Enzo Biochem Reports Fourth Quarter Results and Announces Realignment Program Expected to Reduce Annualized Costs $6 Million Commencing with Fiscal First Quarter
Enzo Biochem Inc. (NYSE: ENZ) today reported results for the fourth
quarter and year ended July 31, 2012, and announced a Company-wide
realignment program to improve profitability and reduce operating
expenses. This program will begin to favorably impact financial results
in the current quarter. Highlights of the program and fourth quarter
Integration and streamlining of manufacturing and sales facilities and
staff to reduce annualized operating expenses in excess of $6 million;
improved product mix at Enzo Life Sciences to increase margins;
additional benefits from realignment program to occur over balance of
2013 fiscal year.
Operating improvements to begin in fiscal 2013 first quarter for
period ending October 31, 2012, as the Company expects at least a 70%
improvement in EBITDA over prior year to $1.2 million at Enzo Life
Sciences. Enzo Clinical Labs also expected to generate revenue growth
and improved EBITDA in fiscal first quarter compared to previous year;
reduction in corporate SG&A to enhance results.
Fourth quarter one-time non-cash charge involving goodwill, as a
result of a decline in Enzo’s market capitalization, lower Life
Sciences revenues and other intangibles, including trademarks, in the
amount of $24.5 million (excluding a $2.1 million tax benefit).
Fourth quarter results reflected double digit revenue growth at Enzo
Clinical Labs, and improved gross margins at Enzo Life Sciences,
despite reduced revenues stemming from product rationalization.
For the final three months of fiscal 2012, revenues and the net
operating loss, before one-time charges, approximated those in the
corresponding year-ago period.
“The actions we announced today, which commenced over the previous three
months, are designed to deliver significantly improved operating results
and to generate cash flow this fiscal year,” said Barry Weiner, Enzo
President. “The realignment is expected to result in a Life Sciences
division that is more profitable, as it selectively delivers
higher-margin products to its customers and positions itself to better
capitalize on its synergies with Enzo Clinical Labs. We have right sized
and refocused Life Sciences for the current trends in the market. Enzo
Clinical Labs continues to expand its menu of novel molecular and
esoteric tests, and is well positioned to continue its double-digit
revenue growth, which exceeds industry norms. In addition to reductions
at Enzo Life Sciences, annual corporate expenses have also been reduced,
further benefitting the Company’s results.”
Among the changes involved in the realignment has been an extensive
repositioning of Enzo Life Sciences manufacturing facilities, which has
resulted in centering production in Ann Arbor, Michigan and
developmental activities in New York. Also involved was a consolidation
of Life Sciences sales offices. Division-wide staff levels since the
last acquisition in 2009 have been materially reduced, and now stand at
approximately 50% below the level of three years ago. Marginally
profitable life science products have been eliminated, resulting in
enhanced margins, despite reduced revenue levels, and the division’s
ability to refocus its products and efforts on the pharmaceutical and
diagnostic markets. Company-wide, the investments and realignments that
we have made are expected, to enhance operating results through the year.
The results of this realignment are expected to yield the following
results, among others:
Generate increased opportunities in molecular and esoteric testing
A fully consolidated Life Science division that will provide synergies
that fit in with the growth of Enzo Clinical Labs capabilities as a
premier provider and distributor of diagnostic services in one of the
leading healthcare markets geographically, and with an increasing
ability to reach out nationally.
Improved development capabilities of Life Sciences due to a more
efficient organization and centralized laboratory and manufacturing.
Enable Clinical Labs to continue its rapid growth and offerings of
advanced diagnostic products and technology.
“The aggressive steps we have taken are designed to improve cash
utilization and reposition Enzo to capitalize on the current market
opportunities. While it may take several quarters to see the full impact
of the realignment, we expect that it will begin to affect our results
immediately, and will also position Enzo for the longer term by
enhancing our ability to produce results that will reflect the Company’s
proprietary development of molecular diagnostic tests and complementary
Fiscal Fourth Quarter
Total revenues amounted to $26.4 million, compared with $26.8 million in
the corresponding year-earlier period. Of the total, revenues from
Clinical Labs amounted to $15.9 million, and were 11% greater than a
year ago reflecting wholly organic growth. Life Sciences product
revenues declined 15% to $8.9 million, but gross profit margins as a
percent of revenues advanced to 42%, from 39% last year. Royalty and
licensing fee income declined 20% to $1.7 million. Company gross profit
margins as a percentage of revenues were 44%, versus 45% a year ago.
Cash utilization for the quarter was reduced year over year by $3.2
million to $0.2 million. On a sequential basis, cash utilization also
improved more than $3.0 million as well.
Operating loss for the quarter was ($27.1) million, or ($0.69) per
share, which includes a $24.5 million non-cash impairment charge for
intangibles and goodwill (excluding a $2.1 million tax benefit), as well
as incremental non-recurring severance costs of $0.3 million. Last
year’s net loss for the quarter was ($4.0) million. EBITDA loss,
adjusted for these charges was ($3.1) million, compared with ($3.0)
million last year.
Full Year Results
Total revenues increased to $103.1 million, from $102.0 million last
year. Gross profit totaled $47.1 million, or 46% as a percentage of
revenues, compared with $48.2 million, or 47%, respectively, in fiscal
2011. Enzo Clinical Lab sales for the year advanced to $59.4 million, up
13% from the previous year, and gross margins were $23.1 million, up 10%
for the year. Enzo Life Sciences posted product revenues of $37.2
million, against $41.8 million last year; gross profit of $18.1 million
declined 8%, but as a percentage of revenues increased to 48%, from 47%.
