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Destron Fearing Corp. Reports Loss For 4th Quarter, Year; Company Expects Profit For 1997 Fiscal Year

SOUTH ST. PAUL, Minn., Nov. 27 /PRNewswire/ -- Destron Fearing Corporation (Nasdaq: DFCO) today reported net revenue of $1,981,000 for the fourth quarter of its fiscal year ended Sept. 30, 1996, down from $4,475,000 in the fourth quarter of 1995. After a one-time write-off of $1.2 million related to the upgrading and accelerated amortization of microchip readers, the company reported a net loss of $2,145,000, equal to 18 cents per share. In the fourth quarter last year, the company earned $409,000, equal to 4 cents per share.

For the year, the company reported net revenue of $10,830,000, down from $16,234,000 in 1995. The net loss for the year was $3,855,000, equal to 33 cents per share, down from net income of $661,000, or 6 cents per share. In addition to the fourth-quarter write-off, results for the year included $1.2 million in legal costs, primarily related to a successful patent enforcement action undertaken by the company.

"We are disappointed with the loss for 1996, but we believe it should not overshadow the very real strategic accomplishments of the year," Randolph K. Geissler, president and chief executive officer, said. "We have positioned ourselves to be the dominant company in animal identification worldwide, and we look for exciting growth, particularly in overseas markets, in the coming year.

"We expect to restore Destron Fearing to profitability for the fiscal year 1997," Geissler continued. "We have pioneered the development of animal ID markets and aligned ourselves with strong marketing partners. We believe that 1997 will be the year these efforts are rewarded. Overseas markets, particularly, are growing rapidly, driven by the need for consumers to comply with government-mandated programs. There are 37 million dogs and 30 million cats in Europe, for example, and most European countries require permanent identification.

In France, where identification of 13 million pets is mandatory, legislation to add microchips to the identification scheme is expected in January. Our European marketing partner, Rhone Merieux, is Europe's largest veterinary marketer. Their belief that demand will grow is underscored by the fact that they have already placed an order for 350,000 integrated circuits for shipment in February and March of 1997 in order to insure a place in our production runs.

"The Destron microchip was the first to meet the new ISO standards in Europe, and also the first to be approved in Japan. We have now made our first shipments to Japan, where Dainippon Pharmaceutical is introducing our microchips this week. Dainippon will target its marketing efforts at converting to the use of microchips the approximately 4 million dogs whose mandatory registrations come up for renewal annually.

"Permanent identification and tracking of food animals has assumed enormous importance in Europe with the widespread fear of meat contaminated by BSE, or 'mad cow disease.' The European Commission has taken the position that all farm animals should be electronically identified by the year 2000 and plans to begin a million-animal trial in 1997. Europe has 107 million cattle, 168 million hogs, and 130 million sheep. We are involved in a pilot program in the private sector, and we expect that market to expand in 1997. After more than two years of effort with the FDA and the USDA, we finally have implant approvals for herd animals in the U.S., and we have begun working with large cattle and hog producers to develop appropriate systems for their use. Also, the introduction of our new universal reader is expected complete the HomeAgain(R) system by giving shelters the kind of scanner they have been waiting for and raising the confidence of the 6,000 HomeAgain veterinary clinics in recommending microchip implants.

"We believe all of these developments position us strongly for 1997. Our fisheries business -- where also we introduced a new reader employing new technology -- continues to be very strong as does the visual identification business, where our Fearing Division sold 30 million visual ID tags in 1996."

Destron Fearing Corporation, based in South St. Paul, Minn., manufactures a broad line of electronic and visual identification devices for companion animals, livestock, laboratory animals, fish and wildlife.

 (in thousands, except per share amounts)
 Quarter ended Fiscal year ended
 Sept. 30, Sept. 30,
 1996 1995 1996 1995
 Net revenue $1,981 $4,475 $10,830 $16,234

Costs and expenses:
 Cost of sales 2,286 2,830 8,534 10,489
 Selling, gen. and admin. 1,531 872 4,972 3,727
 Research and development 272 280 955 1,038
 Interest expense and other 37 50 224 285
 Total costs and expenses 4,126 4,032 14,685 15,539
 Income (loss) from operations (2,145) 443 (3,855) 695
 Provision for income taxes -- 34 -- 34
 Net income (loss) $(2,145) $ 409 ($3,855) $ 661

Net income (loss) per
 common share $ (.18) $ .04 $(.33) $ .06

Weighted average number of
 common shares outstanding 11,641 10,950 11,520 10,944

SOURCE Destron Fearing Corporation
 -0- 11/27/96

/CONTACT: Curt Swenson of Swenson Falker Associates, Minneapolis, 612-371-0000 or Tom Ahmann of Destron Fearing, 612-455-1621/


CO: Destron Fearing Corporation ST: Minnesota IN: SU: ERN

CC-MR -- MNW004 -- 4550 11/27/96 07:50 EST
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Date:Nov 27, 1996
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