Contrast Systems
The Company also competes in areas related and complementary to its basic
contrast systems business, categorized as non-contrast systems. Non-contrast
systems include: radiological medical devices, custom contract pharmaceuticals,
gastrointestinal cleansing laxatives, X-ray protection equipment, and
immunoassay tests. Sales of non-contrast systems increased 2% during 2000 as
compared to 1999.
The Company's line of radiological medical devices include
electromechanical injectors and syringes, needles, trays and ancillary devices
used during a variety of radiologic and ultrasound procedures. This product
grouping includes the PercuPump Touchscreen(TM) with EDA(TM) injector ("PP with
EDA"), which is designed to inject contrast media into the vascular system for
visualization purposes during CT procedures. The PP with EDA, introduced in
1998, is the first CT injector designed to aid in the detection of
extravasation, an accidental infiltration of contrast media into surrounding
tissue. The PP with EDA is comprised of an electromechanical injector, a
consumable syringe, and a disposable EDA detector patch. Other radiological
medical devices include entry needles, biopsy needles, trays and ancillary
products used during mammography, amniocentesis and other specialty procedures.
Custom contract pharmaceutical and cosmetic products are manufactured on a
contract basis by E-Z-EM Canada Inc. ("E-Z-EM Canada"), the Company's wholly-
owned Canadian subsidiary. Pharmaceuticals include products for dermatology,
cough and cold medicines, liquid vitamins, antacids and sun screen lotions and
creams. Cosmetic products include skin care products, namely anti-aging and
moisturizers.
E-Z-EM Canada has a long-term agreement with O'Dell Engineering Ltd.
("O'Dell") of Cambridge, Ontario, Canada, to commercialize a decontamination
lotion for chemical warfare agents. The product line, known as Reactive Skin
Decontaminant Lotion ("RSDL"), is currently marketed to the defense sector.
Under the terms of the agreement, E-Z-EM Canada is the exclusive manufacturer of
the product and is responsible for all phases of product development, including
future generation decontaminants.
RSDL is a decontamination lotion which neutralizes and destroys chemical
warfare agents. It has been shown to be effective against the G and V families
of nerve agents, which include Sarin (used in the Tokyo subway terrorist attack)
and VX, and the H and L families of vesicants (blister agents), which include
Mustard and Lewisite. Developed by the Defense Research Establishment of the
Canadian Department of National Defense, the product patent is held by the
Canadian government, which has entered into an exclusive licensing agreement
with
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O'Dell until the year 2010. To date, patents have been issued for RSDL in the
U.S., Canada and over a dozen European countries.
The Company offers laxative products specially formulated to cleanse the
G.I. tract prior to X-ray and colonoscopic examinations. These products are sold
through the same distribution network as the Company's contrast systems.
The Company markets a line of X-ray protection equipment featuring
Adjust-A-Weight(TM), a patented design concept which allows the wearer to adjust
the weight distribution of the protective apron to relieve fatigue. This product
line is sold through the same distribution network as the Company's contrast
systems.
The Company, through its wholly-owned subsidiary, Enteric Products, Inc.
("EPI"), markets immunoassay tests for use in the detection of Helicobacter
pylori ("H. pylori"). The tests analyze a patient's serum or whole blood sample
using a patented antigen licensed from Baylor College of Medicine. These tests
are available for both laboratory use and for use in a physician's office.
H. pylori infection has been identified as the leading cause of duodenal
and gastric ulcers and has also been linked to gastritis and gastric cancer. The
World Health Organization has categorized H. pylori as a Class 1 carcinogen, a
definite cancer causing agent in humans. Gastric cancer is a leading cause of
death in Asia, Africa and Eastern Europe.
The Primary Care Division of Beckman Coulter, Inc. ("Beckman"), with whom
EPI co-developed the serum and whole blood tests, also markets its version of
the product under the name FlexSure(TM) HP in the U.S. and other selected
territories. EPI receives revenue from royalties on the sale of product by
Beckman to its distributors and end-users, and from the sale of EPI's patented
antigen to Beckman for use in both tests. In addition, EPI derives revenue from
the sale of HM-CAP(TM), the laboratory version of the blood serum test. The
Company markets the HM-CAP test direct and through distributors in the U.S. and
abroad.
EPI, through its EndoDynamics division, also sells products to the
gastroenterology and cardiology markets. These products include the patented
Suction Polyp Trap(TM) that is used during colonoscopy and the patented
E-Z-Guard(TM) Mouthpiece that is used during esophageal echocardiography
procedures. EndoDynamics markets its products through a network of independent
sales representatives in the U.S. and specialty distributors outside the U.S.
Significant Customers
Sales to Marconi Medical Systems, Inc. (formally Picker International,
Inc.) and Diagnostic Imaging Inc., which are distributors of the Company's
Diagnostic products, were 18% and 12%, respectively, of total net sales during
2000.
AngioDynamics Products
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The Company, through its wholly-owned subsidiary, AngioDynamics, designs,
develops, manufactures and markets a variety of differentiated products and
systems for the worldwide interventional radiology marketplace, which is the
practice of medicine using both traditional and new imaging procedures to
perform minimally invasive diagnostic and therapeutic surgical procedures.
The Company believes that the interventional radiology market is growing
dramatically. This is due, in large part, to the less invasive aspects of
interventional radiology procedures, as compared to open surgical procedures,
which result in a reduction in the overall cost of medical care while providing
important patient benefits. Interventional radiology procedures are often
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performed on an out-patient basis, thereby requiring fewer hospital support
services. These procedures, even when performed on an in-patient basis,
generally require a shorter hospital stay than do more traditional surgical
procedures. Interventional radiology procedures also typically can have reduced
risk and trauma, are less complex, have fewer and less serious complications,
can often be performed earlier in the stage of a disease, and frequently result
in less costly and more definitive therapy than do more traditional surgical
procedures. The Company expects the number of interventional radiology
procedures performed to increase as these procedures gain wider acceptance, as
more physicians become trained in less invasive medical specialties, and as
these procedures become more widely performed in community hospitals as well as
in major medical centers. Improvements in imaging and device technology should
further expand the application of interventional radiology procedures.
Angiographic Products
Angiographic products include diagnostic catheters, fluid management
products and CO2Ject(TM), a proprietary angiographic system that uses carbon
dioxide ("CO2") instead of standard iodinated contrast media. These products are
used during procedures known as "angiograms" and "venograms", which provide
images of the human peripheral vasculature and blood flow.
The Company manufactures three lines of angiographic catheters,
Soft-Vu(TM), Memory-Vu(TM), and ANGIOPTIC(TM), suitable for diagnosing the
peripheral human vascular system. These catheters are available in over 500 tip
configurations and lengths, either as standard catalogue items or made to order
through the Company's customization program. The Company's lines of angiographic
catheters are cleared for sale in the U.S., the European community, Japan and
elsewhere throughout the world.
The proprietary Soft-Vu/Memory-Vu catheter technology incorporates a soft,
atraumatic tip that is attached to a more rigid shaft. In addition to being
soft, the catheter tips are also easily visualized under fluoroscopy. The
Company believes this soft tipped catheter technology offers the physician a
safe diagnostic catheter with less propensity to perforate or lacerate an artery
or vein.
The Company's ANGIOPTIC catheter line is distinguished from other catheters
because the entire catheter is highly visible under fluoroscopy. The catheter is
constructed using a proprietary triple-layer extrusion technology.
The Company manufactures several lines of products used to administer
fluids and contain the blood and other biological wastes produced during an
interventional radiology procedure. These products are designed to meet the
concern about HIV and hepatitis. The AngioFill(TM) product line controls
airborne blood borne pathogens by aspirating a catheter and injecting the blood
into an appropriate receptacle. The AngioFill systems also have fluid lines that
connect to saline and contrast media bottles. In use, physicians aspirate the
catheter with a syringe and release the contents in the AngioFill bag. While the
syringe is still connected to the AngioFill, the physician draws fresh saline or
contrast media to flush the catheter. The patented Pulse-Vu Needle(TM) and Sos
Bloodless Entry Needle(TM) control airborne blood borne pathogens and the
spurting blood flow normally encountered in a femoral arterial puncture. Both
needles have a thin diaphragm to divert the pressurized column of blood into a
clear, flexible side arm tube, thus preventing the blood from entering the
clinical environment. The special diaphragm has a slit that allows easy passage
of a guidewire through the needle hub and needle lumen and into the lumen of the
artery. The Company has secured patents on its bloodless needle technology. All
of the Company's fluid management products are cleared for sale in the U.S., the
European community, Japan and elsewhere throughout the world.
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The CO2Ject is comprised of CO2 contrast, an automated injector, a CO2
connection set, a diagnostic catheter and an angioplasty balloon catheter. Since
a normal function of the human vasculature and blood flow system is the transfer
and expulsion of CO2 through the respiratory system, the Company believes that
CO2 provides a higher degree of safety than iodinated contrast media, which can
cause severe allergic reactions in certain patients. The Company also believes
that CO2 is more cost effective and provides better images than iodinated
contrast media. Currently, the CO2Ject is being sold in Europe, South America,
Australia and Asia. To date, there is no automated CO2 system that has received
U.S. Food and Drug Administration ("FDA") clearance for sale in the U.S. The
Company has not applied for FDA clearance for the CO2Ject, and, in the event
that the Company does, there can be no assurance that such clearance will be
obtained at all.
Thrombolytic Products
The Company's proprietary thrombolytic product line is marketed under the
names Pulse*Spray(R) and UNI*FUSE(TM) which are used to dissolve blood clots in
hemodialysis access grafts, arteries and veins. Pulse*Spray and UNI*FUSE Sets
include PRO(TM) Infusion Catheters, occluding wires, check valves, and syringes.
The Pulse*Spray and UNI*FUSE Sets optimize the delivery of lytic agent (the drug
that actually dissolves the clot) by providing a controlled, forceful, uniform
dispersion. This improvement has been clinically shown to reduce the amount of
lytic agent and the time necessary for the procedure by a factor of three. This
represents significant cost savings for the hospital, the patient, and the
healthcare system, while reducing the complications associated with the use of
larger volumes of lytic agent. The Pulse*Spray and UNI*FUSE Sets are cleared for
sale in the U.S., the European community, Japan and elsewhere throughout the
world.
The Pulse*Spray Injector is designed to be used in conjunction with
AngioDynamics' other thrombolytic products. This automated injector replaces
hand pressure as an injection mechanism and improves the consistency and
efficiency of the delivery of lytic agents through various Pulse*Spray and
UNI*FUSE Sets, as well as PRO Infusion Catheters. It allows the user to deliver
a wide range of infusion volumes and times and utilizes state-of-the-art
computer technology with a touch screen program to store up to 20
customer-specified programs.
The Pulse*Spray Injector is cleared for sale in the U.S., the European
community and elsewhere throughout the world. The Company believes that the
Pulse*Spray Injector provides the first viable treatment for dissolving deep
vein clots ("DVT's") in a wide patient population. Clinical experience with the
Pulse*Spray Injector indicates a significant reduction in the amount of
thrombolytic drugs and time required to resolve thrombosed deep veins in the
legs.
Image-Guided Vascular Access Products
The Company's image-guided vascular access products are marketed under the
AVA(TM) trade name and include the Schon catheter, the Schon XL catheter,
peripherally inserted central catheters ("PICC's"), implanted medication ports
("Port's") and central venous catheters.
The AVA(TM) trade name stands for "AngioDynamics Vascular Access" and is
the Company's banner for an initiative into the market for image-guided vascular
access. Precise placement of vascular access devices has become a significant
part of the practice of interventional radiology primarily due to the mastery of
high quality imaging equipment including fluoroscopy and ultrasound. These
devices are used to provide a dialysis conduit, and to deliver nutrition,
antibiotics and chemotherapy drugs. Mixing these fluids in a high blood flow
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near the heart reduces damage to the venous system and more rapidly distributes
these drugs through the body. The Company believes image-guided vascular access
("IGVA") is the most rapidly growing procedure that is performed by
interventional radiologists.
Angioplasty Products
In 2000, the Company introduced a new percutaneous transluminal angioplasty
("PTA") balloon catheter, the Workhorse(TM). This high-pressure balloon is
positioned to perform nearly 80% of all PTA procedures at a very economical
price. The product is offered in 54 configurations. The product is cleared for
sale in the U.S., the European community and elsewhere throughout the world. The
Company is pursuing vigorous sales and marketing efforts.
Stents
Stents are used to hold open passageways in the body that may have closed
or become obstructed as a result of aging, disease, or trauma. Stents are
increasingly being used as an alternative to or adjunct to surgical and
minimally invasive procedures and drug therapies, which reduce procedure time,
patient trauma, hospitalization and recovery time.
The Company's patented stent for biliary and peripheral vascular use, the
VISTAFLEX(TM), incorporates a platinum linked-looped design. The VISTAFLEX stent
is constructed from a single strand of platinum alloy wire that is precision
formed. The Company believes that this design provides more consistent vessel
support and radial force than other stent designs, as well as more visibility,
flexibility, and easier delivery than competitive stents. The Company believes
that its use of platinum imparts better hemocompatibility and long-term
biocompatibility than stainless steel stent designs. The stent is also unique in
that it can be easily imaged using MRI guidance, thus permitting the use of
non-invasive MRI in place of the more invasive fluoroscopic imaging that other
stents require.
During 1999, the FDA granted AngioDynamics a 510(k) clearance to market the
VISTAFLEX stent for the treatment of biliary stricture in the U.S. Biliary
stricture, a condition common among hepatic and pancreatic cancer patients, is a
narrowing of the bile duct as a result of tumor ingrowth. The VISTAFLEX is
marketed internationally for peripheral vascular and biliary stricture
applications. The VISTAFLEX for peripheral vascular applications has not yet
been cleared for sale in the U.S. The Company intends to submit a premarket
approval ("PMA") application to obtain marketing clearance from the FDA for
peripheral vascular applications, but there can be no assurance that such
clearance will be obtained.
Drainage Products
In 2000, the Company introduced a new line of fluid drainage catheters,
trade named Abscession(TM). These catheters are intended to drain abscesses,
chest fluid, pancreatitis fluid, and urine percutaneously from the body. This
product line features a soft catheter material that is intended to be more
comfortable for the patient. The catheter material also recovers its shape if
bent or severely deformed; these events are common as patients roll over and
kink the catheters during sleep. Drainage procedures are routinely performed by
interventional radiologists using fluoroscopy, CT or ultrasound guidance.
Coronary Products
The Company made a strategic decision to exit the market for coronary
products in order to focus entirely on the interventional radiology marketplace.
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This decision culminated in the sale, on July 27, 2000, of AngioDynamics Ltd.,
the Irish subsidiary that manufactured the Company's coronary products.
Marketing
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The Company believes that the success of its barium sulfate products is
primarily due to its ability to create contrast systems with specific,
sophisticated barium formulations for varying radiologic needs. E-Z-EM continues
to develop new barium sulfate products, including products for CT-scanning and
MRI procedures.
E-Z-EM's contrast systems, laxatives, X-ray protection equipment and
radiological medical devices, such as syringes, biopsy needles and trays, are
marketed to radiologists and hospitals in the U.S. through approximately 170
distributors, supported by 29 E-Z-EM sales people, many of whom have had
technical training as X-ray technicians. The Company also advertises in medical
journals and displays at most national and international radiology conventions.
Outside the U.S., the Company's contrast systems are also marketed through
126 distributors, including wholly-owned subsidiaries in Canada, the United
Kingdom, Japan and Holland. Significant sales are made in Canada, the United
Kingdom, Japan, Italy, Holland, Austria, Sweden, Germany, South Africa and
Australia. Foreign distributors are generally granted exclusive distribution
rights and hold governmental product registrations in their names, although new
registrations are currently being filed in the Company's name where permissible
by applicable law.
The Company's AngioDynamics products are marketed to interventional
radiologists. Domestic sales are supported by 21 direct sales employees, while
the international marketing effort is conducted through 50 distributors,
including three wholly-owned subsidiaries. Foreign distributors are generally
granted exclusive distribution rights on a country-by-country basis.
