GFX Media Sciences

OAKLAND, N.J., Sept. 13 /PRNewswire-FirstCall/ -- Media Sciences International, Inc. (AMEX:GFX), the leading independent manufacturer of color toner cartridges and solid ink sticks for business color printers, today announced its financial results for the year ended June 30, 2006, which included record revenues, earnings and cash flows. The Company will host a conference call Wednesday, September 13, 2006, at 8:45 a.m. ET to discuss its fiscal 2006 annual results, its strategic objectives for the current 2007 fiscal year, and the status of its patent litigation with Xerox. (Logo: http://www.newscom.com/cgi-bin/prnh/20020604/NYTU016LOGO ) Financial highlights for the fiscal 2006 year include: -- Net revenue increase of 18% year over year -- Gross margin improvement of 900 bp over the prior year -- Full year EPS of $0.19 per share basic and $0.18 per share diluted -- 4th Quarter EPS of $0.07 per share basic and $0.06 per share diluted -- Effective tax rate reduction of 500 bp on continuing operations -- EBITDA of $4.0 million, up $2.7 million or 203% over the prior year Michael W. Levin, President and Chairman of Media Sciences International, Inc. commented on the year's success, "We are very pleased with our 2006 results. The execution by our recently expanded, exceptional team of professionals included strong product launches, significant manufacturing efficiencies and the implementation of processes and controls required to scale Media Sciences' business. These efforts translated into significant margin enhancement and strong earnings and cash flow, and set the stage for our continued and accelerated growth and profitability." Revenue Consolidated net sales for the fiscal year ended June 30, 2006 increased approximately $3.3 million, or 18 percent, to $21.3 million from $18.0 million in the prior year. The Company's sales of color toner cartridges increased by approximately 39 percent over the same period in 2005 while sales of solid ink sticks increased approximately 18 percent. Sales of Media Sciences branded products increased by 500 bp to 55 percent of revenues and the Company's international business increased by 200 bp to 18 percent of revenues. Consolidated net sales for the quarter ended June 30, 2006 increased approximately 25 percent to $5.96 million from $4.76 million in the prior year. Overall, net revenue growth in fiscal 2006 is attributed to new product introductions, increased market share for some existing products, and growth in the installed base of color business printers for which Media Sciences manufactures supplies. The trend toward these lower-priced, faster color printers is expected to continue. Gross Margin Consolidated gross profit for the year ended June 30, 2006 increased by $3.3 million or 45 percent to $10.8 million from $7.5 million in the prior year. In 2006, the Company's gross margin increased by 900 bp from 42 percent of net revenues in 2005 to 51 percent in 2006. Media Sciences has benefited from margin expansion due to increased efficiencies in solid ink manufacturing and the mix of product sales. Favorable reductions in costs of goods sold were partially offset by increased prices of certain raw materials and their associated shipping costs. In fiscal 2007, the Company does not expect significant additional yield improvements in solid ink production or further product transitions that would reduce costs. Therefore, any further increases in raw material or inbound shipping costs may increase product costs, unless offset by other manufacturing efficiencies. Income Net income for the year ended June 30, 2006 was $2.13 million or $0.19 per share basic and $0.18 per share diluted, as compared to a net loss of $0.08 million or $(0.01) per share (basic and diluted) for the year ended June 30, 2005. During the quarter ended June 30, 2005, the Company ceased all electronic pre-press system sales and service operations, which represented a majority of the operations of the Company's Cadapult subsidiary. The results of operations for that line of business are classified as a discontinued operation and are reflected in the Company's $0.08 million net loss in 2005. Effective Tax Rate For the years ended June 30, 2006 and 2005, the Company's effective tax rate was 34 percent and 39 percent, respectively. The 500 bp decrease reflects the current year realization of the Company's tax planning efforts and improved tax compliance processes to take advantage of all of the state and federal credits and income exemptions for which the Company is entitled. The Company expects its consolidated effective tax rate to remain at about 35 percent through fiscal 2007. Cash Flow For the fiscal year, cash flows from operating activities were $3.4 million, a $3.24 million increase over the prior year of $0.16 million. The $3.4 million of operating cash flows generated in 2006 resulted from $2.1 million of income from operations and the add-back of non-cash expenses totaling $1.3 million. CEO's Comments Mr. Levin commented on the Company's continued aggressive approach in fiscal 2007. "Media Sciences is continuing to leverage and build on the significant operational, financial, product, and sales achievements of fiscal 2006. To achieve our goal of accelerated revenue growth, our focus is on increasing market penetration and on the strategic expansion of our available market. To these ends, we will continue to expand our product development and sales resources, including personnel. Our plan for execution in fiscal 2007 is quite simple: continue to invest in scaling our business for continued growth and further leverage our core competencies." Conference Call Note Media