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ZILA, INC., POSTS RECORD FOURTH QUARTER SALES; FY 1993 STARTS STRONG

 ZILA, INC., POSTS RECORD FOURTH QUARTER SALES;
 FY 1993 STARTS STRONG
 PHOENIX, Ariz., Oct. 25 /PRNewswire/ -- Zila, Inc. (NASDAQ: ZILA), Phoenix-based marketer of oral health and skin care products, today reported record sales for the fourth quarter of fiscal year 1992, which ended July 31.
 As reported by retail analyst Towne Oller, Zila's established products gained significant market share in FY 1992. Zilactin(R), the patented bioadhesive medication for canker sores, increased its market share by 17 percent to 4.6 percent of national market. Newer Zilactol(tm), for cold sores and fever blisters, jumped 20 percent in market share, as distribution rose from 4 percent of national drugstore outlets to 18 percent In July 1992. Zilactol is the fastest growing product in the cold sore treatment category.
 Zila launched two new products late in FY 1992 -- PeriGel(R) oral care system (a dentifrice combining baking soda and hydrogen peroxide gel) and DermaFlex(tm) topical anesthetic gel (a superior first aid alternative to bandage and gauze). At the end of the fourth quarter, after one month of distribution, retail movement of both products was well ahead of projection.
 Net sales in the fourth quarter of FY 1992 were $1,036,013, 13 percent better than FY 1991 fourth quarter sales of $919,193, and a 78 percent improvement over the third quarter of FY 1992. Profit from operations for the fourth quarter of FY 1992, before increases in reserves and before absorbing expenses related to development and introduction of new products (discussed below), was $18,038.
 In spite of outstanding results in the first quarter and resumption of solid growth in the fourth quarter, full year sales and earnings were depressed by two major factors.
 In the FY 1992 second and third quarters, Zila discovered and decisively dealt with several instances of product diversion, wherein certain wholesale buyers were abusing the company's first-time buyer discounts and reselling product to Zila retail customers below normal costs. By uncovering the deception and rejecting several hundred thousand dollars worth of orders from diverters, Zila terminated the abuse and won the outspoken support and respect of its regular customers.
 The second detraction from profit was Zila's expensing in the fiscal year of more than $269,314 of legal fees (including those incurred in the previously announced declaratory judgment action against Block Drug), product development and other costs primarily associated with the introduction of PeriGel, DermaFlex and Orascan(R) in the U.S. and abroad. Had the company not absorbed these expenses during the fiscal year, it would have shown a profit.
 "Our decisive action on diversion in FY 1992 cost us short-term profits, but it cemented our relationship with important customers," said Hines. "Our decision to expense in FY 1992 all the extraordinary charges incurred so far in support of our newest products and our breakthrough oral cancer detection technology erased full-year profit, but it positioned Zila for unprecedented growth in the new fiscal year."
 Net sales for fiscal year 1992 were $3,518,610, resulting in a loss, for the reasons explained above, of $239,345. This compares with FY 1991 net sales of $3,984,460 and income (before the buy-out charge for the Daleco Partnership Obligation) of $316,411.
 "Even with reduced revenue and profits in the FY 1992 second and third quarters, and our unprecedented investment in new products, Zila's financial condition has never been stronger," said Hines. "Our balance sheet is rock solid: assets up 10 percent to $3,331,133, shareholder equity up 15 percent to $2,554,289, working capital up 11 percent to $1,831,567, and our current ratio a robust 6.4:1, up from 5.6:1 a year ago. Although cash was down slightly to $927,449, receivables, inventories and prepaid expenses were up, resulting in an 8 percent increase in current assets."
 "In fiscal year 1992," notes Hines, "Zila made a substantial investment in its future. The growth trend established in the fourth quarter is continuing in the FY 1993 first quarter (ending Oct. 31)."
 Zila has made major gains in its effort to market Orascan, the first oral cancer screening system, around the world. The company's Washington legal counsel reports significant progress toward receipt of government approval to market the product in the U.S. And on Oct. 19, Zila announced plans to begin marketing Orascan in Canada in the first part of 1993. A letter of intent has been signed with a Canadian firm for production and distribution.
 -0- 10/25/92
 /CONTACT: Joseph Hines of Zila, 602-266-6700/ CO: Zila, Inc. ST: Arizona IN: HEA SU: ERN


JP -- NYSU002 -- 4488 10/25/92 09:27 EST
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Publication:PR Newswire
Date:Oct 25, 1992
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