Competition
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Based upon sales, E-Z-EM contrast systems are the most widely used
diagnostic imaging products of their kind in the U.S., Canada and certain
European countries. The Company faces competition domestically from Inovision
Holdings LP (formally Lafayette Pharmaceuticals, Incorporated), as well as from
small U.S. competitors, and it also faces competition outside of the U.S. The
Company competes primarily on the basis of product quality, customer service,
the availability of a full line of barium sulfate formulations tailored to user
needs, and price.
Radiologic procedures for which the Company supplies products complement,
as well as compete with, endoscopic procedures such as colonoscopy and
endoscopy. Such examinations involve visual inspection of the G.I. tract through
the use of a flexible fiber optic instrument inserted into the patient by a
gastroenterologist. The use of gastroenterology procedures has been growing in
both upper and lower G.I. examinations as patients have been increasingly
referred to gastroenterologists rather than radiologists. Also, the availability
of drugs which successfully treat ulcers and other gastrointestinal disorders
has tended to reduce the need for upper G.I. tract examinations. In January
1998, Medicare began reimbursing for colorectal cancer screening utilizing G.I.
examinations, as well as other procedures.
The major non-contrast systems market that the Company competes in is the
medical device radiology market, which is highly competitive. No single company,
domestic or foreign, competes with the Company across all of its non-contrast
system product lines. In electromechanical injectors and syringes, the Company's
main competitors are Schering AG and Mallinckrodt, Inc. In needles and trays,
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the Company competes with C.R. Bard, Inc., Baxter Healthcare Corporation,
Sherwood Medical Co. and various other competitors. The Company also encounters
competition in the marketing of its other non-contrast systems products.
The Company competes in the AngioDynamics products segment on the basis of
product quality, product innovation, sales, marketing and service effectiveness,
and price. There are many large companies, with significantly greater financial,
manufacturing, marketing, distribution and technical resources than the Company,
focusing on these markets. Those Company products that the FDA has already
cleared and those Company products that in the future receive FDA clearance will
have to compete vigorously for market acceptance and market share.
Cook, Inc., Boston Scientific Corporation, Johnson & Johnson Interventional
System, Co., C.R. Bard, Inc., Medtronic, Inc. and Guidant Corporation, among
others, currently compete against the Company in the development, production and
marketing of stents and stent technology.
The Company's stent technology also competes against more traditional
treatments. For example, the medical indications that can be treated by stents
can also be treated by surgery, drugs, or other medical devices, many of which
are widely accepted in the medical community.
Within the contrast media market, the Company's CO2Ject system competes
with a product offered by Daum GmbH. The Company also competes with companies
marketing iodinated contrast agents. These companies include Nycomed Inc.,
Bracco s.p.a., Schering AG and Mallinckrodt, Inc.
In the market for angiographic catheters, the Company's major competitors
are Cook, Inc. and Johnson & Johnson Interventional System, Co.
The competitive situation in the market for thrombolytic products is
complex. The first level of competition is the medical profession, where each
physician can decide if an artery or graft will be cleared surgically or by
thrombolysis. If thrombolysis is used, the second level of competition is for
the specific type of catheter or wire that will be used. The Company's primary
competitors in this market are Boston Scientific Corporation, Micro
Therapeutics, Inc., Cook, Inc. and Arrow International.
The Company believes that it is perceived as a market leader in the market
for blood containment products, where its primary competition comes from Arrow
International and Becton-Dickinson. The market for fluid management systems is
extremely competitive, with the Company's products being similar to products
from Boston Scientific Corporation, Merit, Burron Medical, DeRoyal, Biocore,
Advanced Medical Design, and Furon, Inc. These products are non-patient contact
and, therefore, the barriers to entry, such as regulatory clearance, potential
liability, and the need for technical sophistication, are not significant.
Research and Development
------------------------
In addition to its technical staff, which consists of a Medical/Technical
Director and 39 employees, the Company has consulting arrangements with various
physicians who assist through their independent research and product
development. Research and development expenditures totaled $4,880,000, or 4% of
net sales, in 2000, as compared to $4,847,000, or 5% of net sales, in 1999 and
$5,662,000, or 6% of net sales, in 1998. The Company is committed to expansion
of its product lines through research and development.
Raw Materials and Supplies
--------------------------
Most of the barium sulfate for contrast systems is supplied by a number of
European and U.S. manufacturers, with a minor portion being supplied by E-Z-EM
-11-
<PAGE>
Canada, which operates a barium sulfate mine and processing facility in Nova
Scotia and whose reserves are anticipated to last a minimum of five years at
current usage rates. The Company believes that these sources should be adequate
for its foreseeable needs.
The Company has generally been able to obtain adequate supplies of all
components for its AngioDynamics business in a timely manner from existing
sources. However, the inability to develop alternative sources, if required, or
a reduction or interruption in supply, or a significant increase in the price of
components, could adversely affect operations.
Patents and Trademarks
----------------------
Although several products and processes are patented and the Company
considers its trademarks to be a valuable marketing tool, the Company does not
consider any single patent, group of patents, or trademarks to be materially
important to its Diagnostic business segment. E-Z-EM and AngioDynamics are
examples of the Company's registered trademarks in the U.S.
The Company believes that success in the AngioDynamics products segment is
dependent, to a large extent, on patent protection and the proprietary nature of
its technology. The Company intends to file and prosecute patent applications
for technology for which it believes patent protection is effective and
advisable. The Company believes that issued patents covering Soft-Vu
angiographic catheters, thrombolytic products and VISTAFLEX are significant to
its AngioDynamics business.
Because patent applications are secret until patents are issued in the U.S.
or corresponding applications are published in foreign countries, and because
publication of discoveries in the scientific or patent literature often lags
behind actual discoveries, the Company cannot be certain that it was the first
to make the inventions covered by each of its pending patent applications, or
that it was the first to file patent applications for such inventions. The
Company also relies on trade secret protection and confidentiality agreements
for certain unpatented aspects of its proprietary technology.
Regulation
----------
The Company's products are registered with the FDA and with similar
regulatory agencies in foreign countries where they are sold. The Company
believes it is in compliance, in all material respects, with applicable
regulations of these agencies.
Certain of the Company's products are subject to FDA regulation as medical
devices and certain other products, such as various contrast systems products
and CO2Ject, are regulated as pharmaceuticals. Outside of the U.S., the
regulatory process and categorization of products vary on a country-by-country
basis.
The Company's products are covered by Medicare, Medicaid and private
healthcare insurers, subject to patient eligibility. Changes in the
reimbursement policies and procedures of such insurers may affect the frequency
with which such procedures are performed.
The Company operates several facilities within a broad industrial area
located in Nassau County, New York, which has been designated by New York State
as a Superfund site. This industrial area has been listed as an inactive
hazardous waste site, due to ground water investigations conducted on Long
Island during the 1980's. Due to the broad area of the designated site, the
potential number of responsible parties, and the lack of information concerning
the degree of contamination and potential clean-up costs, it is not possible to
estimate what, if any, liability exists with respect to the Company. Further, it
has not
-12-
<PAGE>
been alleged that the Company contributed to the contamination, and it is the
Company's belief that it has not done so.
Employees
---------
The Company employs 955 persons, 185 of whom are covered by various
collective bargaining agreements. Collective bargaining agreements covering 91
and 90 employees expire in December 2002 and December 2004, respectively. The
Company considers employee relations to be satisfactory.
(d) Financial Information Regarding Foreign and Domestic Operations and Export
---------------------------------------------------------------------------
Sales
-----
The Company derived about 33% of its sales from customers outside the U.S.
during 2000. Operating profit margins on export sales are somewhat lower than
domestic sales margins. The Company's domestic operations bill third party
export sales in U.S. dollars and, therefore, do not incur foreign currency
transaction gains or losses. Third party sales to Canadian customers, which are
made by E-Z-EM Canada, are billed in local currency. Third party sales to
Japanese customers, which are made by the Company's Japanese subsidiary, are
also billed in local currency.
The Company employs 366 persons involved in the developing, manufacturing
and marketing of products internationally. The Company's product lines are
marketed through approximately 155 foreign distributors to 83 countries outside
of the U.S.
The net sales of each geographic area and the long-lived assets
attributable to each geographic area are set forth in Note O to the Consolidated
Financial Statements included herein.
Item 2. Properties
----------
The Company's principal manufacturing facilities and executive offices are
located in Westbury, New York. They consist of three buildings, one of which is
owned by the Company, containing an aggregate of 183,800 square feet used for
manufacturing, warehousing and administration. One of the Westbury facilities is
leased to the Company by various lessors, including certain related parties. See
"Certain Relationships and Related Transactions". AngioDynamics occupies
manufacturing and warehousing facilities located in Queensbury, New York
consisting of two buildings, one of which is owned by the Company, containing an
aggregate of 29,312 square feet. E-Z-EM Caribe owns a 38,600 square-foot plant
in San Lorenzo, Puerto Rico which fabricates enema tips and heat-sealed
products. E-Z-EM Canada occupies manufacturing and warehousing facilities
located in Montreal, Canada consisting of two buildings, one of which is owned
by the Company, containing an aggregate of 109,950 square feet. E-Z-EM Canada
also leases a 29,120 square-foot building in Debert, Nova Scotia and both owns
and leases land encompassing its barium sulfate mining operation.
Item 3. Legal Proceedings
-----------------
The Company is presently involved in various claims, legal actions and
complaints arising in the ordinary course of business. The Company believes such
matters are either without merit, or involve such amounts that unfavorable
disposition would not have a material adverse effect on the Company's financial
position and results of operations.
-13-
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
-14-
<PAGE>
Part II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
E-Z-EM, Inc. Class A and Class B Common Stock is traded on the American
Stock Exchange ("AMEX") under the symbols "EZM.A" and "EZM.B", respectively. The
following table sets forth, for the periods indicated, the high and low sale
prices for the Class A and Class B Common Stock as reported by the AMEX.
<TABLE>
<CAPTION>
Class A Class B
-------------------- ---------------------
High Low High Low
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Fifty-three weeks ended June 3, 2000
------------------------------------
First Quarter .................... $ 6.13 $5.19 $ 6.25 $4.88
Second Quarter ................... 5.75 4.13 5.50 4.38
Third Quarter .................... 10.63 5.75 10.88 5.50
Fourth Quarter ................... 10.13 6.63 10.00 6.50
Fifty-two weeks ended May 29, 1999
----------------------------------
First Quarter .................... $ 7.63 $5.88 $7.50 $5.38
Second Quarter ................... 7.13 5.88 6.13 5.50
Third Quarter .................... 7.00 5.88 6.50 4.38
Fourth Quarter ................... 7.00 4.88 6.00 4.38
</TABLE>
As of August 4, 2000 there were 204 and 342 record holders of the Company's
Class A and Class B Common Stock, respectively.
During fiscal 1998, the Company declared a 3% stock dividend payable in
non-voting Class B Common Stock. During fiscal 1999 and 2000, no stock dividends
were declared. The Company will continue to evaluate its dividend policy,
including the payment of any cash dividends, on an ongoing basis. Any future
dividends are subject to the Board of Directors' review of operations and
financial and other conditions then prevailing.
On September 1, 1999, the Company issued 10,000 shares of non-voting Class
B Common Stock to Paul S. Echenberg, a director of the Company, in consideration
for consulting services rendered. On November 1, 1999, the Company issued 1,000
shares of non-voting Class B Common Stock to each of the following directors of
the Company in consideration for services rendered as directors: Paul S.
Echenberg, James L. Katz, Donald A. Meyer and Robert M. Topol. All such shares
were issued pursuant to Section 4(2) of the Securities Act of 1933. The basis
upon which the exemption is claimed is that the issued shares were made only to
directors of the Company.
-15-
<PAGE>
Item 6. Selected Financial Data
-----------------------
<TABLE>
<CAPTION>
Fifty-three Fifty-two weeks ended
weeks ended --------------------------------------------------------------
June 3, May 29, May 30, May 31, June 1,
2000 1999 1998# 1997 1996
--------- --------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income statement data:
Net sales ................................. $112,093 $107,179 $102,884 $97,324 $91,932
Gross profit .............................. 50,465 45,157 37,433 36,570 36,414
Operating profit (loss) ................... 8,599 7,242 (5,351) (4,911) 957
Earnings (loss) from
continuing operations
before income taxes ..................... 9,234 6,671 (5,534) (4,530) 1,940
Earnings (loss) from
continuing operations ................... 5,965 4,797 (5,967) (3,208) 1,697
Net earnings (loss) ....................... 5,965 4,797 (5,967) (3,208) 21,008
Earnings (loss) from
continuing operations
per common share
Basic (1) ............................. .60 .48 (.60) (.33) .17
Diluted (1) ........................... .58 .47 (.60) (.33) .17
Earnings (loss) per
common share
Basic (1) ............................. .60 .48 (.60) (.33) 2.16
Diluted (1) ........................... .58 .47 (.60) (.33) 2.04
Weighted average common
shares
Basic (1) ............................. 10,013 10,077 9,952 9,871 9,712
Diluted (1) ........................... 10,314 10,314 9,952 9,871 10,315
<CAPTION>
June 3, May 29, May 30, May 31, June 1,
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Working capital ........................... $51,434 $48,430 $41,597 $43,115 $53,508
Cash, certificates of
deposit and short-
term debt and equity
securities .............................. 13,634 13,289 8,129 15,475 23,610
Total assets .............................. 99,085 96,059 90,706 100,720 96,037
Long-term debt, less
current maturities ...................... 453 477 606 842 680
Stockholders' equity ...................... 80,034 75,291 71,223 77,244 80,603
</TABLE>
# Includes the impairment charge of $4,121,000 described in Note C to the
Consolidated Financial Statements included herein.
(1) Retroactively restated to reflect the total shares issued after the 3%
stock dividend described in Note M to the Consolidated Financial Statements
included herein.
-16-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
The Company's fiscal year ended June 3, 2000 represents fifty-three weeks
and the fiscal years ended May 29, 1999 and May 30, 1998 represent fifty-two
weeks.
Results of Operations
---------------------
Segment Overview
----------------
The Company operates in two industry segments: Diagnostic products and
AngioDynamics products. The Diagnostic products operating segment encompasses
both contrast systems, consisting of barium sulfate formulations and related
medical devices used in X-ray, CT-scanning, ultrasound and MRI imaging
examinations, and non-contrast systems, including radiological medical devices,
custom contract pharmaceuticals, gastrointestinal cleansing laxatives, X-ray
protection equipment, and immunoassay tests. Contrast systems, which constitute
the Company's core business and the majority of the Diagnostic products segment,
accounted for 58% of net sales in 2000, as compared to 56% in 1999 and 57% in
1998. Non-contrast system sales accounted for 24% of net sales in 2000, as
compared to 25% in 1999 and 24% in 1998. The AngioDynamics products operating
segment, which includes angiographic products, thrombolytic products, image-
guided vascular access products, angioplasty products, stents, and drainage
products used in the interventional radiology marketplace, accounted for 18% of
net sales in 2000, as compared to 19% in both 1999 and 1998.
<TABLE>
<CAPTION>
Diagnostic AngioDynamics Eliminations Total
---------- ------------- ------------ -----
(in thousands)
<S> <C> <C> <C> <C>
Fifty-three weeks ended June 3, 2000
------------------------------------
Unaffiliated customer sales $92,132 $19,961 - $112,093
Intersegment sales 2 1,063 ($1,065) -
Gross profit 40,519 9,895 51 50,465
Operating profit (loss) 9,285 (739) 53 8,599
Fifty-two weeks ended May 29, 1999
----------------------------------
Unaffiliated customer sales $86,920 $20,259 - $107,179
Intersegment sales 36 503 ($539) -
Gross profit (loss) 36,154 9,028 (25) 45,157
Operating profit (loss) 8,237 (990) (5) 7,242
Fifty-two weeks ended May 30, 1998
----------------------------------
Unaffiliated customer sales $83,475 $19,409 - $102,884
Intersegment sales 91 483 ($574) -
Gross profit (loss) 30,220 7,263 (50) 37,433
Operating profit (loss) 1,988 (7,317) (22) (5,351)
</TABLE>
Diagnostic Products
-------------------
Diagnostic segment operating results for 2000 improved by $1,048,000 due to
increased sales and improved gross profit, partially offset by increased
operating expenses. Net sales increased 6%, or $5,212,000, due to price
increases and increased demand for contrast systems. Price increases accounted
for approximately 4% of net sales in 2000. Gross profit expressed as a
percentage of net sales improved to 44% during 2000, versus 42% during 1999 due
primarily to sales price increases. Increased operating expenses of $3,317,000
can be attributed to increased S&A expenses, resulting, in part, from investment
in new product introductions and selling and marketing initiatives.
