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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 29, 1998
(January 27, 1998)
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KYZEN CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
UTAH 0-26434 87-0475115
(See or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification
Incorporation) Number)
430 HARDING INDUSTRIAL DRIVE, NASHVILLE, TENNESSEE 37211
(Address of Principal Executive Offices) (Zip Code)
(615) 831-0888
(Registrant's Telephone Number, including Area Code)
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ITEM 5. OTHER EVENTS AND INFORMATION
On January 27, 1998, Kyzen Corporation conducted an Analyst Conference
Call at which the prepared remarks attached hereto as Exhibit 99.1 were read to
analysts and certain other interested parties.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS
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Exhibit No. Description
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<S> <C>
99.1 Analyst Conference Call Script, dated January 27, 1998
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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 party duly authorized.
KYZEN CORPORATION
BY: /s/ Thomas M. Forsythe
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Thomas M. Forsythe
Vice President and Treasurer
(Chief Financial Officer)
Date: January 27, 1998
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EXHIBIT INDEX
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Exhibit No. Description
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<S> <C>
99.1 Analyst Conference Call Script, dated January 27, 1998
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Kyzen Corporation
Conference Call Script
January 27, 1998
The statements in this press release/Conference Call that relate to future
plans, events or performance are forward-looking statements that involve risks
and uncertainties. Among the factors that can could cause actual results to
differ materially from those projected are the following: business conditions
and the general economy as they affect interest rates; business conditions as
they affect manufacturers of chemical raw materials; the federal, state and
local regulatory environment; availability of debt and equity capital with
favorable terms and conditions; availability of new expansion and acquisition
opportunities; changes in the financial condition or corporate strategy of the
Company's primary customers; and the ability of the Company to develop new
competitive product lines. Actual results, events and performance may differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to release publicly the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Welcome to the Kyzen Corporation 1997 Q4 and year end conference call. We thank
you for taking time to join us.
I will begin by reviewing the press release which was put on the wire this
morning. I believe everyone on the call this morning should have received a copy
by fax as well from Daemon Wright of Allen & Caron.
We have several matters to discuss as outlined in the press release, these
include: 4th quarter and full year results, restatements of prior quarters
earning, and recent executive personnel changes.
1997 was a record year for Kyzen.
Chemical revenue increased approximately 21% over Q4 96. Total quarterly revenue
was even with Q4 96 at $1.39 million, reflecting strong chemical sales offset by
equipment sales weakening from last years strong final quarter, as well as a
seasonal
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affect due to the longer than usual Holiday period this year. Overall gross
margins increased to approximately 48% for the quarter due to product mix, while
chemical gross margins remained solid at historical levels. It is worth noting
that international chemical sales for the quarter and year have rebounded to
approximately 15% of sales from the depressed levels of 1996. As of yet we have
seen no slow down in business from East Asia customers.
R&D expenses were approximately 8.0% for the quarter, within our expected range
of 7-9% range reflecting the increased chemical product development work for
optics and other new niche market. For the full year, R&D expenses continued its
downward trend, finishing at about 8.5% decreasing from approximately 11.6% in
1996.
SG&A increased around 8% for Q4 and approximately 12.1% for the full year, the
majority of that growth in the sales and marketing areas largely offset by
double digit declines in G&A for both the quarter and the year. The growth rate
on the selling expense line continues to moderate. The selling and marketing
expenses are comprised of new sales and marketing people, promotional materials,
increased capability and utilization of our applications laboratory,
advertising, trade shows, etc.
These income statement related items were the main contributors to the
$(163,745) or $(0.03) loss for the quarter as compared to an $(0.04) last year.
Looking at the full year, sales have risen approximately 10% to $5.46 mm from
$4.96 mm last year, fueled by a nearly 20% growth in chemical sales. The net
loss for the period was $(572)k or (11 cents) per share as compared with a
$(757k) or (15 cents) per share in 1996.
Chemical sales growth is being driven by a variety factors:
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Our core chemical business continues to grow. The gains this quarter reflect
continued growth with both new and existing customers in our current market
segments of electronics, solid propellant, and television components. The
quarter was marked by more of this steady, solid growth. We did see an
exacerbated Holiday "lull" in ordering due to extended Holiday shutdowns this
year. New business is under development for future growth in coming quarters.
Our balance sheet remains strong, with a current ratio of 2.9 : 1, total assets
of $3.2 million, working capital of $1.3 million, cash and equivalents of $800k,
and shareholders equity of $2.3 million.
Receivables have improved over last year, due to a focused effort throughout the
year, and Payables have increased somewhat due to a change in accrual method for
commissions and the year end adjustments, which I'll discuss next. Chemical
inventory turns are consistent with historical norms, although we are beginning
to purchase more raw materials in bulk quantities, which while helping on cost
does tend increase inventories based on delivery schedules.
As you read in the press release management has decided, with the
concurrence of our auditors, to restate the previously announced first, second
and third quarter 1997 earnings based on adjustments identified in the year-end
closing process. The total adjustment for these three quarters was approximately
$124,315 or $0.02 per share. These adjustments consisted of multiple items that
individually would not be material, but in the aggregate necessitated
management's decision to restate earnings. The adjustments involved clearing
accounts, asset capitalization accounts, and other year-end adjustments of
expenses. Steps have been taken and are currently being implemented to prevent
the need for such adjustments in the future.
As a result of these adjustments, we will amend our Forms 10-Q to restate
results for the first quarter ended March 31, 1997, the second quarter ended
June 30,
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1997 and the third quarter ended September 30, 1997. The effects on quarterly
net income are approximately $28,238, $52,920, and $43,157, respectively, for
the first three quarters of 1997. No prior year results were effected. Adjusted
earnings per share for the first quarter of 1997 remain the same at a net loss
of $0.05 per share; the adjusted loss for the second quarter of 1997 is $0.03
per share versus the previously stated loss of $0.02 per share; and for the
third quarter of 1997, the adjustments resulted in no earnings per share versus
previously reported net income of $0.01 per share.
Additionally, we have announced that Ben. Wolfley, Vice President-Finance,
Treasurer and Secretary, has resigned effective yesterday. I [Tom Forsythe],
Vice President and Director, was named by the Board of Directors to serve as
Treasurer and Chief Accounting Officer, and Tom Herrmann, Vice President, was
named by the Board to serve as Corporate Secretary.
Returning our Business Strategy.
We are engaged in the further development of the electronics, rocket
manufacture, and various precision metal cleaning opportunities. I will touch on
some of the highlights.
Optics. We have commercialized our optical lens cleaning products, and expect
sales will commence in early this yearQ1. Extensive field trials of Kyzen
OPTISOLV products have been conducted both here and abroad, with very positive
results. We expect the OPTISOLV products to be significant revenue contributors
in '98 on a global basis.
PCS products. We continue to round out the PCS product line introduced last
winter. PCS devices will be central to our efforts in the semiconductor
marketplace. Sales during 97 were in line with our goals for the period.
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Semiconductor products. Our development work on customized semiconductor
cleaning products continues. The development and evaluation program has been
progressing very rapidly, and includes several world class manufactures from
among our current electronics customer base. While their is much work remaining,
we expect to complete and commercialize this new product segment early in '98.
Existing Core products. We expect solid growth from our core electronics and
high-tech cleaning products in addition to the new growth areas listed above.
All in all Kyzen is poised to capitalize on the sales and development efforts of
'97 as the new year begins. This concludes the formal portion of our conference
call. Operator, we are ready for the first questions:
No more questions, Kyle Doyel and I thank you all for your time this morning.
These are exciting times at Kyzen, and we look forward to speaking with you
again soon.
