E-Z-EM is a leading manufacturer of contrast agents for gastrointestinal radiology. The Company recently introduced VoLumen® the next generation low density barium sulfate suspension for use as an oral contrast in Multidetector CT (MDCT) and Positron Emission Tomography (PET/CT) studies. The Company also offers Empower®?the only family of CT injectors on the market with patented EDA™ technology that can help detect contrast extravasation?and offers a complete product set for the virtual colonoscopy practitioner. This product line consists of virtual colonoscopy hardware, software, nutritional prep kits and bowel cleaners, tagging agents and a carbon dioxide colon insufflation system. The Company is also the exclusive global manufacturer and marketer of RSDL for first-responder organizations and military services in many countries. RSDL is a liquid skin decontaminant that breaks down chemical agents such as Sarin or VX in seconds, leaving a non-toxic liquid that can be washed away with water.

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Net sales for the third quarter ended March 4, 2006 were $32.3 million, up 5% over net sales of $30.8 million for the third quarter ended February 26, 2005. Growth in the Empower® injectors systems and increased contract manufacturing contributed to the increased sales, but was offset by lower sales of CT oral contrast and fluoroscopy products, which was due to the consolidation of the two largest U.S. distributors of radiology supplies during the third quarter of fiscal 2006. Gross profit for the third quarter of 2006 was $12.8 million, a slight increase from $12.7 million recorded for the year-ago quarter, while gross profit as a percentage of sales was 40%, compared with 41% reported in the third quarter of 2005. Gross profit during the third quarter of fiscal 2006 was adversely affected by increased raw material costs, particularly barium, and a stronger Canadian dollar. 

Operating expenses were $10.7 million, compared with $11.0 million for the prior-year quarter. Increased selling and administrative costs were more than offset by the $1.2 million gain on the sale of the Company’s Westbury, N.Y. manufacturing facility. The current quarter included $0.2 million in restructuring charges related to the planned closing of the Company’s Japanese subsidiary, and last year’s quarter included plant closing and operational restructuring costs of $0.6 million associated with the company’s Manufacturing, Streamlining and Restructuring program. Operating profit was $2.1 million in the third quarter of fiscal 2006, up 22% over $1.7 million in the comparable prior-year quarter. 

Other income for the fiscal 2006 third quarter was $0.3 million, compared with other income during the same period last year of $1.5 million, which included $1.0 million in gains on the sale of securities as well as $0.5 million in foreign currency exchange gains. 

For the fiscal 2006 third quarter, the Company reported a tax benefit of $2.0 million against earnings from continuing operations before income taxes of $2.4 million. This was due primarily to a tax benefit of $2.3 million associated with the closing of the Company’s Japanese subsidiary, and the reversal of a valuation allowance of $0.5 million relating to a previously impaired, non-core equity security. For the third quarter of fiscal 2005, the Company’s effective tax rate of 10% differed from the Federal statutory rate of 34%, due primarily to the reversal of a valuation allowance relating to a previously impaired, non-core equity security sold during the quarter and the closing of the Company’s Puerto Rico subsidiary in 2004. 

Net earnings in the 2006 third quarter were $4.3 million, or $0.39 per diluted share, compared with net earnings of $2.9 million, or $0.27 per diluted share, for the prior-year quarter. 

For the nine months (40 weeks) ended March 4, 2006, net sales were $101.3 million, up 25% compared with net sales of $81.1 million for the nine months (39 weeks) ended February 26, 2005. Gross profit increased 27% to $44.0 million from $34.6 million in the prior-year period, and, as a percentage of sales was 43.4% compared with 42.7% recorded for the prior-year period. Operating profit increased over 250% to $8.6 million, compared with $2.4 million reported last year. Earnings from continuing operations for the first nine months of fiscal 2006 were $8.4 million, or $0.76 per diluted share, up sharply compared with $4.4 million, or $0.40 per diluted share, in the same period last year. 

E-Z-EM had cash, cash equivalents and short-term marketable securities as of March 4, 2006 of $31.7 million, compared with $28.6 million as of May 28, 2005. Working capital was $74.1 million as of March 4, 2006, compared with $59.6 million as of the previous year-end.