Sciences International, Inc. will hold a conference call to discuss annual results on Wednesday, September 13, 2006, at 8:45 a.m. Eastern Time. The call will be webcast live by Thomson/CCBN and may be accessed through Media Sciences' web site at http://www.mediasciences.com/. Investors and other interested parties in the United States may access the teleconference by calling 866.202.1971. International callers may dial 617.213.8842. The passcode for the teleconference is 27839855. For more information on Media Sciences or its SEC filings, please visit the investor relations section of the Company's website at http://www.mediasciences.com/. Media Sciences expects to file its fiscal 2006 Form 10-KSB with the SEC on or before September 28th. About Media Sciences International, Inc. (AMEX:GFX): Media Sciences International, Inc. (AMEX:GFX), the leading independent manufacturer of solid ink and color toner cartridges for office color printers, has a strong reputation for being the informed customer's choice. As the premium quality price alternative to the printer manufacturer's brand, Media Sciences' newly manufactured color toner and solid ink products for use in Xerox(R), Tektronix(R), OKI(R), Ricoh(R), Konica-Minolta/Minolta-QMS(R), Epson(R), and Brother(R) office color printers deliver up to and over 30% in savings when compared to the printer manufacturer's brand. Behind every Media Sciences product is The Science of Color(TM)-the company's proprietary process for delivering high quality products at the very best price, including its commitment to exceptional, highly responsive technical support and its longstanding, industry-leading warranty. With the Company's groundbreaking INKlusive(TM) FREE Color Printer Program (http://www.inklusive.com/), printer users buy the supplies, and get the printer for free. For more information on the Company, its products, and its programs, visit http://www.mediasciences.com/, E-mail , or call 201.677.9311. Brand names and trademarks are used for descriptive purposes only and are the properties of their respective owners. Forward Looking Statements Our disclosure and analysis in this report contain forward-looking information, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, about our financial results and estimates, business prospects and products in development that involve substantial risks and uncertainties. You can identify these statements by the fact that they do not relate strictly to historic or current facts. These forward-looking statements use terms such as "believes," "expects," "may", "will," "should," "anticipates," "estimate," "project," "plan," or "forecast" or other words of similar meaning relating to future operating or financial performance or by discussions of strategy that involve risks and uncertainties. From time to time, we also may make oral or written forward-looking statements in other materials we release to the public. These forward-looking statements are based on many assumptions and factors, and are subject to many conditions, including, but not limited to, our continuing ability to obtain additional financing, dependence on contracts with suppliers and major customers, competitive pricing for our products, demand for our products, changing technology, our introduction of new products, industry conditions, anticipated future revenues and results of operations, retention of key officers, management or employees, prospective business ventures or combinations and their potential effects on our business. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects upon our business. We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. We cannot predict whether future developments affecting us will be those anticipated by management, and there are a number of factors that could adversely affect our future operating results or cause our actual results to differ materially from the estimates or expectations reflected in such forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP Financial Measures The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP). Management finds it useful at times to provide adjustments to its GAAP numbers. This news release contains the non- GAAP financial measure of EBITDA, defined as Earnings Before Interest, Taxes, Depreciation and Amortization, which are adjusted from results based on GAAP to exclude certain expenses. These non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. They are presented because the Company's management uses this information when evaluating current results of operations and cash flow, and believes that this information provides the users of the financial statements with an additional and useful comparison of the Company's current results of operations and cash flows with past and future periods. This adjusted financial information should not be construed as an alternative to our reported results determined in accordance with GAAP. Further, our definition of this adjusted financial information may differ from similarly titled measures used by other companies. Reconciliation of Non-GAAP Measures Year Ended Year Ended 6/30/2006 6/30/2005 Reported Income from Operations $3,269,114 $ 805,522 Add back: Depreciation & Amortization $ 747,048 $ 519,856 EBITDA $4,016,162 $1,325,378 MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Operations Year Ended June 30, 2006 2005 NET REVENUES $21,273,362 $17,995,849 COST OF GOODS SOLD: Cost of goods sold, excluding depreciation and amortization, product warranty, and shipping and freight 8,535,397 8,924,730 Depreciation and amortization 524,935 238,137 Product warranty 873,004 1,115,914 Shipping and freight 519,117 243,730 Total cost of goods