-17-
<PAGE>
Diagnostic segment operating results for 1999 improved by $6,249,000 due to
increased sales, improved gross profit and reduced operating expenses. Net sales
increased 4%, or $3,445,000, due to increased demand for both contrast systems
and non-contrast systems. Price increases had little effect on net sales in
1999. Gross profit expressed as a percentage of net sales improved to 42% during
1999, versus 36% during 1998 due primarily to reduced unabsorbed overhead costs.
Decreased operating expenses of $315,000 can be attributed to a decline in
research and development ("R&D") expenditures of $651,000, partially offset by
an increase in selling and administrative expenses of $336,000. The decline in
R&D expenses resulted primarily from decreases in corporate projects of $341,000
and expenses associated with product validations and clinical trials of
$273,000.
AngioDynamics Products
----------------------
AngioDynamics segment operating results for 2000 improved by $251,000 due
to improved gross profit, partially offset by increased operating expenses. Net
sales decreased 1%, or $298,000, due primarily to reduced international sales of
$1,199,000, partially offset by increased domestic sales of $901,000. The
international sales decline resulted, in large part, from the continued decline
in stent sales. The domestic sales improvement resulted from the introduction of
several new products, namely Abscession(TM) fluid drainage catheters,
VistaFlex(TM) platinum biliary stents, and Workhorse(TM) PTA balloon catheters,
in the second quarter of 2000. Gross profit expressed as a percentage of net
sales improved to 47% during 2000, as compared to 43% during 1999 due primarily
to decreased provision for inventory reserves of $727,000. Increased operating
expenses of $616,000 was primarily due to an expansion of the domestic sales
force.
AngioDynamics segment operating results for 1999 improved by $6,327,000, of
which $4,121,000 resulted from the recording of an impairment charge (described
in Note C to the Consolidated Financial Statements included herein) in 1998.
Excluding the effect of the impairment charge, AngioDynamics operating results
improved by $2,206,000 due to increased sales, improved gross profit and reduced
operating expenses of $441,000. Net sales increased 4%, or $850,000, due to
domestic market penetration of angiographic products. International sales
declined 17% as a result of temporarily suspending product shipments to
distributors affected by the Brazilian economic crisis, and a continued decline
in sales of the coronary AngioStent(TM). Gross profit expressed as a percentage
of net sales improved to 43% during 1999, as compared to 37% during 1998, due
primarily to increased manufacturing efficiencies at the Queensbury, New York
facility, increased production throughput at both the Queensbury and Irish
facilities, and the consolidation of operations, resulting from the closing of
its Leocor facility in 1998.
Certain financial information, including net sales, depreciation and
amortization, net earnings (loss), assets and capital expenditures attributable
to each operating segment are set forth in Note O to the Consolidated Financial
Statements included herein.
Consolidated Results of Operations
----------------------------------
The Company reported net earnings of $5,965,000, or $.60 and $.58 per
common share on a basic and diluted basis, respectively, for 2000, as compared
to net earnings of $4,797,000, or $.48 and $.47 per common share on a basic and
diluted basis, respectively, for 1999, and a net loss of $5,967,000, or ($.60)
per common share on a basic and diluted basis, for 1998. Results for 1998
included the AngioDynamics impairment charge, with no associated tax benefit, of
$4,121,000, or $.41 per common share. The fact that the Company did not record a
tax benefit for financial reporting purposes, associated with the impairment
charge, does not affect its ability to record the deduction for tax purposes.
-18-
<PAGE>
Results for 2000 were favorably affected by increased Diagnostic sales and
improved gross profit in both operating segments, partially offset by increased
operating expenses in both operating segments.
Results for 1999 were favorably affected by increased sales, improved gross
profit and decreased operating expenses in both operating segments.
Net sales increased 5%, or $4,914,000, to $112,093,000 in 2000, and
increased 4%, or $4,295,000, to $107,179,000 in 1999. Net sales in 2000 were
favorably affected primarily by increased sales of contrast systems of
$4,684,000, resulting from price increases and increased demand. Price increases
accounted for approximately 3% of net sales in 2000. Net sales in 1999 were
favorably affected by increased sales of contrast systems of $1,892,000, non-
contrast systems of $1,553,000 and AngioDynamics products of $850,000. Price
increases had little effect on net sales in 1999.
Net sales in international markets, including direct exports from the U.S.,
increased less than 1%, or $219,000, to $36,844,000 in 2000 and decreased less
than 1%, or $114,000, to $36,625,000 in 1999. The improvement in 2000 was due to
increased sales of contrast systems of $1,778,000, partially offset by decreased
sales of AngioDynamics products of $1,199,000 and non-contrast systems of
$360,000. The decrease in sales of AngioDynamics products was due to the
continued decline in stent sales. The decline in sales of non-contrast systems
was attributable to decreased custom contract sales. The 1999 decline was due to
foreign currency exchange rate fluctuations, which adversely affected the
translation of Canadian and Japanese sales to U.S. dollars for financial
reporting purposes, partially offset by the effects of volume and price
increases.
Gross profit expressed as a percentage of net sales was 45% in 2000, as
compared to 42% in 1999 and 36% in 1998. The improvement in gross profit,
expressed as a percentage of net sales, in 2000 was due to increased gross
profit in the Diagnostic segment, resulting from sales price increases, and
increased gross profit in the AngioDynamics segment, resulting from decreased
provision for inventory reserves of $727,000. The improvement in gross profit,
expressed as a percentage of net sales, in 1999 was due to increased gross
profit in both operating segments. The improved Diagnostic gross profit was due
primarily to reduced unabsorbed overhead costs. The improved AngioDynamics gross
profit was due primarily to increased manufacturing efficiencies at the
Queensbury facility, increased production throughput at both the Queensbury and
Irish facilities, and the consolidation of operations, resulting from the
closing of its Leocor facility in 1998.
Selling and administrative ("S&A") expenses were $36,986,000 in 2000,
$33,068,000 in 1999 and $33,001,000 in 1998. The increase in 2000 versus 1999 of
$3,918,000, or 12%, was due to increased Diagnostic S&A expenses of $3,319,000,
resulting, in part, from investment in new product introductions and selling and
marketing initiatives, and increased AngioDynamics S&A expenses of $599,000,
resulting from an expansion of its domestic sales force. There were no
materially significant factors affecting the comparison of S&A expenses in 1999
versus 1998.
R&D expenditures in 2000 totaled $4,880,000, or 4% of net sales, as
compared to $4,847,000, or 5% of net sales, in 1999 and $5,662,000, or 6% of net
sales, in 1998. There were no materially significant factors affecting the
comparison of R&D expenditures in 2000 versus 1999. The decline in 1999 versus
1998 of $815,000 was due primarily to decreases in corporate projects of
$341,000, expenses associated with Diagnostic product validations and clinical
trials of $273,000, and AngioDynamics projects of $164,000. Of the R&D
expenditures in 2000, approximately 46% relate to contrast systems, 34% to
AngioDynamics projects, 12% to general regulatory costs, 4% to immunological
-19-
<PAGE>
projects, and 4% to other projects. R&D expenditures are expected to continue at
or exceed current levels and significant revenues resulting from future product
commercialization are not anticipated during the next fiscal year. In addition
to its in-house technical staff, the Company is presently sponsoring various
independent R&D projects and is committed to continued expansion of its product
lines through R&D.
Other income, net of other expenses, totaled $635,000 of income in 2000,
compared to $571,000 of expense in 1999 and $183,000 of expense in 1998. The
improvement in 2000 versus 1999 was primarily due to the write-down of the
Company's investment in ITI Medical Technologies, Inc. ("ITI") of $1,121,000 in
1999. The increase in other expense in 1999 versus 1998 was primarily due to the
recording of an impairment charge of $896,000 relating to the Company's
investment in ITI, partially offset by improved foreign currency exchange gains
and losses of $259,000 and decreased interest expense, resulting from the
repayment of AngioDynamics debt in 1998.
Note H to the Consolidated Financial Statements included herein details the
major elements affecting income taxes for 2000, 1999 and 1998. In 2000, the
Company's effective tax rate of 35% differed from the Federal statutory tax rate
of 34% due primarily to losses incurred in a foreign jurisdiction subject to
lower tax rates and to the fact that the Company did not provide for the tax
benefit on losses incurred in certain foreign jurisdictions, since it is more
likely than not that such benefits will not be realized, partially offset by
earnings of the Puerto Rican subsidiary, which are subject to favorable U.S. tax
treatment. In 1999, the Company's effective tax rate of 28% differed from the
Federal statutory tax rate of 34% due primarily to the fact that the Company
reversed a portion of its valuation allowance against certain domestic tax
benefits since, at that time, it was more likely than not that such benefits
would be realized. The utilization of previously unrecorded carryforward
benefits and earnings of the Puerto Rican subsidiary, which are subject to
favorable U.S. tax treatment, also favorably affected the Company's effective
tax rate in 1999, but were offset by the fact that the Company did not provide
for the tax benefit on losses incurred in certain foreign jurisdictions, since,
at that time, it was more likely than not that such benefits would not be
realized. In 1998, the Company reported an income tax provision of $433,000
against losses before income taxes of $5,534,000 due primarily to the fact that
the Company did not provide for the tax benefit on losses incurred in certain
jurisdictions, since, at that time, it was more likely than not that such
benefits would not be realized.
Liquidity and Capital Resources
-------------------------------
During 2000, capital expenditures, the purchase of treasury stock and debt
repayments were funded by cash provided by operations. During 1999, capital
expenditures and debt repayments were funded by cash provided by operations.
During 1998, debt repayments, capital expenditures and investment in affiliate
were funded primarily by cash reserves. The Company's policy has been to fund
capital requirements without incurring significant debt. At June 3, 2000, debt
(notes payable, current maturities of long-term debt and long-term debt) was
$1,636,000 as compared to $2,503,000 at May 29, 1999. The Company has available
$3,354,000 under two bank lines of credit of which no amounts were outstanding
at June 3, 2000.
At June 3, 2000, approximately 63% of the Company's assets consist of
inventories, accounts receivable, short-term debt and equity securities, and
cash and cash equivalents. The current ratio is 4.25 to 1, with net working
capital of $51,434,000, at June 3, 2000, as compared to the current ratio of
3.71 to 1, with net working capital of $48,430,000, at May 29, 1999.
-20-
<PAGE>
Net capital expenditures, primarily for machinery and equipment, were
$3,206,000 in 2000, as compared to $2,207,000 in 1999 and $1,897,000 in 1998. Of
the 2000 expenditures, approximately $703,000 relates to the upgrading of the
Company's information systems at its Canadian subsidiary. No material increase
in the aggregate level of capital expenditures is currently contemplated for
2001.
In January 1999, the Board of Directors authorized the repurchase of up to
500,000 shares of the Company's Class B Common Stock at an aggregate purchase
price of up to $2,000,000. In October 1999, the Board modified the program to
include the Company's Class A Common Stock. In February 2000, the Board further
modified the program to increase the aggregate purchase price of Class A and
Class B Common Stock by an additional $2,000,000. As of June 3, 2000, the
Company had repurchased 38,145 shares of Class A Common Stock and 313,748 shares
of Class B Common Stock for approximately $2,503,000.
Forward-Looking Statements
--------------------------
This Form 10-K contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which are intended to be covered by the safe
harbors created thereby. Words such as "expects," "intends," "anticipates,"
"plans," "believes," "seeks," "estimates," or variations of such words and
similar expressions are intended to identify such forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty, including without limitation, the ability of the Company to develop
its products, future actions by the FDA, results of pending or future clinical
trials, as well as general market conditions, competition and pricing. Although
the Company believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements included in this Form 10-K will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
Effects of Recently Issued Accounting Pronouncements
----------------------------------------------------
In September 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
requires entities to recognize all derivatives in their financial statements as
either assets or liabilities measured at fair value. SFAS No. 133 also specifies
new methods of accounting for hedging transactions, prescribes the items and
transactions that may be hedged and specifies detailed criteria to be met to
qualify for hedge accounting. SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after September 15, 2000. The Company
currently does not use derivative instruments as defined by SFAS No. 133. If the
Company continues not to use these derivative instruments by the effective date
of SFAS No. 133, the adoption of this pronouncement will have no effect on the
Company's results of operations or financial position.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Company is exposed to market risk from changes in foreign currency
exchange rates and, to a much lesser extent, interest rates on investments and
financing, which could impact results of operations and financial position. The
Company does not currently engage in hedging or other market risk management
tools. There have been no material changes with respect to market risk
previously disclosed in the 1999 Annual Report on Form 10-K.
-21-
<PAGE>
Foreign Currency Exchange Rate Risk
-----------------------------------
The Company's international subsidiaries are denominated in currencies
other than the U.S. dollar. Since the functional currency of the Company's
international subsidiaries is the local currency, foreign currency translation
adjustments are accumulated as a component of accumulated other comprehensive
income (loss) in stockholders' equity. Assuming a hypothetical aggregate change
in the foreign currencies versus the U.S. dollar exchange rates of 10% at June
3, 2000, the Company's assets and liabilities would increase or decrease by
$2,318,000 and $604,000, respectively, and the Company's net sales and net
earnings would increase or decrease by $2,347,000 and $56,000, respectively, on
an annual basis.
The Company also maintains intercompany balances and loans receivable with
subsidiaries with different local currencies. These amounts are at risk of
foreign exchange losses if exchange rates fluctuate. Assuming a hypothetical
aggregate change in the foreign currencies versus the U.S. dollar exchange rates
of 10% at June 3, 2000, results of operations would be favorably or unfavorably
impacted by approximately $982,000 on an annual basis.
Interest Rate Risk
------------------
The Company is exposed to interest rate change market risk with respect to
its investments in tax-free municipal bonds in the amount of $7,980,000. The
bonds bear interest at a floating rate established weekly. During 2000, the
after-tax interest rate on the bonds approximated 3.9%. Each 100 basis point
(1%) fluctuation in interest rates will increase or decrease interest income on
the bonds by approximately $80,000 on an annual basis.
As the Company's principal amount of fixed interest rate financing
approximated $1,636,000 at June 3, 2000, a change in interest rates would not
materially impact results of operations or financial position. At June 3, 2000,
the Company did not maintain any variable interest rate financing.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Financial statements and supplementary data required by Part II, Item 8 are
included in Part IV of this form as indexed at Item 14 (a) 1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
-22-
<PAGE>
Part III
--------
Certain information required by Part III is omitted from this Annual Report
on Form 10-K because the Company will file a definitive proxy statement within
120 days after the end of its fiscal year pursuant to Regulation 14A (the "Proxy
Statement") for its Annual Meeting of Stockholders, currently scheduled for
October 24, 2000. The information included in the Proxy Statement under the
respective headings noted below is incorporated herein by reference.
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The following table sets forth certain information with respect to the
Company's officers and directors.