Royalty and licensing fee income declined 20% to $6.0 million. Including
the non-cash fourth quarter impairment charges ($22.4 million net of tax
benefit), the year’s net loss amounted to ($39.3) million, or ($1.01)
per share, compared with ($13.0) million or ($0.34) per share,
respectively, in fiscal 2011.
The Company had, as of July 31, 2012, working capital of $21.5 million,
including $15.1 million in cash and equivalents and a current ratio of
2.1-to-1. There is no debt.
Enzo Labs continues to benefit from growth of the ColonSentry™ test,
introduced this past year, which provides an assessment of a patient’s
risk of having colorectal cancer. The simple blood test is indicative of
the emerging demand for simpler, effective and cost effective approaches
to speed diagnosis and effect treatment, where necessary. In addition,
Enzo expects to introduce several new molecular diagnostic products and
other tests that it is already offering or plans to do so, including but
not limited to:
Our proprietary AmpiProbe™ highly sensitive Real Time Amplification
Detection platform, currently awaiting New York State Department of
Health evaluation, that enables multiple tests from a single specimen,
thus offering sharply lower expenses for clinical laboratories
affected by what is currently a highly cost-conscious market.
A highly comprehensive panel of products to identify women’s health
diseases that would make diagnosis simpler and be more patient
friendly also based on the AmpiProbe™ platform.
A planned roll out in the next quarter of Enzo’s laboratory developed
test for the identification of integrated Human papillomavirus.
The Company will conduct a conference call on October 16, 2012 at
8:30 AM ET.The call can be accessed by dialing 1-888-459-5609.
International callers can dial 1-973-321-1024. Please reference PIN
number 39091633. Interested parties may also listen over the Internet at http://phoenix.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=94391&eventID=4846551.
To listen to the live call on the Internet, please go to the web site
at least fifteen minutes early to register, download and install any
necessary audio software. For those who cannot listen to the live
broadcast, a replay will be available approximately two hours after the
end of the live call, through midnight (ET) on October 30, 2012. The
replay of the conference call can be accessed by dialing 1-800-585-8367,
and when prompted, use PIN number 39091633. International callers can
dial 1-404-537-3406, using the same PIN number.
NON-GAAP Financial Measures
To comply with Regulation G promulgated pursuant to the Sarbanes-Oxley
Act, Enzo Biochem attached to this news release and will post to the
Company's investor relations web site (www.enzo.com)
any reconciliation of differences between non-GAAP financial information
that may be required in connection with issuing the Company's quarterly
The Company uses EBITDA, as a measure of performance to demonstrate
earnings exclusive of interest, taxes, depreciation and amortization.
Adjustments to EBITDA are for items of a non-recurring nature and are
reconciled on the table provided. The Company manages its business based
on its operating cash flows. The Company, in its daily management of its
business affairs and analysis of its monthly, quarterly and annual
performance, makes its decisions based on cash flows, not on the
amortization of assets obtained through historical activities. The
Company, in managing its current and future affairs, cannot affect the
amortization of the intangible assets to any material degree, and
therefore uses EBITDA as its primary management guide. Since an outside
investor may base its evaluation of the Company's performance based on
the Company's net loss not its cash flows, there is a limitation to the
EBITDA measurement. EBITDA is not, and should not be considered, an
alternative to net loss, loss from operations, or any other measure for
determining operating performance of liquidity, as determined under
accounting principles generally accepted in the United States (GAAP).
The most directly comparable GAAP reference in the Company's case is the
removal of interest, taxes, depreciation and amortization.
About Enzo Biochem
Enzo Biochem is a pioneer in molecular diagnostics, leading the
convergence of clinical laboratories, life sciences and therapeutics
through the development of unique diagnostic platform technologies that
provide numerous advantages over previous standards. A global company,
Enzo Biochem utilizes cross-functional teams to develop and deploy
products systems and services that meet the ever-changing and rapidly
growing needs of health care both today and into the future.
Underpinning Enzo Biochem’s products and technologies is a broad and
deep intellectual property portfolio, with patent coverage across a
number of key enabling technologies.
Except for historical information, the matters discussed in this news
release may be considered "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements include declarations regarding the intent, belief or current
expectations of the Company and its management, including those related
to cash flow, gross margins, revenues, and expenses are dependent on a
number of factors outside of the control of the company including, inter
alia, the markets for the Company’s products and services, costs of
goods and services, other expenses, government regulations, litigations,
and general business conditions. See Risk Factors in the Company’s Form
10-K for the fiscal year ended July 31, 2012. Investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties that could
materially affect actual results. The Company disclaims any obligations
to update any forward-looking statement as a result of developments
occurring after the date of this press release.
ENZO BIOCHEM, INC.
(in thousands, except per share data)
Three months ended
Fiscal year ended
Selected operations data:
July 31, 2012
July 31, 2012
Clinical laboratory services
Royalty and license fee income
Gross profit %
Loss before income taxes
Benefit (provision) for income taxes (A)
Basic and diluted loss per share
Weighted average shares outstanding - basic and diluted
Reconciliation of GAAP Net Loss to
EBITDA, as adjusted:
Depreciation and amortization
Interest expense (income)
Provision (benefit) for income taxes
Non- cash Impairment charges and incremental severance (C )
EBITDA, as adjusted ( C)
A- All periods reflect effective tax rates below the statutory rate
due to inability to recognize future tax benefits.
B- EBITDA is a non-GAAP measure, as described in the attached press
C- EBITDA, adjusted for non-cash impairment charges relating to
goodwill and intangibles of $24.5 million and incremental one-
time severance costs of $0.3 million.
Selected balance sheet data:
July 31, 2012
July 31, 2011
Cash and cash equivalents and short term investments