sold 10,452,453 10,522,511 GROSS PROFIT 10,820,909 7,473,338 OTHER COSTS AND EXPENSES: Research and development 1,090,243 629,241 Selling, general and administrative, excluding depreciation, amortization, loss from sublease, moving expenses and impact of variable plan accounting 6,239,439 5,012,432 Depreciation and amortization 222,113 281,719 Loss from sublease and moving expenses - 545,128 Impact of variable plan accounting - 199,296 Total other costs and expenses 7,551,795 6,667,816 INCOME FROM OPERATIONS 3,269,114 805,522 Interest expense, net 55,436 179,385 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 3,213,678 626,137 Provision for income taxes 1,086,077 245,696 INCOME FROM CONTINUING OPERATIONS 2,127,601 380,441 LOSS FROM DISCONTINUED OPERATIONS - (789,193) Benefit for income taxes - (325,414) LOSS FROM DISCONTINUED OPERATIONS - (463,779) NET INCOME (LOSS) $ 2,127,601 $ (83,338) BASIC EARNINGS (LOSS) PER SHARE Income from continuing operations $ 0.19 $ 0.04 Income (loss) from discontinued operations $ - $ (0.05) Net Income (loss) $ 0.19 $ (0.01) DILUTED EARNINGS (LOSS) PER SHARE Income from continuing operations $ 0.18 $ 0.04 Income (loss) from discontinued operations $ - $ (0.05) Net Income (loss) $ 0.18 $ (0.01) WEIGHTED AVERAGE SHARES USED TO COMPUTE NET EARNINGS (LOSS) PER SHARE Basic 11,016,726 10,259,423 Diluted 11,593,114 10,259,423 MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Balance Sheets ASSETS As of June 30, 2006 2005 CURRENT ASSETS: Cash and cash equivalents $ 1,485,399 $ 611,016 Accounts receivable, net 2,387,991 2,175,512 Inventories, net 4,454,997 3,196,323 Deferred tax assets 271,970 959,910 Prepaid expenses and other current assets 371,684 308,822 Total Current Assets 8,972,041 7,251,583 PROPERTY AND EQUIPMENT, NET 2,580,472 2,058,251 OTHER ASSETS: Goodwill, net 3,584,231 3,584,231 Other assets 78,627 63,911 3,662,858 3,648,142 TOTAL ASSETS $15,215,371 $12,957,976 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Bank line of credit $ - $ 1,620,233 Current maturities of long-term debt 150,000 100,000 Accounts payable 910,853 1,254,921 Accrued compensation and benefits 690,153 128,413 Accrued expenses and other current liabilities 667,491 14,019 Income taxes payable 475,072 295 Accrued product warranty 230,437 291,733 Deferred revenue 740,632 526,853 Total Current Liabilities 3,864,638 3,936,467 OTHER LIABILITIES: Bank term loan, less current maturities 464,450 375,000 Deferred rent liability 299,907 341,988 Deferred revenue, less current portion 396,620 280,418 Deferred tax liabilities 165,330 404,099 Total Other Liabilities 1,326,307 1,401,505 TOTAL LIABILITIES 5,190,945 5,337,972 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Series A Convertible Preferred Stock, $.001 par value Authorized 1,000,000 shares; none issued - - Common Stock, $.001 par value Authorized 20,000,000 shares; issued 11,131,363 shares in 2006 and 10,953,606 shares in 2005 11,131 10,954 Additional paid-in capital 10,210,132 9,753,405 Cost of common stock in treasury, 54,577 shares in 2005 - (112,913) Deferred stock based compensation (292,996) - Retained earnings (accumulated deficit) 96,159 (2,031,442) Total Shareholders' Equity 10,024,426 7,620,004 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $15,215,371 $12,957,976 MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended June 30, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations $ 2,127,601 $ 380,441 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation and amortization 747,048 519,856 Deferred income taxes 449,171 (120,891) Provision for bad debts 35,159 9,323 Impact of variable plan accounting - 212,455 Loss on write-off of leasehold improvements - 180,364 Cash provided by discontinued operations - 304,152 Non-cash and stock-based compensation expense 78,238 - Changes in operating assets and liabilities : Accounts receivable (247,638) (558,548) Cash received from landlord as lease incentive - 200,000 Inventories (1,258,674) (922,235) Prepaid expenses and other current assets (62,862) (28,292) Other assets (14,716) (15,811) Insurance claim receivable - 500,000 Accounts payable (344,068) (1,256,196) Accrued compensation and benefits 561,740 (49,033) Accrued expenses and other current liabilities 592,176 (105,974) Income taxes payable 474,777 (10,338) Deferred revenue 329,981 777,513 Deferred rent liability (42,081) 141,988 Net cash provided by operating activities 3,425,852 158,774 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,326,203) (1,692,990) Sale of Cadapult service contracts - 1 Net cash used in investing activities (1,326,203) (1,692,989) CASH FLOWS FROM FINANCING ACTIVITIES: Bank line of credit, net (1,620,233) (168,821) Bank term loan, net 139,450 75,000 Payments of other short-term debt - (39,081) Proceeds of issuance of common stock, net 255,517 1,612,017 Net cash provided by (used in) financing activities (1,225,266) 1,479,115 NET INCREASE (DECREASE) IN CASH 874,383 (55,100) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 611,016 666,116 CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,485,399 $ 611,016 SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 54,811 $ 179,385 Income taxes paid $ 58,368 $ 155,598 NON-CASH INVESTING AND FINANCING TRANSACTIONS: Cashless exercise of stock options $ - $ 92,081 http://www.newscom.com/cgi-bin/prnh/20020604/NYTU016LOGODATASOURCE: Media Sciences International, Inc. CONTACT: Investor Contact - Kevan D. Bloomgren, Chief Financial Officer, Media Sciences, , +1-201-677-9311, ext. 213; Media Contact - Barb Short, Marketing Communications Manager, Media, , +1-201-677-9311, ext. 216 Web site: http://www.mediasciences.com/

Copyright