Name Age Positions
---- --- ---------
Howard S. Stern (1)...... 69 Chairman of the Board, Director
Anthony A. Lombardo...... 53 President, Chief Executive Officer,
Director
Dennis J. Curtin......... 53 Senior Vice President - Chief Financial
Officer
Joseph J. Palma.......... 58 Senior Vice President - Sales and
Marketing
Arthur L. Zimmet......... 64 Senior Vice President - Special Projects
Sandra D. Baron.......... 48 Vice President - Human Resources
Craig A. Burk............ 47 Vice President - Manufacturing
Joseph A. Cacchioli...... 44 Vice President - Controller
Agustin V. Gago.......... 41 Vice President - International
Eamonn P. Hobbs.......... 47 Vice President - AngioDynamics Division
Archie B. Williams....... 49 Vice President - Imaging Products
Management
Terry S. Zisowitz........ 53 Vice President - Legal and Regulatory
Affairs
Michael A. Davis, M.D.... 59 Medical Director/Technical Director,
Director
Paul S. Echenberg (1).... 56 Chairman of the Board of E-Z-EM Canada,
Director
James L. Katz CPA, JD.... 64 Director
(1)(2)(4)(5)
Donald A. Meyer (3)(4)... 66 Director
David P. Meyers.......... 36 Director
Robert M. Topol (1)(2)... 75 Director
(3)(5)
---------------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee
(4) Member of Compensation Committee
(5) Member of Finance Committee
Directors are elected for a three year term and each holds office until his
successor is elected and qualified. Officers are elected annually and serve at
the pleasure of the Board of Directors.
Mr. Stern is a co-founder of the Company and has served as Chairman of the
Board and Director of the Company since its formation in 1962. Mr. Stern has
also served as President and Chief Executive Officer of the Company from 1997 to
April 2000. From 1990 to 1994, Mr. Stern served as Chief Executive Officer, and
-23-
<PAGE>
from the formation of the Company until 1990, he served as President and Chief
Executive Officer. Mr. Stern is also a director of ITI Medical Technologies,
Inc. The Company has an investment in ITI Medical Technologies, Inc.
Mr. Lombardo has served as President, Chief Executive Officer and Director
of the Company since April 2000. Prior to joining the Company, he served as
President of ALI Imaging Systems, Inc. (radiology information management) from
1998 to April 2000. From 1996 to 1998, Mr. Lombardo served as Global Manager of
the Integrated Imaging Systems business of General Electric Medical Systems.
From 1994 to 1996, he served as President of the Medical business of
Loral/Lockhead Martin Corp.
Mr. Curtin has served as Senior Vice President - Chief Financial Officer
since October 1999, and previously served as Vice President - Chief Financial
Officer from 1985 to October 1999. Mr. Curtin has been an employee of the
Company since 1983.
Mr. Palma has served as Senior Vice President - Sales and Marketing since
October 1999, and previously served as Vice President - Sales and Marketing from
1996 to October 1999, and Vice President - Sales from 1995 to 1996. Mr. Palma
has been an employee of the Company since 1994.
Mr. Zimmet has served as Senior Vice President - Special Projects since
1988, and has been an employee of the Company since 1982.
Ms. Baron has served as Vice President - Human Resources since 1995, and
has been an employee of the Company since 1985.
Mr. Burk has served as Vice President - Manufacturing since 1987.
Mr. Cacchioli has served as Vice President - Controller since 1988, and has
been an employee of the Company since 1984.
Mr. Gago has served as Vice President - International since 1997, and has
been an employee of the Company since 1979.
Mr. Hobbs has served as Vice President - AngioDynamics Division since 1991,
and has been an employee of the Company since 1988.
Mr. Williams has served as Vice President - Imaging Products Management
since 1993, and has been an employee of the Company since 1980.
Ms. Zisowitz has served as Vice President - Legal and Regulatory Affairs
since 1995, and previously served as Vice President - Legal Affairs from 1990 to
1995. Ms. Zisowitz has been an employee of the Company since 1989.
Dr. Davis has served as Medical Director/Technical Director and Director of
the Company since 1997, and previously served as Medical Director and Director
of the Company from 1995 to 1996, and as Medical Director from 1994 to 1995. He
has been Professor of Radiology and Nuclear Medicine and Director of the
Division of Radiologic Research, University of Massachusetts Medical Center
since 1980. Previously, he served as the President and Chief Executive Officer
of Amerimmune Pharmaceuticals, Inc. and its wholly-owned subsidiary, Amerimmune,
Inc., from February 1999 to November 1999. He is also a director of MacroChem
Corp. and Amerimmune Pharmaceuticals, Inc.
Mr. Echenberg has been a director of the Company since 1987 and has served
as Chairman of the Board of E-Z-EM Canada since 1994. He is the President, Chief
Executive Officer and Director of Schroders & Associates Canada Inc. (investment
buy-out advisory services) and Director of Schroders Ventures Ltd. since 1997.
He is also a founder and has been a general partner and director of Eckvest
-24-
<PAGE>
Equity Inc. (personal investment and consulting services) since 1989. He is also
a director of Lallemand Inc., Cedara Software Corp., Benvest Capital Inc.,
Colliers MacAuley Nicholl, Huntington Mills (Canada) Ltd., ITI Medical
Technologies, Inc., Flexia Corp., Fib-Pak Industries Inc., Shirmax Fashions
Ltd., Med-King Systems Inc. and MacroChem Corp. The Company has investments in
Cedara Software Corp. and ITI Medical Technologies, Inc.
Mr. Katz has been a director of the Company since 1983. He is a founder of
Lakeshore Medical Fitness, LLC (fitness and diagnostic facilities with
hospitals), and has served as its Chief Executive Officer since April 2000.
Previously, he had been a founder and managing director from its organization in
1995 until May 2000 of Chapman Partners LLC (investment banking). From its
acquisition in 1985 until its sale in 1994, he had been the co-owner and
President of Ever Ready Thermometer Co., Inc. From 1971 until 1980 and from 1983
until 1985, he held various executive positions with Baxter International and
subsidiaries of Baxter International, principally that of Chief Financial
Officer of Baxter International. He is also a director of Intec, Inc. and
Lakeshore Management Group, LLC, as well as a member of the Board of Advisors of
Jerusalem Global and The Patterson Group.
Mr. Meyer has been a director of the Company since 1968. Since 1995, he has
served as an independent consultant in legal matters to arts and business
organizations, specializing in technical assistance. He had been the Executive
Director of the Western States Arts Federation, Santa Fe, New Mexico, which
provides and develops regional arts programs, from 1990 to 1995. From 1958
through 1990, he was an attorney practicing in New Orleans, Louisiana.
Mr. Meyers has been a director of the Company since 1996. He is the founder
of MedTest Express, Inc., an Atlanta, Georgia provider of contracted laboratory
services for home health agencies, and has served as its President, Chief
Executive Officer and Director since 1994.
Mr. Topol has been a director of the Company since 1982. Prior to his
retirement in 1994, he served as an Executive Vice President of Smith Barney,
Inc. (financial services). He is also a director of First American Health
Concepts, Fund for the Aging, City Meals on Wheels, American Health Foundation,
State University of New York - Purchase and Redstone Resources Inc.
-25-
<PAGE>
Item 11. Executive Compensation
----------------------
Summary Compensation Table
The following table sets forth information concerning the compensation for
services, in all capacities for 2000, 1999 and 1998, of those persons who were,
during 2000, Chief Executive Officer ("CEO") (Howard S. Stern and Anthony A.
Lombardo), those persons who were, at the end of 2000, each of the four most
highly compensated executive officers of the Company other than the CEO, and the
President of E-Z-EM Canada, who would otherwise be included in this table had he
been an executive officer of the Company (collectively, the "Named Executive
Officers"):
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------- -------------------------------------
Awards Payouts
---------------------------- -------
Other
Annual Restricted All Other
Name and Compensa- Stock Options LTIP Compensa-
Principal Fiscal Salary Bonus tion (1) Awards ---------------- Payouts tion (4)
Position Year ($) ($) ($) ($) # (2) # (3) ($) ($)
--------- ------ ------ ----- --------- ---------- ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Howard S. Stern,........ 2000 $261,458 $89,105 None None None .2273 None $ 6,975
Chairman of the Board, 1999 250,000 83,250 None None None .2273 None 15,404
and former President and 1998 250,000 61,874 None None None .2273 None 19,609
Chief Executive Officer
Anthony A. Lombardo,.... 2000 $ 41,667 None None None 300,000 None None None
President and Chief
Executive Officer
(effective April 2000)
Arthur L. Zimmet,....... 2000 $172,563 $58,809 None None None None None $ 6,838
Senior Vice President 1999 165,000 54,945 None None None None None 9,264
1998 155,000 40,283 None None None None None 8,069
Joseph J. Palma,........ 2000 $159,792 $54,457 None None 10,000 None None $ 7,830
Senior Vice President 1999 150,000 49,950 None None None None None 9,150
1998 135,000 33,247 None None None None None 6,052
Dennis J. Curtin,....... 2000 $167,333 $42,308 None None None None None $ 7,107
Senior Vice President 1999 160,000 39,996 None None None None None 8,956
1998 146,667 38,861 None None None None None 7,637
Eamonn P. Hobbs,........ 2000 $209,166 None None None None .2273 None $ 8,208
Vice President 1999 200,000 $17,481 None None None .2273 None 8,083
1998 195,000 21,923 None None None .2273 None 7,630
Pierre A. Ouimet,....... 2000 $223,844 $45,344 None None None None None $ 6,554
President of E-Z-EM 1999 181,441 47,963 None None 10,000 None None 6,395
Canada 1998 129,223 46,407 None None None None None 6,167
</TABLE>
-----------
(1) The Company has concluded that the aggregate amount of perquisites and
other personal benefits paid to each of the Named Executive Officers for
2000, 1999 and 1998 did not exceed the lesser of 10% of such officer's
total annual salary and bonus for 2000, 1999 or 1998 or $50,000; such
amounts are, therefore, not reflected in the table.
(2) Options are exercisable in Class B Common Stock of the Company.
(3) Options are exercisable in Class B Common Stock of AngioDynamics, Inc., a
wholly-owned subsidiary of the Company.
(4) For 2000, 1999 and 1998, includes for each of the Named Executive Officers,
except Mr. Ouimet, the amounts contributed by the Company under the
Profit-Sharing Plan and, as matching contributions, under the companion
401(k) Plan. For Mr. Ouimet, represents amounts contributed by E-Z-EM
Canada under a defined contribution plan. For 1999 and 1998, also includes
for Howard S. Stern fees of $6,000 and $12,000, respectively, relating to
attendance at AngioDynamics directors' meetings.
-26-
<PAGE>
Option/SAR Grants Table
The following table sets forth certain information concerning stock option
grants made during 2000 to the Named Executive Officers. These grants are also
reflected in the Summary Compensation Table. In accordance with SEC disclosure
rules, the hypothetical gains or "option spreads" for each option grant are
shown based on compound annual rates of stock price appreciation of 5% and 10%
from the grant date to the expiration date. The assumed rates of growth are
prescribed by the SEC and are for illustrative purposes only; they are not
intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance. The Company did not grant any
stock appreciation rights during 2000.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
------------------------------------------------------------------------ --------------------------------------
Number of % of Total
Securities Options 5% 10%
Underlying Granted to Exercise ------------------ -----------------
Options Employees in or Base Stock Potential Stock Potential
Granted Fiscal Year Price Expiration Price Value Price Value
Name (#) 2000 ($/Sh) Date ($/Sh) $ ($/Sh) $
---- ---------- ----------- -------- ---------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Howard S. Stern....... .2273 (1) 3.2% (2) $40,000(3) 6/02/10 $65,156 $5,717 $103,750 $14,489
Anthony A. Lombardo... 300,000 (4) 63.5% (5) $8.50(6) 4/02/10 $13.85 $1,603,681 $22.05 $4,064,043
Arthur L. Zimmet...... None
Joseph J. Palma....... 10,000 (4) 2.1% (5) $5.63(6) 7/28/09 $9.16 $35,375 $14.59 $89,648
Dennis J. Curtin...... None
Eamonn P. Hobbs....... .2273 (1) 3.2% (2) $40,000(3) 6/02/10 $65,156 $5,717 $103,750 $14,489
Pierre A. Ouimet...... None
</TABLE>
-----------
(1) Options are exercisable in Class B Common Stock of AngioDynamics, Inc., a
wholly-owned subsidiary of the Company. Options are exercisable 20% per
year over five years from the date of grant, provided a threshold event
occurs or 100% on the ninth anniversary of the grant, if no threshold event
occurs. A threshold event is the earlier of (i) fourteen months after
either an initial public offering ("IPO") or the spin off of all
AngioDynamics stock to the Company's shareholders, or (ii) two months after
the occurrence of both an IPO and the spin off of all AngioDynamics stock
to the Company's shareholders.
(2) Represents the percentage of total options granted to employees during 2000
and exercisable in Class B Common Stock of AngioDynamics, Inc.
(3) The options granted during 2000 have an exercise price not less than the
fair market value of the Class B Common Stock of AngioDynamics, Inc. on the
date of grant, and expire in ten years. A total of 136.36 shares of
AngioDynamics Class B Common Stock may be issued under this plan.
(4) Options are exercisable in Class B Common Stock of the Company. Options
granted to Mr. Lombardo are exercisable 25% per year over four years from
the date of grant. Options granted to Mr. Palma are exercisable 33 1/3% per
year over three years from the date of grant.
(5) Represents the percentage of total options granted to employees during 2000
and exercisable in Class B Common Stock of the Company.
(6) The options granted during 2000 have an exercise price not less than the
fair market value of the Class B Common Stock of the Company on the date of
grant, and expire in ten years.
-27-
<PAGE>
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth certain information concerning all exercises
of stock options during 2000 by the Named Executive Officers and the fiscal
year-end value of unexercised stock options on an aggregated basis:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
June 3, 2000 June 3, 2000
(#) ($) (1)
------------- -------------
Shares Value Exercisable/ Exercisable/
Acquired on Realized Unexercisable Unexercisable
Name Exercise (#) ($) (2) (2)
---- ------------ --------- ------------- -------------
<S> <C> <C> <C> <C>
Howard S. Stern.... None None 78,786/ $179,607/
None None
Anthony A. Lombardo None None None/ None/
300,000 None
Arthur L. Zimmet... None None 50,884/ $106,498/
None None
Joseph J. Palma.... None None 31,307/ $54,232/
6,667 $5,834
Dennis J. Curtin... None None 50,556/ $111,867/
None None
Eamonn P. Hobbs.... None None 39,595/ $82,120/
None None
Pierre A. Ouimet... None None 34,906 $66,085/
3,334 $2,917
</TABLE>
--------------------
(1) Options are "in-the-money" if on June 3, 2000, the market price of the
stock exceeded the exercise price of such options. At June 3, 2000, the
closing price of the Company's Class A and Class B Common Stock was $6.88
and $6.50, respectively. The value of such options is calculated by
determining the difference between the aggregate market price of the stock
covered by the options on June 3, 2000 and the aggregate exercise price of
such options.
(2) Options granted prior to the Company's recapitalization on October 26, 1992
are exercisable one-half in Class A Common Stock and one-half in Class B
Common Stock. Options granted after the recapitalization are exercisable in
Class B Common Stock.
Compensation of Directors
On an annual basis, directors, who are not employees of the Company, are
entitled to the following compensation: a retainer of $15,000; a fee of $1,000
for each regular board meeting attended; a fee of $250 for each telephonic board
meeting attended; 1,000 shares of the Company's Class B Common Stock; and stock
options for 1,000 shares of Class B Common Stock, which vest one year from date
-28-
<PAGE>
of grant. Directors, who serve on committees of the Company and who are not
employees of the Company, are entitled to a fee of $500 for each committee
meeting attended, except that the chairman of a committee is entitled to a fee
of $1,000 for each committee meeting attended.
Employment Contracts
During 1994, the Company entered into an employment contract with Howard S.
Stern in his capacity as Chairman of the Board. This employment contract is for
a term of eight years at an annual compensation currently of $262,500.
During 2000, the Company entered into an employment contract with Anthony
A. Lombardo in his capacity as President and Chief Executive Officer. This
employment contract provides for annual base salary of $250,000. The contract is
cancellable at any time by either the Company or Mr. Lombardo, but provides for
severance pay of one years base salary in the event of termination by the
Company without cause, as defined in the contract. A copy of this employment
contract has been attached as Exhibit 10(e).
Severance Arrangements
The information required by this caption is incorporated by reference to
the Company's Proxy Statement under the heading "Severance Arrangements."
Compensation and Stock Option Committee Report on Executive Compensation
The information required by this caption is incorporated by reference to
the Company's Proxy Statement under the heading "Compensation and Stock Option
Committee Report on Executive Compensation."
