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LINCOLN, Neb., March 7 /PRNewswire/ -- Isco, Inc. (Nasdaq: ISKO) reported that earnings for the fiscal second quarter, which ended January 26, 1996, were $620,000 or $.12 per share on sales of $9,940,000. This compares with earnings of $987,000 or $.18 per share on sales of $10,431,000 for the same period a year ago.

For the fiscal six-month period just ended, earnings were $1,098,000 or $.21 per share on sales of $19,692,000, compared with earnings of $2,136,000 or $.40 per share on sales of $20,695,000 for the same period a year ago. Cash flows from operations for the six-month period were $2,677,000 compared with $648,000 for the same period last year. The improvement in cash flows was primarily the result of two partially offsetting factors. For the periods being reviewed, there was a $3.1 million positive effect on cash flows from a decrease in net operating assets and liabilities, partially offset by the lower earnings of $1.0 million.

Operating results for each division in the recent first quarter, the previous quarter, and the first quarter a year ago were as follows:
 2Q F1996 1Q F1996 2Q F1995

Sales (000s)
 Environmental $6,270 $7,011 $6,838
 Separation Instruments 3,670 2,741 3,593

Operating Income (000s)
 Environmental $287 $913 $1,062
 Separation Instruments 150 (609) (22)

Orders in the second quarter, while 4.5% below the same quarter a year ago, were 3.9% ahead of the first quarter. Environmental Division orders were 4.8% ahead of the year ago quarter and slightly ahead of the first quarter of this year. Second quarter orders in the Separation Instruments Division were 19.7% below the comparable quarter of last year, and they were 11.9% ahead of the previous quarter.

Performance in the second quarter and the first half of the fiscal year was in line with expectations," said Robert Allington, chairman and CEO of Isco. "For the quarter, net income was down 37.2% on a sales decline of 4.7%. For the year-to-date, net income was down 48.6% on a sales decline of 4.8%. However, from the first quarter of the year to the second quarter net income increased 29.6% on a sales increase of 1.9%."

During the first half of fiscal 1996, sales declined $1.0 million to $19.7 million, or 4.8% from the same period last year. Separation Instruments Division sales of $6.4 million were down 5.3% and Environmental Division sales of $13.3 million were down 4.6%. The six months sales decline of $1.0 million includes a domestic decline of $1.6 million offset by an international increase of $0.6 million. International sales continue to grow and were 26.8% of total sales on a year to date basis. The domestic sales decline occurred in the Environmental Division and Allington explained, "Customer buying behaviors continue to reflect the regulatory and funding uncertainty in the environmental market."

Reviewing product line performance Allington said, "Sales of chromatography products were slightly ahead of last year, while sales of supercritical fluid extraction systems and products and syringe pumps were down. In the Environmental Division sales of samplers and parameter products were about the same as last year, while flow meter sales were down.

"I remain concerned with the company's lack of operating profitability," noted Allington. "Our operating margin for the second quarter was 4.4% compared with 10.0% in the year ago quarter. For the six months the margin was 3.8% compared with 11.9% for the same period a year ago. The current performance includes a weak 9.0% margin in the Environmental Division and an operating loss in the Separation Instruments Division.

"The primary cause for the lower operating profitability is the decline in the six month gross margin from 61.8% to 55.5%," said Allington. Factors causing the decline include slightly higher domestic and international discounting, a shift in the proportion of international versus domestic sales, changes in the product mix, and increases in manufacturing overhead costs. Operating expenses of $10.2 million for the six months were down slightly from last year.

"The divisional order rates in the early part of the third quarter suggest flat to slightly improved sales in the second half," said Allington. Looking forward he commented, "Based on our year-to-date performance and the outlook for the remainder of the year, I anticipate that fiscal 1996 sales will be slightly below last year and that earnings will be below a year ago by 25% to 30%."

Isco manufactures water pollution monitoring equipment, and is the leading producer of wastewater samplers and open channel flow measuring devices. Isco also manufactures chemical separation instruments for industrial, environmental, and research use.
 Three months ended Six months ended
 Jan 26 Jan 27 Jan 26 Jan 27
 1996 1995 1996 1995

(Amounts in thousands, except per share data)
 Net sales $9,940 $10,431 $19,692 $20,695
 Cost of sales 4,467 4,014 8,774 7,907
 5,478 6,417 10,918 12,788


Selling, general, and
 administrative 3,856 4,208 7,880 8,036

Research and
 engineering 1,180 1,169 2,297 2,294
 5,036 5,377 10,177 10,330
 Operating income 437 1,040 741 2,458
 Non-Operating income 368 366 732 702

Earnings before income
 taxes 805 1,406 1,473 3,160
 Income taxes 185 419 375 1,024
 Net earnings $620 $987 $1,098 $2,136
 Net earnings per share $.12 $.18 $.21 $.40

Weighted average number
 of shares outstanding 5,352 5,378 5,352 5,378
 Cash dividend per share $.05 $.05 $.10 $.10
 January 26 July 28
 (Amounts in thousands) 1996 1995

Current assets:
 Cash and cash equivalents $6,436 $4,063
 Short-term investments 3,510 5,883
 Accounts receivable 6,601 6,949
 Inventories 6,631 6,812
 Other current assets 1,579 1,585
 Total current assets 24,757 25,292
 Property plant, and equipment (net) 7,926 8,337
 Long-term investments 12,421 10,487
 Other assets 1,670 1,650
 Total assets $46,774 $45,766

Current liabilities
 Accounts payable $887 $547
 Other current liabilities 2,165 2,216
 Total current liabilities 3,052 2,763
 Deferred income taxes 965 1,001
 Shareholders' equity 42,757 42,002

Total liabilities and shareholders'
 equity $46,774 $45,766
 -0- 3/7/96

/CONTACT: John Korab, Vice President of Isco, 402-474-2233; or Wayne Brown, Senior Account Executive of Carl Thompson Associates, Inc., 303-494-5472/


CO: Isco, Inc. ST: Nebraska IN: SU: ERN

DM-MO -- LATH045 -- 1295 03/07/96 16:20 EST
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Date:Mar 7, 1996

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