Common Stock Performance
The information required by this caption is incorporated by reference to
the Company's Proxy Statement under the heading "Common Stock Performance."
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table sets forth information, as of August 4, 2000, as to the
beneficial ownership of the Company's voting Class A Common Stock by each person
known by the Company to own beneficially more than 5% of the Company's voting
Class A Common Stock:
Name and Address of Shares Percent of
Beneficial Owner Beneficially Owned Class
---------------- ------------------ -----
Howard S. Stern,.................. 956,412 23.8
Chairman of the Board,
Director
717 Main Street
Westbury, NY 11590
Betty S. Meyers,.................. 820,806 20.4
401 Emerald Street
New Orleans, LA 70124
David P. Meyers,.................. 311,551 (1) 7.8
Director
1220 Pasadena Avenue
Atlanta, GA 30306
-29-
<PAGE>
Name and Address of Shares Percent of
Beneficial Owner Beneficially Owned Class
---------------- ------------------ -----
Jonas I. Meyers,.................. 311,551 (2) 7.8
904 Oakland Avenue
Ann Arbor, MI 48104
Stuart J. Meyers,................. 311,551 (3) 7.8
434 Bellaire Drive
New Orleans, LA 70124
Dimensional Fund Advisors, Inc.,.. 238,575 (4) 5.9
1299 Ocean Avenue
Santa Monica, CA 90401
Wellington Management Company,.... 219,258 (4) 5.5
75 State Street
Boston, MA 02109
---------------
(1) Includes 154,801 shares in which David P. Meyers has only a remainder
interest. Betty S. Meyers holds a life estate in such shares.
(2) Includes 154,801 shares in which Jonas I. Meyers has only a remainder
interest. Betty S. Meyers holds a life estate in such shares.
(3) Includes 154,801 shares in which Stuart J. Meyers has only a remainder
interest. Betty S. Meyers holds a life estate in such shares.
(4) Information was derived from a Schedule 13G dated December 31, 1999.
The following table sets forth information, as of August 4, 2000, as to the
beneficial ownership of the Company's voting Class A and non-voting Class B
Common Stock, by (i) each of the Company's directors, (ii) each of the Company's
Named Executive Officers, and (iii) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
Class A Class B
--------------------------- ---------------------------
Shares Percent Shares Percent
Name of Beneficially of Beneficially of
Beneficial Owner Owned (1) Class Owned (2) Class
---------------- ------------ ------- ------------ -------
<S> <C> <C> <C> <C>
Howard S. Stern,........... 956,412 23.8 1,228,169 20.5
Chairman of the Board,
Director
David P. Meyers,........... 311,551 (3) 7.8 615,439 (4) 10.4
Director
Arthur L. Zimmet,.......... 28,750 * 90,784 1.5
Senior Vice President
Robert M. Topol,........... 24,694 * 68,336 1.2
Director
Paul S. Echenberg,......... 1,694 * 87,900 1.5
Chairman of the Board of
E-Z-EM Canada, Director
Donald A. Meyer,........... 18,873 * 44,865 *
Director
</TABLE>
-30-
<PAGE>
<TABLE>
<CAPTION>
Class A Class B
--------------------------- ---------------------------
Shares Percent Shares Percent
Name of Beneficially of Beneficially of
Beneficial Owner Owned (1) Class Owned (2) Class
---------------- ------------ ------- ------------ -------
<S> <C> <C> <C> <C>
James L. Katz,............. 1,719 * 56,166 *
Director
Dennis J. Curtin,.......... 2,052 * 53,382 *
Senior Vice President
Michael A. Davis, M.D.,.... None * 39,786 *
Medical Director/Technical
Director, Director
Eamonn P. Hobbs,........... 50 * 39,604 *
Vice President
Pierre A. Ouimet,.......... 500 * 34,936 *
President of E-Z-EM Canada
Joseph J. Palma,........... None * 31,307 *
Senior Vice President
Anthony A. Lombardo,....... None * None *
President, Chief Executive
Officer, Director
All directors and executive
officers as a group (18
persons).................. 1,345,795 (3) 33.5 2,495,128 (4) 38.3
</TABLE>
----------------
* Does not exceed 1%.
(1) Includes Class A Common Stock shares issuable upon exercise of options
currently exercisable or exercisable within 60 days from August 4, 2000 as
follows: Robert M. Topol (1,194), Paul S. Echenberg (1,194), Donald A.
Meyer (1,194), James L. Katz (1,194) and all directors and executive
officers as a group (4,776).
(2) Includes Class B Common Stock shares issuable upon exercise of options
currently exercisable or exercisable within 60 days from August 4, 2000 as
follows: Howard S. Stern (78,786), David P. Meyers (2,000), Arthur L.
Zimmet (50,884), Robert M. Topol (31,444), Paul S. Echenberg (75,210),
Donald A. Meyer (19,272), James L. Katz (53,355), Dennis J. Curtin
(50,556), Michael A. Davis, M.D. (39,091), Eamonn P. Hobbs (39,595), Pierre
A. Ouimet (34,906), Joseph J. Palma (31,307) and all directors and
executive officers as a group (610,890).
(3) Includes 154,801 shares in which Mr. Meyers has only a remainder interest.
Betty S. Meyers, a principal shareholder, holds a life estate in such
shares.
(4) Includes 201,014 shares in which Mr. Meyers has only a remainder interest.
Betty S. Meyers, a principal shareholder, holds a life estate in such
shares. Also includes 190,035 shares owned by a partnership in which Mr.
Meyers has an interest.
-31-
<PAGE>
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
A facility of the Company located in Westbury, New York is owned 27% by
Howard S. Stern, 25% by Betty S. Meyers, a principal shareholder, 2% by other
employees of the Company and 46% by unrelated parties, which includes a 25%
owner who manages the property. Aggregate rentals, including real estate tax
payments, were $167,000 during 2000. The lease term expires in 2004.
During 1998, the Company entered into split dollar life insurance
arrangements with Howard S. Stern (including his spouse) and Betty S. Meyers
(the "insureds"). On an annual basis, the Company makes interest bearing
advances of approximately $100,000 per insured toward the cost of such life
insurance policies. Interest on the advances is to be paid to the Company
annually by the insureds. Under collateral assignment agreements, the proceeds
from the policies will first be paid to the Company to repay the advances it
made. If the policies are terminated prior to the death of the insured, the
Company will be entitled to the cash surrender value of the policies at that
time, and any shortfall between that amount and the amount of the advances made
by the Company will be repaid to the Company by the insureds. At June 3, 2000,
the cash surrender value of such policies aggregated $474,000, and advances of
$600,000 are recorded in the consolidated balance sheet under the caption "Other
Assets".
The Company had an unsecured, two-year interest bearing note receivable
from Eamonn P. Hobbs, an executive officer of the Company, in the principal
amount of $320,000. Approximately $297,000 of this note receivable was satisfied
in October 1999, while the remaining portion was satisfied during June 2000.
The Company has engaged Michael A. Davis, M.D., a director of the Company,
for consulting services. Fees for such services were approximately $165,000
during 2000.
The Company engaged Paul S. Echenberg, a director of the Company, for
consulting services in 2000. Fees for such services, including fees relating to
attendance at directors' meetings, were approximately $62,000 in cash and 11,000
shares of non-voting Class B Common Stock valued at $55,000 during 2000.
The Company has engaged David P. Meyers, a director of the Company, for
consulting services. Fees for such services, including fees relating to
attendance at directors' meetings, were approximately $100,000 during 2000.
-32-
<PAGE>
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
Page
----
(a) l. Financial Statements
--------------------
The following consolidated financial statements and
supplementary data of Registrant and its subsidiaries required by
Part II, Item 8, are included in Part IV of this report:
Report of Independent Certified Public Accountants 36
Consolidated balance sheets - June 3, 2000 and May 29, 1999 37
Consolidated statements of earnings - fifty-three weeks ended
June 3, 2000 and fifty-two weeks ended May 29, 1999 and May 30,
1998 39
Consolidated statement of stockholders' equity and
comprehensive income (loss) - fifty-three weeks ended June 3,
2000 and fifty-two weeks ended May 29, 1999 and May 30, 1998 40
Consolidated statements of cash flows - fifty-three weeks ended
June 3, 2000 and fifty-two weeks ended May 29, 1999 and May 30,
1998 41
Notes to consolidated financial statements 43
(a) 2. Financial Statement Schedules
-----------------------------
The following consolidated financial statement schedule is
included in Part IV of this report:
Schedule II - Valuation and qualifying accounts 67
All other schedules are omitted because they are not
applicable, or not required, or because the required information is
included in the consolidated financial statements or notes thereto.
(a) 3. Exhibits
--------
3(i) Certificate of Incorporation (a)
3(ii) Amended Bylaws (b)
10(a) Agreement and Plan of Merger dated November 7, 1995
among United States Surgical Corporation, USSC
Acquisition Corporation, Surgical Dynamics Inc., and
E-Z-EM, Inc. and Calmed Laboratories, Inc. and
E-Z-SUB, Inc. (c)
10(b) 1983 Stock Option Plan (d)
10(c) 1984 Directors and Consultants Stock Option Plan (e)
10(d) Income Deferral Program (f)
10(e) Employment Agreement dated April 3, 2000 between
E-Z-EM, Inc. and Anthony A. Lombardo 68
-33-
<PAGE>
Page
----
(a) 3. Exhibits (continued)
-------------------
13 Annual report to security holders (g)
21 Subsidiaries of the Registrant 78
22 Proxy statement to security holders (h)
23 Consent of Independent Certified Public Accountants 79
27 Financial Data Schedule 80
99 Report of Independent Certified Public Accountants Other
than Principal Accountants 81
---------------
(a) Incorporated by reference to Exhibit 3(i) of the Company's annual
report filed on Form 10-K for the fiscal year ended May 31, 1997
(b) Incorporated by reference to Exhibit 3(ii) of the Company's
annual report filed on Form 10-K for the fiscal year ended May
28, 1994
(c) Incorporated by reference to Exhibit 10 of the Company's current
report filed on Form 8-K/A dated November 22, 1995
(d) Incorporated by reference to Exhibit 10 of the Company's
quarterly report filed on Form 10-Q for the quarterly period
ended February 26, 2000
(e) Incorporated by reference to Exhibit 10(b) of the Company's
quarterly report filed on Form 10-Q for the quarterly period
ended December 2, 1995
(f) Incorporated by reference to Exhibit 10(c) of the Company's
annual report filed on Form 10-K for the fiscal year ended May
29, 1993
(g) The Company intends to mail a copy of its annual report on Form
10-K to its security holders. The Company's shareholders letter
will be filed on a subsequent date together with its proxy
statement to security holders.
(h) To be filed on a subsequent date
(b) 1. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed for the quarter ended June 3, 2000.
Schedules other than those shown above are not submitted as the subject
matter thereof is either not required or is not present in amounts sufficient to
require submission in accordance with the instructions in Regulation S-X or the
information required is included in the Notes to Consolidated Financial
Statements.
-34-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
E-Z-EM, Inc.
-----------------------------------
(Registrant)
Date August 30, 2000 /s/ Howard S. Stern
------------------- -----------------------------------
Howard S. Stern, Chairman of the
Board, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date August 30, 2000 /s/ Howard S. Stern
------------------- -----------------------------------
Howard S. Stern, Chairman of the
Board, Director
Date August 30, 2000 /s/ Anthony A. Lombardo
------------------- -----------------------------------
Anthony A. Lombardo, President,
Chief Executive Officer, Director
Date August 30, 2000 /s/ Dennis J. Curtin
------------------- -----------------------------------
Dennis J. Curtin, Senior Vice
President - Chief Financial Officer
Date August 30, 2000 /s/ Michael A. Davis
------------------- -----------------------------------
Michael A. Davis, Director
Date August 26, 2000 /s/ Paul S. Echenberg
------------------- -----------------------------------
Paul S. Echenberg, Director
Date August 30, 2000 /s/ James L. Katz
------------------- -----------------------------------
James L. Katz, Director
Date August 24, 2000 /s/ Donald A. Meyer
------------------- -----------------------------------
Donald A. Meyer, Director
Date August 30, 2000 /s/ David P. Meyers
------------------- -----------------------------------
David P. Meyers, Director
Date August 30, 2000 /s/ Robert M. Topol
------------------- -----------------------------------
Robert M. Topol, Director
-35-
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
E-Z-EM, Inc.
We have audited the accompanying consolidated balance sheets of E-Z-EM, Inc. and
Subsidiaries as of June 3, 2000 and May 29, 1999, and the related consolidated
statements of earnings, stockholders' equity and comprehensive income (loss),
and cash flows for the fifty-three weeks ended June 3, 2000 and the fifty-two
weeks ended May 29, 1999 and May 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of a certain subsidiary, which statements reflect total
assets constituting approximately 17% in 2000 and 1999 and net sales
constituting approximately 12% in 2000, 1999 and 1998 of the related
consolidated totals. Those statements were audited by other auditors, whose
report thereon has been furnished to us, and our opinion, insofar as it relates
to the amounts included for this subsidiary, is based solely upon the report of
the other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of E-Z-EM, Inc. and Subsidiaries as of June
3, 2000 and May 29, 1999, and the consolidated results of their operations and
their consolidated cash flows for the fifty-three weeks ended June 3, 2000 and
the fifty-two weeks ended May 29, 1999 and May 30, 1998 in conformity with
accounting principles generally accepted in the United States of America.
We have also audited the financial statement schedule listed in the Index at
Item 14(a)(2). In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.
GRANT THORNTON LLP
Certified Public Accountants
Melville, New York
July 28, 2000
-36-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 3, May 29,
ASSETS 2000 1999
------ ------
CURRENT ASSETS
Cash and cash equivalents $ 5,583 $ 8,073
Debt and equity securities 8,051 5,216
Accounts receivable, principally
trade, net of allowance for
doubtful accounts of $853 in
2000 and $1,028 in 1999 22,256 21,904
Inventories 26,856 26,974
Other current assets 4,530 4,151
------ ------
Total current assets 67,276 66,318
PROPERTY, PLANT AND EQUIPMENT - AT COST,
less accumulated depreciation and
amortization 21,721 21,325
COST IN EXCESS OF FAIR VALUE OF NET ASSETS
ACQUIRED, less accumulated amortization
of $251 in 2000 and $464 in 1999 407 424
INTANGIBLE ASSETS, less accumulated
amortization of $959 in 2000 and
$870 in 1999 2,151 2,328
DEBT AND EQUITY SECURITIES 4,067 3,015
OTHER ASSETS 3,463 2,649
------ ------
$99,085 $96,059
====== ======
The accompanying notes are an integral part of these statements.
-37-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 3, May 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------ ------
CURRENT LIABILITIES
Notes payable $ 1,080 $ 1,829
Current maturities of long-term debt 103 197
Accounts payable 6,384 7,320
Accrued liabilities 7,798 7,736
Accrued income taxes 477 806
------ ------
Total current liabilities 15,842 17,888
LONG-TERM DEBT, less current maturities 453 477
OTHER NONCURRENT LIABILITIES 2,756 2,403
------ ------
Total liabilities 19,051 20,768
------ ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per share -
authorized, 1,000,000 shares; issued, none
Common stock
Class A (voting), par value $.10 per
share - authorized, 6,000,000 shares;
issued and outstanding 4,015,111 shares
in 2000 and 4,035,346 shares in 1999
(excluding 38,145 shares held in treasury
in 2000) 401 403
Class B (non-voting), par value $.10 per
share - authorized, 10,000,000 shares;
issued and outstanding 5,909,277 shares
in 2000 and 6,058,277 shares in 1999
(excluding 313,748 and 12,100 shares held
in treasury in 2000 and 1999, respectively) 591 606
Additional paid-in capital 20,521 21,917
Retained earnings 59,852 53,887
Accumulated other comprehensive income (loss) (1,331) (1,522)
------ ------
Total stockholders' equity 80,034 75,291
------ ------
$ 99,085 $ 96,059
====== ======
The accompanying notes are an integral part of these statements.
-38-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fifty-three Fifty-two weeks ended
weeks ended -----------------------
June 3, May 29, May 30,
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Net sales $112,093 $107,179 $102,884
Cost of goods sold 61,628 62,022 65,451
------- ------- -------
Gross profit 50,465 45,157 37,433
------- ------- -------
Operating expenses
Selling and administrative 36,986 33,068 33,001
Research and development 4,880 4,847 5,662
Impairment of long-lived assets 4,121
------- ------- -------
Total operating expenses 41,866 37,915 42,784
------- ------- -------
Operating profit (loss) 8,599 7,242 (5,351)
Other income (expense)
Interest income 716 505 692
Interest expense (253) (263) (694)
Write-down of investment in affiliate (1,121) (219)
Other, net 172 308 38
------- ------- -------
Earnings (loss) before income
taxes 9,234 6,671 (5,534)
Income tax provision 3,269 1,874 433
------- ------- -------
NET EARNINGS (LOSS) $ 5,965 $ 4,797 $ (5,967)
======= ======= =======
Earnings (loss) per common share
Basic $ .60 $ .48 $ (.60)
======= ======= =======
Diluted $ .58 $ .47 $ (.60)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
-39-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
Fifty-three weeks ended June 3, 2000 and fifty-two weeks
ended May 29, 1999 and May 30, 1998
(in thousands, except share data)
<TABLE>
<CAPTION>
Class A Class B Accumulated Compre-
common stock common stock Additional other hensive
----------------- ----------------- paid-in Retained comprehensive income
Shares Amount Shares Amount capital earnings income (loss) Total (loss)
--------- ------ --------- ------ ------- ------- ------------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1997 4,035,346 $403 5,600,883 $560 $19,073 $57,087 $ 121 $77,244
Exercise of stock options 107,417 11 470 481
Income tax benefits on
stock options exercised 88 88
Compensation related to
stock options plans 7 7
Issuance of stock 1,025 6 6
3% common stock dividend 289,748 29 1,999 (2,030) (2)
Net loss (5,967) (5,967) $(5,967)
Unrealized holding gain on
debt and equity securities 12 12 12
Foreign currency translation
adjustments (646) (646) (646)
--------- --- --------- --- ------ ------ ----- ----- -----
Comprehensive loss $(6,601)
======
Balance at May 30, 1998 4,035,346 403 5,999,073 600 21,643 49,090 (513) 71,223
Exercise of stock options 64,704 6 267 273
Income tax benefits on
stock options exercised 38 38
Compensation related to
stock option plans 5 5
Issuance of stock 6,600 1 31 32
Purchase of treasury stock (12,100) (1) (67) (68)
Net earnings 4,797 4,797 $4,797
Unrealized holding loss on
debt and equity securities (151) (151) (151)
Foreign currency translation
adjustments (858) (858) (858)
--------- --- --------- --- ------ ------ ----- ----- -----
Comprehensive income $3,788
=====
Balance at May 29, 1999 4,035,346 403 6,058,277 606 21,917 53,887 (1,522) 75,291
Exercise of stock options 17,910 2 137,373 13 807 822
Income tax benefits on
stock options exercised 119 119
Compensation related to
stock option plans 5 5
Issuance of stock 15,275 2 74 76
Purchase of treasury stock (38,145) (4) (301,648) (30) (2,401) (2,435)
Net earnings 5,965 5,965 $5,965
Unrealized holding gain on
debt and equity securities 871 871 871
Foreign currency translation
adjustments (680) (680) (680)
--------- --- --------- --- ------ ------ ----- ----- -----
Comprehensive income $6,156
=====
Balance at June 3, 2000 4,015,111 $401 5,909,277 $591 $20,521 $59,852 $(1,331) $80,034
========= === ========= === ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
-40-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Fifty-three Fifty-two weeks ended
weeks ended ---------------------
June 3, May 29, May 30,
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 5,965 $ 4,797 $ (5,967)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used
in) operating activities
Depreciation and amortization 2,803 2,829 3,315
Impairment of long-lived assets 4,121
Provision for doubtful accounts 37 250 286
Write-down of investment in
affiliate 1,121 219
Loss (gain) on sale of assets 39 (11)
Deferred tax benefit (40) (735) (64)
Other non-cash items 75 30 7
Changes in operating assets and
liabilities
Accounts receivable (389) (806) (4,663)
Inventories 118 (210) 587
Other current assets (334) (251) 1,565
Other assets (814) (35) (588)
Accounts payable (936) 1,055 97
Accrued liabilities 62 778 127
Accrued income taxes (360) 183 310
Other noncurrent liabilities 162 146 (21)
------ ------ ------
Net cash provided by (used
in) operating activities 6,349 9,191 (680)
------ ------ ------
Cash flows from investing activities:
Additions to property, plant and
equipment (3,206) (2,207) (1,897)
Investment in affiliate (1,340)
Proceeds from disposal of business 510
Proceeds from sale of assets 33 8 50
Available-for-sale securities
Purchases (36,845) (34,061) (12,290)
Proceeds from sale 34,010 32,320 19,806
------ ------ ------
Net cash (used in) provided by
investing activities (6,008) (3,940) 4,839
------ ------ ------
</TABLE>
The accompanying notes are an integral part of these statements.
-41-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
<TABLE>
<CAPTION>
Fifty-three Fifty-two weeks ended
weeks ended ---------------------
June 3, May 29, May 30,
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Cash flows from financing activities:
Repayments of debt $(1,100) $(2,670) $(7,704)
Proceeds from issuance of debt 26 1,072 3,619
Proceeds from exercise of stock
options, including related income
tax benefits 941 311 569
Purchase of treasury stock (2,435) (68)
Proceeds from issuance of stock in
connection with the stock purchase
plan 6 7 6
------ ------ ------
Net cash used in financing
activities (2,562) (1,348) (3,510)
------ ------ ------
Effect of exchange rate changes on
cash and cash equivalents (269) (484) (479)
------ ------ ------
(DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (2,490) 3,419 170
Cash and cash equivalents
Beginning of year 8,073 4,654 4,484
------ ------ ------
End of year $5,583 $8,073 $4,654
===== ===== =====
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the year for:
Interest $ 95 $ 154 $ 650
===== ===== =====
Income taxes (net of $16, $218
and $1,337 in refunds in 2000,
1999 and 1998, respectively) $ 3,577 $ 2,153 $ (762)
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these statements.
-42-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the consolidated financial
statements. These policies are in conformity with generally accepted
accounting principles and have been applied consistently in all material
respects.
Nature of Business
------------------
The Company is primarily engaged in developing, manufacturing and marketing
diagnostic products used by radiologists and other physicians during
image-assisted procedures to detect anatomic abnormalities and diseases.
The Company also designs, develops, manufactures and markets, through its
wholly-owned subsidiary, AngioDynamics, Inc. ("AngioDynamics"), a variety
of therapeutic and diagnostic products, for use principally in the
diagnosis and treatment of peripheral vascular disease (see Note O).
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of E-Z-EM, Inc.
and all 100%-owned subsidiaries (the "Company"). All significant
intercompany balances and transactions have been eliminated. Through 1999,
the Company's approximate 23% interest in an affiliate was accounted for by
the equity method. Pursuant to this method, such investment was recorded at
cost and adjusted by the Company's share of undistributed earnings (or
losses) (see Note D).
Operations outside the U.S. are included in the consolidated financial
statements and consist of: a subsidiary operating a mining and chemical
processing operation in Nova Scotia, Canada and a manufacturing and
marketing facility in Montreal, Canada; a subsidiary manufacturing products
located in Puerto Rico; a subsidiary manufacturing and marketing products
located in Japan; a subsidiary promoting and distributing products located
in Holland; a subsidiary promoting and distributing products located in the
United Kingdom; and a subsidiary manufacturing products located in Ireland
(see Note Q).
Fiscal Year
-----------
The Company reports on a fiscal year which concludes on the Saturday
nearest to May 31. Fiscal year 2000 ended on June 3, 2000 for a reporting
period of fifty-three weeks and fiscal years 1999 and 1998 ended on May 29,
1999 and May 30, 1998, respectively, for reporting periods of fifty-two
weeks.
Cash and Cash Equivalents
-------------------------
The Company considers all unrestricted highly liquid investments purchased
with a maturity of less than three months to be cash equivalents. Included
in cash equivalents are Eurodollar investments and certificates of deposit
of $4,575,000 and $5,089,000 at June 3, 2000 and May 29, 1999,
respectively. The carrying amount of these financial instruments reasonably
approximates fair value because of their short maturity.
Foreign-denominated cash and cash equivalents aggregated $1,960,000 and
$1,116,000 at June 3, 2000 and May 29, 1999, respectively.
-43-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Debt and Equity Securities
--------------------------
Debt and equity securities are classified as "available-for-sale securities"
and reported at fair value, with unrealized gains and losses excluded from
operations and reported as a component of accumulated other comprehensive
income (loss), net of the related tax effects, in stockholders' equity. Cost
is determined using the specific identification method.
Inventories
-----------
Inventories are stated at the lower of cost (on the first-in, first-out
method) or market. Appropriate consideration is given to deterioration,
obsolescence and other factors in evaluating net realizable value.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed principally using the straight-line
method over the estimated useful lives of the assets. Leasehold improvements
are amortized over the terms of the related leases or the useful life of the
improvements, whichever is shorter. Expenditures for repairs and maintenance
are charged to expense as incurred. Renewals and betterments are
capitalized. Depreciation expense was $2,610,000, $2,595,000 and $2,827,000
in 2000, 1999 and 1998, respectively.
Cost in Excess of Fair Value of Net Assets Acquired
---------------------------------------------------
The cost in excess of fair value of net assets acquired ("goodwill") is
being amortized on a straight-line basis over 40 years. Amortization of
goodwill was $16,000, $16,000 and $17,000 in 2000, 1999 and 1998,
respectively.
Intangible Assets
-----------------
Intangible assets are being amortized on a straight-line basis over the
estimated useful lives of the respective assets ranging from approximately
eight to fifteen years. Amortization of intangible assets was $177,000,
$218,000 and $471,000 in 2000, 1999 and 1998, respectively.
On an ongoing basis, management reviews the valuation and amortization of
goodwill and intangible assets to determine possible impairment by
considering current operating results and comparing the carrying values to
the anticipated undiscounted future cash flows of the related assets (see
Note C).
Revenue Recognition
-------------------
The Company recognizes revenues as products are shipped to customers.
-44-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising
-----------
All costs associated with advertising are expensed when incurred.
Advertising expense, included in selling and administrative expenses, was
$1,103,000, $1,074,000 and $900,000 in 2000, 1999 and 1998, respectively.
Income Taxes
------------
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities and loss
carryforwards and tax credit carryforwards for which income tax benefits are
expected to be realized in future years. A valuation allowance has been
established to reduce deferred tax assets as it is more likely than not that
all, or some portion, of such deferred tax assets will not be realized. The
effect on deferred taxes of a change in tax rates is recognized in income in
the period that includes the enactment date.
Foreign Currency Translation
----------------------------
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52, "Foreign Currency Translation," the Company has determined that the
functional currency for its foreign subsidiaries is the local currency. This
assessment considers that the day-to-day operations are not dependent upon
the economic environment of the parent's functional currency, financing is
effected through their own operations, and the foreign operations primarily
generate and expend foreign currency. Foreign currency translation
adjustments are accumulated as a component of accumulated other
comprehensive income (loss) in stockholders' equity.
Earnings (Loss) Per Common Share
--------------------------------
Basic earnings per share are based on the weighted average number of common
shares outstanding without consideration of potential common stock. Diluted
earnings per share are based on the weighted average number of common and
potential common shares outstanding. The calculation takes into account the
shares that may be issued upon exercise of stock options, reduced by the
shares that may be repurchased with the funds received from the exercise,
based on the average price during the period. Potential common shares were
excluded from the diluted calculation for 1998, as their effects were
anti-dilutive.
The following table sets forth the reconciliation of the weighted average
number of common shares:
2000 1999 1998
------ ------ ------
Basic 10,012,973 10,077,445 9,952,482
Effect of dilutive securities
(stock options) 301,198 236,644
---------- ---------- ---------
Diluted 10,314,171 10,314,089 9,952,482
========== ========== =========
-45-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The weighted average number of common shares and the per share amounts for
all periods presented have been retroactively restated to reflect the total
shares issued after the 3% stock dividends described in Note M.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at year-end and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Effects of Recently Issued Accounting Pronouncements
----------------------------------------------------
In September 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
requires entities to recognize all derivatives in their financial statements
as either assets or liabilities measured at fair value. SFAS No. 133 also
specifies new methods of accounting for hedging transactions, prescribes the
items and transactions that may be hedged and specifies detailed criteria to
be met to qualify for hedge accounting. SFAS No. 133, as amended by SFAS No.
137, is effective for fiscal years beginning after September 15, 2000. The
Company currently does not use derivative instruments as defined by SFAS No.
133. If the Company continues not to use these derivative instruments by the
effective date of SFAS No. 133, the adoption of this pronouncement will have
no effect on the Company's results of operations or financial position.
NOTE B - COMPREHENSIVE INCOME (LOSS)
During 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 established new rules for the reporting and display of
comprehensive income and its components; however, the adoption of SFAS No.
130 had no impact on the Company's net earnings (loss) or stockholders'
equity. SFAS No. 130 requires unrealized holding gains or losses on debt and
equity securities available-for-sale and cumulative translation adjustments,
which prior to adoption were reported separately in stockholders' equity, to
be included in accumulated other comprehensive income (loss). The 1998
financial statements have been reclassified to conform to the requirements
of SFAS No. 130.
-46-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE B - COMPREHENSIVE INCOME (LOSS) (continued)
The components of comprehensive income (loss), net of related tax, are as
follows:
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Net earnings (loss) $ 5,965 $ 4,797 $(5,967)
Unrealized holding gain (loss) on
debt and equity securities, net
of income tax provision of $183,
$1,118 and $6 in 2000, 1999 and
1998, respectively 871 (151) 12
Foreign currency translation
adjustments (680) (858) (646)
------ ------ ------
Comprehensive income (loss) $ 6,156 $ 3,788 $(6,601)
====== ====== ======
</TABLE>
The components of accumulated other comprehensive income (loss), net of
related tax, are as follows:
<TABLE>
<CAPTION>
June 3, May 29,
2000 1999
------ ------
(in thousands)
<S> <C> <C>
Unrealized holding gain on debt and equity
securities, net of income tax liability of
$387 and $204 at June 3, 2000 and May 29,
1999, respectively $ 2,064 $ 1,193
Cumulative translation adjustments (3,395) (2,715)
------ ------
Accumulated other comprehensive income
(loss) $(1,331) $(1,522)
====== ======
</TABLE>
NOTE C - ASSET IMPAIRMENT CHARGE
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Company
recorded an impairment charge in 1998, with no associated tax benefit, of
$4,121,000, or $.41 per share, relating to certain long-lived assets
pertaining to the acquisition of Leocor, Inc. and used in the
cardiovascular market. The Company determined that the revenue potential of
this technology, as it relates to the cardiovascular market, was impaired
due to increased competition and price erosion for coronary stents and
angioplasty products and the Company's strategic decision to commercially
exploit this technology in the interventional radiology market. The
impairment charge represents the difference between the carrying value of
intangible assets and the fair market value of these assets based on
estimated future cash flows discounted at a rate commensurate with the risk
involved. The charge had no impact on the Company's cash flow or its
ability to generate cash flow in the future. As a result of the impairment
charge, amortization related to these assets decreased by approximately
$250,000 per year, with the remaining intangible assets being amortized on
a straight-line basis over the remaining estimated useful lives of
approximately eight years.
-47-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE D - INVESTMENT IN AFFILIATE AND IMPAIRMENT CHARGE
In 1998, the Company acquired approximately 23% of ITI Medical
Technologies, Inc. ("ITI") for $1,340,000, including acquisition related
expenses of $40,000. ITI is a California corporation, based in Livermore,
California, which develops and manufactures MRI diagnostic and therapeutic
medical devices. The Company's investment in ITI was accounted for by the
equity method. In accordance with SFAS No. 121, the Company recorded an
impairment charge in the fourth quarter of 1999, with no associated tax
benefit, of $896,000, as it was determined that the fair value of such
investment was zero, with no future cash flows anticipated due to ITI's
inability to generate income from operations or raise additional capital.
Prior to the impairment charge, the Company's investment in ITI had been
reduced by its proportionate share of losses in 1999 and 1998 of
approximately $225,000 and $219,000, respectively. For 1999 and 1998, the
impairment charge and the Company's proportionate share of losses are
included in the consolidated statements of earnings under the caption
"Write-down of investment in affiliate".
NOTE E - DEBT AND EQUITY SECURITIES
Debt and equity securities at June 3, 2000 consist of the following:
<TABLE>
<CAPTION>
Unrealized
Amortized Fair holding
cost value gain
--------- ----- ----------
(in thousands)
<S> <C> <C> <C>
Current
-------
Available-for-sale securities
(carried on the balance sheet
at fair value)
Debt securities with maturities
Due in 1 through 10 years $ 90 $ 90
Due after 10 years and through
20 years 3,875 3,875
Due after 20 years 4,015 4,015
Other 71 71
----- -----
$8,051 $8,051
===== =====
Noncurrent
----------
Available-for-sale securities
(carried on the balance sheet
at fair value)
Equity securities $1,615 $4,066 $2,451
Other 1 1
----- ----- -----
$1,616 $4,067 $2,451
===== ===== =====
</TABLE>
-48-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE E - DEBT AND EQUITY SECURITIES (continued)
Debt and equity securities at May 29, 1999 consist of the following:
<TABLE>
<CAPTION>
Unrealized
Amortized Fair holding
cost value gain
--------- ----- ----------
(in thousands)
<S> <C> <C> <C>
Current
-------
Available-for-sale securities
(carried on the balance sheet
at fair value)
Debt securities $5,155 $5,155
Other 61 61
----- -----
$5,216 $5,216
===== =====
Noncurrent
----------
Available-for-sale securities
(carried on the balance sheet
at fair value)
Equity securities $1,617 $3,014 $1,397
Other 1 1
----- ----- -----
$1,618 $3,015 $1,397
===== ===== =====
</TABLE>
NOTE F - INVENTORIES
Inventories consist of the following:
June 3, May 29,
2000 1999
------- -------
(in thousands)
Finished goods $13,246 $14,000
Work in process 2,813 1,926
Raw materials 10,797 11,048
------ ------
$26,856 $26,974
====== ======
-49-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE G - PROPERTY, PLANT AND EQUIPMENT, AT COST
Property, plant and equipment are summarized as follows:
Estimated
useful June 3, May 29,
lives 2000 1999
--------- ------ ------
(in thousands)
Building and building
improvements 10 to 39 years $13,613 $13,411
Machinery and equipment 2 to 10 years 31,306 28,675
Leasehold improvements Term of lease 1,619 1,740
------ ------
46,538 43,826
Less accumulated depreciation
and amortization 28,309 25,984
------ ------
18,229 17,842
Land 3,492 3,483
------ ------
$21,721 $21,325
====== ======
NOTE H - INCOME TAXES
Income tax expense analyzed by category and by income statement
classification is summarized as follows:
2000 1999 1998
------ ------ ------
(in thousands)
Current
Federal $2,304 $1,592 $ (159)
State and local 199 204 131
Foreign 806 813 525
----- ----- ---
Subtotal 3,309 2,609 497
Deferred (40) (735) (64)
----- ----- ---
Total $3,269 $1,874 $ 433
===== ===== ===
-50-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE H - INCOME TAXES (continued)
Temporary differences which give rise to deferred tax assets and
liabilities are summarized as follows:
June 3, May 29,
2000 1999
------ ------
(in thousands)
Deferred tax assets
Tax operating loss carryforwards $ 1,219 $ 982
Difference between book and tax basis in
investment sold to Canadian subsidiary 1,137 1,137
Tax credit carryforwards 224 356
Alternative minimum tax ("AMT") credit
carryforward 4 4
Impairment of long-lived assets 1,256 1,356
Expenses incurred not currently deductible 1,184 1,171
Inventories 793 721
Deferred compensation costs 663 603
Write-down of investment in affiliate 496 496
Other 82 88
------ ------
Gross deferred tax asset 7,058 6,914
------ ------
Deferred tax liabilities
Excess tax over book depreciation 1,061 1,026
Unrealized investment gains 387 204
Tax on unremitted profits of Puerto
Rican subsidiary 124 112
Other 16 16
------ ------
Gross deferred tax liability 1,588 1,358
Valuation allowance (4,791) (4,754)
------ ------
Net deferred tax asset $ 679 $ 802
====== ======
In 1994, the Company sold to its Canadian subsidiary warrants to purchase
396,396 shares of stock in Cedara Software Corporation (formally ISG
Technologies, Inc.). This transaction generated a capital gain for tax
purposes of approximately $3,344,000, utilizing a portion of the Company's
capital loss carryforward and giving rise to a temporary difference
pertaining to the difference between the financial statement and tax basis
in this asset.
During 1999, the Company reduced its valuation allowance primarily to
recognize deferred tax assets of approximately $832,000, in the fourth
quarter, that management believes is more likely than not to be realized
through future taxable earnings from U.S. operations.
If not utilized, the tax operating loss carryforwards will expire in
various amounts over the years 2001 through 2005. The tax credit
carryforwards will expire in various amounts over the years 2001 through
2012.
-51-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE H - INCOME TAXES (continued)
Deferred income taxes are provided for the expected Tollgate tax on the
undistributed earnings of the Company's Puerto Rican subsidiary, which are
expected to be distributed at some time in the future.
At June 3, 2000, undistributed earnings of certain foreign subsidiaries
aggregated $16,644,000 which will not be subject to U.S. tax until
distributed as dividends. Any taxes paid to foreign governments on these
earnings may be used, in whole or in part, as credits against the U.S. tax
on any dividends distributed from such earnings. On remittance, certain
foreign countries impose withholding taxes that are then available for use
as credits against a U.S. tax liability, if any, subject to certain
limitations. The amount of withholding tax that would be payable on
remittance of the entire amount of undistributed earnings would approximate
$832,000.
Deferred tax assets and liabilities are included in the consolidated
balance sheets as follows:
<TABLE>
<CAPTION>
June 3, May 29,
2000 1999
------ ------
(in thousands)
<S> <C> <C>
Current - Other current assets $1,446 $1,401
Current - Accrued income taxes (124) (112)
Noncurrent - Other noncurrent liabilities (643) (487)
----- -----
Net deferred tax asset $ 679 $ 802
===== =====
</TABLE>
Earnings (loss) before income taxes for U.S. and international operations
consist of the following:
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
(in thousands)
<S> <C> <C> <C>
U.S. $7,789 $5,371 $(5,225)
International 1,445 1,300 (309)
----- ----- ------
$9,234 $6,671 $(5,534)
===== ===== ======
</TABLE>
-52-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
The Company's consolidated income tax provision has differed from the
amount which would be provided by applying the U.S. Federal statutory
income tax rate to the Company's earnings (loss) before income taxes for
the following reasons:
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Income tax provision $ 3,269 $ 1,874 $ 433
Effect of:
State income taxes, net of Federal
tax benefit (128) (108) (40)
Research and development credit 22 27 41
Earnings of the Puerto Rican
subsidiary, net of Puerto Rico
Corporate tax and Tollgate tax 223 242 188
Earnings of the Foreign Sales
Corporation 22 22 7
Tax-exempt portion of investment
income 111 27 96
Change in valuation allowance 94 770 (1,807)
Losses of foreign entities
generating no current tax
benefit (445) (553) (526)
Nondeductible expenses (187) (148) (324)
Other 159 115 50
----- ----- -----
Income tax provision (benefit)
at statutory tax rate of 34% $ 3,140 $ 2,268 $(1,882)
===== ===== ======
</TABLE>
The Company has an agreement with the Commonwealth of Puerto Rico pursuant
to which its operations in Puerto Rico are subject to a partial tax
exemption which expires January 23, 2007. Commonwealth taxes are currently
being provided on earnings of the subsidiary.
The U.S. Federal income tax returns of the Company through May 31, 1997
have been closed by the Internal Revenue Service.
-53-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE I - DEBT
Notes payable consist of the following:
June 3, May 29,
2000 1999
------ ------
(in thousands)
Japanese bank
2.68% note (1) $1,080
2.43% note (1) $1,111
Bank, lines of credit
6.25% (2) 718
----- -----
$1,080 $1,829
===== =====
Long-term debt consists of the following:
June 3, May 29,
2000 1999
------ ------
(in thousands)
Japanese bank loan, due November 2007,
2.68% (1) $238 $301
Japanese bank loan, due November 2004,
1.80% (1) 298 260
Canadian bank loan, repaid November 1999,
6.75% 113
Other 20
--- ---
556 674
Less current maturities 103 197
--- ---
$453 $477
=== ===
(1) Guaranteed by the Company and collateralized by property, plant and
equipment having a net carrying value of $1,914,000 at June 3, 2000.
(2) The Company's Canadian subsidiary has available $1,354,000 (Canadian
$2,000,000) under this line of credit with a bank, which is
collateralized by accounts receivable and inventory and expires on
September 30, 2000.
The Company also has available $2,000,000 under an unsecured line of credit
with a bank, which expires on November 30, 2000. At June 3, 2000, no
amounts were outstanding under this line of credit.
The Company believes that the carrying amount of its debt approximates the
fair value as the variable interest rates approximate current prevailing
interest rates.
During 2000, 1999 and 1998, the weighted average interest rates on
short-term debt were 2.71%, 3.54% and 6.38%, respectively.
-54-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE J - ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES
Accrued liabilities consist of the following:
June 3, May 29,
2000 1999
------ ------
(in thousands)
Payroll and related expenses $4,565 $3,808
Accrued sales rebates 1,498 2,604
Other 1,735 1,324
----- -----
$7,798 $7,736
===== =====
Other noncurrent liabilities consist of the following:
June 3, May 29,
2000 1999
------ ------
(in thousands)
Deferred compensation $1,792 $1,628
Deferred taxes 643 487
Other 321 288
----- -----
$2,756 $2,403
===== =====
NOTE K - RETIREMENT PLANS
E-Z-EM, Inc. and its domestic subsidiaries ("E-Z-EM") provide pension
benefits through three Profit-Sharing Plans, under which E-Z-EM makes
discretionary contributions to eligible employees, and three companion
401(k) Plans, under which eligible employees can defer a portion of their
annual compensation, part of which is matched by E-Z-EM. These plans cover
all E-Z-EM employees not otherwise covered by collective bargaining
agreements. In 2000, 1999 and 1998, profit-sharing contributions were
$589,000, $581,000 and $534,000, respectively, and 401(k) matching
contributions were $355,000, $359,000 and $341,000, respectively.
E-Z-EM also contributed $34,000, $36,000 and $42,000 in 2000, 1999 and
1998, respectively, to a multiemployer pension plan for employees covered
by a collective bargaining agreement. This plan is not administered by
E-Z-EM and contributions are determined in accordance with provisions of
negotiated labor contracts.
E-Z-EM Canada Inc., a wholly-owned subsidiary of the Company, also provides
pension benefits to eligible employees through two Defined Contribution
Plans. In 2000, 1999 and 1998, contributions were $85,000, $71,000 and
$70,000, respectively.
-55-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE L - COMMITMENTS AND CONTINGENCIES
The Company is committed under non-cancellable operating leases for
facilities, automobiles and equipment, including certain facility leases
with related parties. During 2000, 1999 and 1998, aggregate rental costs
under all operating leases were approximately $1,713,000, $1,743,000 and
$1,325,000, respectively, of which approximately $212,000, $196,000 and
$196,000, respectively, were paid to related parties. Future annual
operating lease payments in the aggregate, which include escalation clauses
and real estate taxes, with initial remaining terms of more than one year
at June 3, 2000, are summarized as follows:
Related
Total party
leases leases
------ -------
(in thousands)
2001 $1,198 $156
2002 927 106
2003 701 109
2004 663 101
2005 584
Thereafter 1,905
----- ---
$5,978 $472
===== ===
The Company has employment contracts with two executive officers. One such
contract expires November 30, 2001 and one contract is cancellable at any
time, but provides for severance pay in the event such executive is
terminated by the Company without cause, as defined in the contract.
Aggregate minimum compensation commitments under these contracts at June 3,
2000, are summarized as follows:
(in thousands)
2001 $513
2002 131
---
$644
===
-56-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE M - COMMON STOCK
In 1983, the Company adopted a Stock Option Plan (the "1983 Plan"). The
1983 Plan provides for the grant to key employees of both nonqualified
stock options and incentive stock options. A total of 2,617,974 shares
(including 800,000 shares authorized in October 1999) of the Company's
Common Stock may be issued under the 1983 Plan pursuant to the exercise of
options. All stock options must have an exercise price of not less than the
market value of the shares on the date of grant. Options will be
exercisable over a period of time to be designated by the administrators of
the 1983 Plan (but not more than 10 years from the date of grant) and will
be subject to such other terms and conditions as the administrators may
determine. The 1983 Plan terminates in December 2005.
In 1984, the Company adopted a second Stock Option Plan (the "1984 Plan").
The 1984 Plan provides for the grant to members of the Board of Directors
and consultants of nonqualified stock options. A total of 459,490 shares of
the Company's Common Stock may be issued under the 1984 Plan pursuant to
the exercise of options. All stock options must have an exercise price of
not less than the market value of the shares on the date of grant. Options
will be exercisable over a period of time to be designated by the
administrators of the 1984 Plan (but not more than 10 years from the date
of grant) and will be subject to such other terms and conditions as the
administrators may determine. The 1984 Plan terminates in December 2005.
In 1997, the Company's AngioDynamics subsidiary adopted a Stock Option Plan
(the "1997 Plan"). The 1997 Plan provides for the grant to key employees of
both nonqualified stock options and incentive stock options and to members
of the Board of Directors and consultants of nonqualified stock options. A
total of 136.36 shares of AngioDynamics' Class B Common Stock may be issued
under the 1997 Plan pursuant to the exercise of options. All stock options
must have an exercise price of not less than the market value of the shares
on the date of grant. Options will be exercisable over a period of time to
be designated by the administrators of the 1997 Plan (but not more than 10
years from the date of grant) and will be subject to such other terms and
conditions as the administrators may determine. The 1997 Plan terminates in
March 2007. As a result of the 1997 Plan, the Company's equity interest in
AngioDynamics may become diluted by as much as 12%.
In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company elected to continue to account for stock-based compensation
using the "intrinsic value" method under the guidelines of APB Opinion No.
25, "Accounting for Stock Issued to Employees" as opposed to the "fair
value" method contained in SFAS 123. Accordingly, no compensation expense
has been recognized under these plans concerning options granted to key
employees and to members of the Board of Directors, as such options were
granted to Board members in their capacity as Directors. Compensation
expense of $5,000, $5,000 and $7,000 in 2000, 1999 and 1998, respectively,
was recognized under these plans for options granted to consultants.
-57-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE M - COMMON STOCK (continued)
If the Company had elected to recognize compensation expense based upon the
fair value at the grant date for options granted under these plans to key
employees and to members of the Board of Directors, consistent with the
methodology prescribed by SFAS 123, the Company's pro forma net earnings
(loss) and earnings (loss) per common share would be as follows:
2000 1999 1998
------ ------ ------
(in thousands, except per share data)
Net earnings (loss)
As reported $5,965 $4,797 $(5,967)
Pro forma 5,317 4,345 (6,549)
Basic earnings (loss) per
common share
As reported $.60 $.48 $(.60)
Pro forma .53 .43 (.66)
Diluted earnings (loss) per
common share
As reported $.58 $.47 $(.60)
Pro forma .52 .42 (.66)
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related
to grants made before 1996. The fair value of options was estimated at the
date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions for 2000, 1999 and 1998,
respectively: dividend yields of zero for all years; expected volatility
ranging from 44.59% to 48.65% in 2000, from 41.32% to 48.90% in 1999 and
from 43.89% to 47.30% in 1998; risk-free interest rates ranging from 5.99%
to 6.89% in 2000, from 4.78% to 5.98% in 1999 and from 5.61% to 6.35% in
1998; and expected terms ranging from 5 to 9 1/2 years for all years.
-58-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE M - COMMON STOCK (continued)
A summary of the status of the Company's stock option plans as of June 3,
2000, May 29, 1999 and May 30, 1998, and changes for the three years then
ended, is presented below:
<TABLE>
<CAPTION>
2000 1999 1998
---------------------- ---------------------- ---------------------
Weighted Weighted Weighted
-Average -Average -Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
1983 Plan
---------
Outstanding at
beginning of year 973 $ 4.99 1,002 $ 4.94 1,115 $4.90
Granted 472 $ 7.45 33 $ 5.83
Exercised (144) $ 5.42 (56) $ 4.22 (107) $4.48
Forfeited (12) $ 4.75 (3) $ 6.23 (5) $7.01
Expired (3) $10.68 (1) $8.74
----- ----- -----
Outstanding at
end of year 1,289 $ 5.84 973 $ 4.99 1,002 $4.94
===== ===== =====
Options exercisable
at year-end 796 $ 4.89 940 $ 4.96 995 $4.91
Weighted-average
fair value of
options granted
during the year $ 3.66 $ 2.59
1984 Plan
---------
Outstanding at
beginning of year 301 $ 5.54 304 $ 5.51 305 $5.60
Granted 6 $ 6.50 6 $ 5.00 6 $5.88
Exercised (12) $ 3.75 (9) $ 4.22
Forfeited (2) $ 8.58
Expired (12) $ 9.55 (7) $9.53
--- --- ---
Outstanding at
end of year 281 $ 5.44 301 $ 5.54 304 $5.51
=== === ===
Options exercisable
at year-end 275 $ 5.42 289 $ 5.55 293 $5.47
Weighted-average
fair value of
options granted
during the year $ 3.24 $ 2.36 $2.72
</TABLE>
-59-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE M - COMMON STOCK (continued)
<TABLE>
<CAPTION>
2000 1999 1998
---------------------- ---------------------- ---------------------
Weighted Weighted Weighted
-Average -Average -Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
1997 Plan
---------
Outstanding at
beginning of year 129.15 $40,000 130.00 $40,000 122.39 $80,000
Granted 8.18 $40,000 1.93 $40,000 140.62 $43,022
Forfeited (1.19) $40,000 (2.78) $40,000 (133.01) $80,000
------ ------ ------
Outstanding at
end of year 136.14 $40,000 129.15 $40,000 130.00 $40,000
====== ====== ======
Options exercisable
at year-end None None None
Weighted-average
fair value of
options granted
during the year $26,427 $26,480 $24,877
</TABLE>
The following information applies to options outstanding and exercisable at
June 3, 2000:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------------- -----------------------
Weighted-
Number Average Weighted- Number Weighted-
Out- Remaining Average Exer- Average
Range of standing Life in Exercise cisable Exercise
Exercise Prices (000) Years Price (000) Price
--------------- -------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
1983 Plan
---------
$3.66 to $5.39 702 3.94 $4.42 702 $4.42
$5.63 to $6.00 204 9.00 $5.66 11 $5.83
$8.50 to $10.13 383 8.93 $8.56 83 $8.78
----- ---
1,289 796
===== ===
1984 Plan
---------
$3.66 to $5.49 199 4.53 $4.20 199 $4.20
$5.88 to $8.58 64 5.54 $7.74 58 $7.86
$9.58 to $12.49 18 6.12 $10.99 18 $10.99
--- ---
281 275
=== ===
</TABLE>
On June 3, 2000, there remained 531,271, 115,385 and .23 shares available
for granting of options under the 1983, 1984 and 1997 Plans, respectively.
Options granted prior to the Company's recapitalization on October 26, 1992
are exercisable one-half in Class A Common Stock and one-half in Class B
Common Stock. Options granted after the recapitalization are exercisable in
Class B Common Stock.
-60-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE M - COMMON STOCK (continued)
On May 5, 1998, the Company's Board of Directors approved the repricing of
all outstanding stock options previously granted under the 1997 Plan. The
repricing provided for the exercise price of 128.41 options to be reduced
from $80,000 per share to $40,000 per share, to reflect current fair value.
The repricing did not affect the term or vesting period of the options.
In 1985, the Company adopted an Employee Stock Purchase Plan (the "Employee
Plan"). The Employee Plan provides for the purchase by employees of the
Company's Class B Common Stock at a discounted price of 85% of the market
value of the shares on the date of purchase. A total of 150,000 shares of
the Company's Class B Stock may be purchased under the Employee Plan which
terminates on September 30, 2002. During 2000, employees purchased 1,275
shares, at $4.46 per share. Total proceeds received by the Company
approximated $6,000.
On January 23, 1998, the Board of Directors declared a 3% stock dividend on
shares of Class A and Class B Common Stock. The dividend, payable in non-
voting Class B Stock, was distributed on March 16, 1998 to shareholders of
record on February 26, 1998. Earnings (loss) per common share have been
retroactively adjusted to reflect the stock dividends.
In January 1999, the Board of Directors authorized the repurchase of up to
500,000 shares of the Company's Class B Common Stock at an aggregate
purchase price of up to $2,000,000. In October 1999, the Board modified the
program to include the Company's Class A Common Stock. In February 2000,
the Board further modified the program to increase the aggregate purchase
price of Class A and Class B Common Stock by an additional $2,000,000. As
of June 3, 2000, the Company had repurchased 38,145 shares of Class A
Common Stock and 313,748 shares of Class B Common Stock for approximately
$2,503,000.
NOTE N - RELATED PARTIES
During 1998, the Company entered into split dollar life insurance
arrangements with a key executive (including his spouse) and a principal
shareholder (the "insureds"). On an annual basis, the Company makes
interest bearing advances of approximately $100,000 per insured toward the
cost of such life insurance policies. Interest on the advances is to be
paid to the Company annually by the insureds. Under collateral assignment
agreements, the proceeds from the policies will first be paid to the
Company to repay the advances it made. If the policies are terminated prior
to the death of the insured, the Company will be entitled to the cash
surrender value of the policies at that time, and any shortfall between
that amount and the amount of the advances made by the Company will be
repaid to the Company by the insureds. At June 3, 2000, the cash surrender
value of such policies aggregated $474,000. At June 3, 2000 and May 29,
1999, advances of $600,000 and $400,000, respectively, are recorded in the
consolidated balance sheets under the caption "Other Assets".
-61-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE N - RELATED PARTIES (continued)
The Company had an unsecured, two-year interest bearing note receivable
from an executive officer in the principal amount of $320,000.
Approximately $297,000 of this note receivable was satisfied in October
1999, while the remaining portion was satisfied during June 2000.
Several directors provided consulting services to the Company during 2000,
1999 and 1998. Fees for such services, including fees relating to
attendance at directors' meetings, were approximately $446,000, $258,000
and $298,000 during 2000, 1999 and 1998, respectively.
NOTE O - OPERATING SEGMENT, GEOGRAPHIC AREA OPERATIONS AND CONCENTRATION OF
CREDIT RISK
In 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". The statement redefines how
operating segments are determined and requires disclosure of certain
financial and descriptive information about a company's operating segments.
The Company has adopted the new requirements retroactively.
The Company is engaged in the manufacture and distribution of a wide
variety of products which are classified into two operating segments:
Diagnostic products and AngioDynamics products. Diagnostic products
encompass both contrast systems, consisting of barium sulfate formulations
and related medical devices used in X-ray, CT-scanning, ultrasound and MRI
imaging examinations, and non-contrast systems, including radiological
medical devices, custom contract pharmaceuticals, gastrointestinal
cleansing laxatives, X-ray protection equipment, and immunoassay tests.
AngioDynamics products include angiographic, thrombolytic, image-guided
vascular access, angioplasty, stents, and drainage medical devices used in
the interventional radiology marketplace. The Company's primary business
activity is conducted with radiologists and hospitals, located throughout
the U.S. and abroad, through numerous distributors. The Company's exposure
to credit risk is dependent, to a certain extent, on the healthcare
industry. The Company performs ongoing credit evaluations of its customers
and does not generally require collateral; however, in certain
circumstances, the Company may require letters of credit from its
customers.
In 2000, there were two customers to whom sales of Diagnostic products
represented 18% and 12%, respectively. In 1999 and 1998, there was one
customer to whom sales of Diagnostic products represented 17% and 15% of
total sales, respectively. Approximately 21% and 14% of accounts receivable
pertained to these customers at June 3, 2000 and approximately 20% of
accounts receivable pertained to this customer at May 29, 1999.
The Company's chief operating decision maker utilizes operating segment net
earnings (loss) information in assessing performance and making overall
operating decisions and resource allocations. The accounting policies of
the operating segments are the same as those described in the summary of
significant accounting policies. Information about the Company's segments
is as follows:
-62-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE O - OPERATING SEGMENT, GEOGRAPHIC AREA OPERATIONS AND CONCENTRATION OF
CREDIT RISK (continued)
<TABLE>
<CAPTION>
Operating Segments 2000 1999 1998
------------------ ------ ------ ------
(in thousands)
<S> <C> <C> <C>
Net sales to external customers
Diagnostic products
Contrast systems $ 65,050 $ 60,366 $ 58,474
Non-contrast systems 27,082 26,554 25,001
-------- -------- --------
Total Diagnostic products 92,132 86,920 83,475
AngioDynamics products 19,961 20,259 19,409
-------- -------- --------
Total net sales to external
customers $ 112,093 $ 107,179 $ 102,884
======== ======== ========
Intersegment net sales
Diagnostic products $ 2 $ 36 $ 91
AngioDynamics products 1,063 503 483
-------- -------- --------
Total intersegment net sales $ 1,065 $ 539 $ 574
======== ======== ========
Interest income
Diagnostic products $ 1,708 $ 1,475 $ 1,269
AngioDynamics products 12 16 20
Eliminations (1,004) (986) (597)
-------- -------- --------
Total interest income $ 716 $ 505 $ 692
======== ======== ========
Interest expense
Diagnostic products $ 252 $ 263 $ 340
AngioDynamics products 1,005 986 951
Eliminations (1,004) (986) (597)
-------- -------- --------
Total interest expense $ 253 $ 263 $ 694
======== ======== ========
Depreciation and amortization
Diagnostic products $ 2,124 $ 2,125 $ 2,361
AngioDynamics products 679 704 954
-------- -------- --------
Total depreciation and amortization $ 2,803 $ 2,829 $ 3,315
======== ======== ========
Equity in losses of affiliate
Diagnostic products $ -- $ 225 $ 219
-------- -------- --------
Total equity in losses of affiliate $ -- $ 225 $ 219
======== ======== ========
Income tax provision (benefit)
Diagnostic products $ 3,566 $ 2,419 $ 1,198
AngioDynamics products (297) (545) (765)
-------- -------- --------
Total income tax provision $ 3,269 $ 1,874 $ 433
======== ======== ========
</TABLE>
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<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE O - OPERATING SEGMENT, GEOGRAPHIC AREA OPERATIONS AND CONCENTRATION OF
CREDIT RISK (continued)
<TABLE>
<CAPTION>
Operating Segments (continued) 2000 1999 1998
------------------------------ -------- ------- -------
(in thousands)
<S> <C> <C> <C>
Net earnings (loss)
Diagnostic products $ 7,328 $ 5,960 $ 1,623
AngioDynamics products (1,416) (1,158) (7,568)*
Eliminations 53 (5) (22)
-------- -------- --------
Total net earnings (loss) $ 5,965 $ 4,797 $ (5,967)
======== ======== ========
Other significant noncash items
Diagnostic products
Impairment of investment in
affiliate $ - $ 896 $ -
AngioDynamics products
Impairment of long-lived assets - - 4,121
-------- -------- --------
Total other significant noncash
items $ - $ 896 $ 4,121
======== ======== ========
Assets
Diagnostic products $ 111,046 $ 107,027 $ 99,846
AngioDynamics products 17,573 17,922 19,631 *
Eliminations (29,534) (28,890) (28,771)
-------- -------- --------
Total assets $ 99,085 $ 96,059 $ 90,706
======== ======== ========
Capital expenditures
Diagnostic products $ 2,813 $ 1,831 $ 1,745
AngioDynamics products 393 376 152
-------- -------- --------
Total capital expenditures $ 3,206 $ 2,207 $ 1,897
======== ======== ========
Investment in affiliate
Diagnostic products $ - $ - $ 1,121
-------- -------- --------
Total investment in affiliate $ - $ - $ 1,121
======== ======== ========
</TABLE>
* Includes an impairment charge of $4,121,000 (see Note C).
-64-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE O - OPERATING SEGMENT, GEOGRAPHIC AREA OPERATIONS AND CONCENTRATION OF
CREDIT RISK (continued)
Geographic Areas
----------------
The following geographic area data includes net sales generated by and
long-lived assets employed in operations located in each area:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Net sales
U.S. operations $ 94,271 $ 89,200 $ 85,014
International operations:
Canada 23,671 22,735 20,321
Other 12,697 12,226 13,932
Eliminations (18,546) (16,982) (16,383)
-------- -------- --------
Total net sales $112,093 $107,179 $102,884
======= ======= =======
Long-lived assets
U.S. operations $13,727 $14,154 $14,752
International operations:
Canada 6,526 5,672 5,745
Other 4,026 4,251 4,412
-------- -------- -------
Total long-lived assets $24,279 $24,077 $24,909
======= ======= =======
</TABLE>
NOTE P - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Quarterly results of operations during 2000 and 1999 were as follows:
2000
---------------------------------------------
First Second Third Fourth
quarter quarter quarter quarter
------- ------- ------- -------
(in thousands, except per share data)
Net sales $27,197 $27,973 $25,752 $31,171
Gross profit 12,083 13,234 11,105 14,043
Net earnings 1,798 1,817 516 1,834
Earnings per common share
Basic (1) .18 .18 .05 .18
Diluted (1) .18 .18 .05 .18
-65-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 3, 2000, May 29, 1999 and May 30, 1998
NOTE P - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (continued)
1999
---------------------------------------------
First Second Third Fourth
quarter quarter quarter quarter
------- ------- ------- -------
(in thousands, except per share data)
Net sales $25,665 $26,508 $26,618 $28,388
Gross profit 10,669 11,538 11,192 11,758
Net earnings 1,470 1,528 959 840
Earnings per common share
Basic .15 .15 .10 .08
Diluted (1) .14 .15 .09 .08
(1) The sum of the quarters does not equal the fiscal year due to rounding
and changes in the calculation of weighted average shares.
NOTE Q - SUBSEQUENT EVENT
On July 27, 2000, AngioDynamics entered into two agreements to sell all the
capital stock of AngioDynamics Ltd., a wholly-owned subsidiary, and certain
other assets to AngioDynamics Ltd.'s management. AngioDynamics Ltd.,
located in Ireland, manufactured cardiovascular and interventional
radiology products. The aggregate consideration paid was $3,250,000 in
cash. The sale was the culmination of AngioDynamics' strategic decision to
exit the cardiovascular market and to focus entirely on the interventional
radiology marketplace. The gain resulting from this sale will not be
material to the financial position and results of operations for the
quarter ended September 2, 2000. Further, AngioDynamics entered into a
manufacturing agreement, a distribution agreement and a royalty agreement
with the buyer. Under the two-year manufacturing agreement, the buyer will
be manufacturing certain interventional radiology products sold by
AngioDynamics.
-66-
<PAGE>
E-Z-EM, Inc. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
----------------------------
(1) (2)
Balance Charged to Balance
at Charged to other at end
beginning costs and accounts- Deductions- of
Description of period expenses describe describe period
----------- --------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Fifty-two weeks
ended May 30, 1998
Allowance for
doubtful accounts.... $930 $286 $68 (a) $1,148
=== === == =====
Fifty-two weeks
ended May 29, 1999
Allowance for
doubtful accounts.... $1,148 $250 $370 (a) $1,028
===== === === =====
Fifty-three weeks
ended June 3, 2000
Allowance for
doubtful accounts.... $1,028 $37 $212 (a) $853
===== == === ===
</TABLE>
(a) Amounts written off as uncollectible.
-67-
