UNITED STATES SECURITIES
AND EXCHANGE COMMISSION Washington,
D.C. 20549 FORM 10-Q |X| QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934 For the quarterly
period ended November 27, 2004 OR |_|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition
period from _________ to _________ Commission
file number 1-11479 E-Z-EM,
      Inc.(Exact
      name of registrant as specified in its charter)Delaware
    
    11-1999504(State
      or other jurisdiction of 
      incorporation or organization)
    
    (I.R.S. Employer
      
      Identification No.)1111 Marcus
      Avenue, Lake Success, New York
    
    11042(Address of
      principal executive offices)
    
    (Zip Code)(516)
      333-8230Registrants
      telephone number, including area code  Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes    |X|     No
|_| Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes    |_|     No
|X| As of January 7, 2005, there were
10,772,286 shares of the issuers common stock outstanding.    E-Z-EM, Inc.
and Subsidiaries


INDEX

Part
      I: Financial Information
    PageItem
      l. Financial StatementsConsolidated
      Balance Sheets - November 27, 2004 andMay
      29, 2004
    3
      - 4Consolidated
      Statements of Earnings - Thirteen and twenty-sixweeks
      ended November 27, 2004 and November 29, 2003
    5Consolidated
      Statement of Stockholders Equity andComprehensive
      Income - Twenty-six weeks endedNovember
      27, 2004
    6Consolidated
      Statements of Cash Flows - Twenty-six weeksended
      November 27, 2004 and November 29, 2003
    7
      - 8Notes
      to Consolidated Financial Statements
    9
      - 22Item
      2. Managements Discussion and Analysis of FinancialCondition
      and Results of Operations
    23
      - 33Item
      3. Quantitative and Qualitative Disclosures AboutMarket
      Risk
    33
      - 34Item
      4. Controls and Procedures
    34Part
      II: Other InformationItem
      1. Legal Proceedings
    35Item
      2. Unregistered Sales of Equity Securitiesand
      Use of Proceeds
    35Item
      3. Defaults Upon Senior Securities
    35Item
      4. Submission of Matters to a Vote of Security Holders
    35
      - 36Item
      5. Other Information
    36Item
      6. Exhibits
    36-2-
E-Z-EM, Inc. and
Subsidiaries





CONSOLIDATED
BALANCE SHEETS(in thousands)



ASSETS
    
    November
      27,
      2004
    
    May 29,
      2004(unaudited)
    
    (audited)CURRENT
      ASSETSCash
      and cash equivalents
    
    $
    7,824
    
    $
    12,334Debt
      and equity securities, at fair value
    
    
    16,233
    
    
    12,130Accounts
      receivable, principallytrade,
      net
    
    
    17,251
    
    
    16,673Inventories
    
    
    23,572
    
    
    18,901Other
      current assets
    
    
    5,307
    
    
    5,792Current
      assets of discontinued operation
    
    
    
    
    
    40,290Total
      current assets
    
    
    70,187
    
    
    106,120PROPERTY,
      PLANT AND EQUIPMENT - AT COST,less
      accumulated depreciation andamortization
    
    
    17,552
    
    
    15,415INTANGIBLE
      ASSETS, less accumulatedamortization
    
    
    67
    
    
    133DEBT
      AND EQUITY SECURITIES, at fair value
    
    
    2,805
    
    
    3,107INVESTMENTS
      AT COST
    
    
    1,000
    
    
    1,000OTHER
      ASSETS
    
    
    7,626
    
    
    7,409NONCURRENT
      ASSETS OF DISCONTINUED OPERATION
    
    
    
    
    
    9,352$
    99,237
    
    $
    142,536The accompanying notes are an
integral part of these statements.


-3-
E-Z-EM, Inc. and
Subsidiaries


CONSOLIDATED BALANCE
SHEETS(in thousands, except share and per share data)



LIABILITIES
      AND STOCKHOLDERS EQUITY
    
    November
      27,
      2004
    
    May 29,
      2004(unaudited)
    
    (audited)CURRENT
      LIABILITIESNotes
      payable
    
    $
    468
    
    $
    440Current
      maturities of long-term debt
    
    
    115
    
    
    149Accounts
      payable
    
    
    3,951
    
    
    4,415Accrued
      liabilities
    
    
    6,505
    
    
    6,557Accrued
      income taxes
    
    
    205
    
    
    179Current
      liabilities of discontinuedoperation
    
    
    
    
    
    5,744Total
      current liabilities
    
    
    11,244
    
    
    17,484LONG-TERM
      DEBT, less current maturities
    
    
    135
    
    
    178OTHER
      NONCURRENT LIABILITIES
    
    
    3,678
    
    
    3,488NONCURRENT
      LIABILITIES AND MINORITY INTERESTOF
      DISCONTINUED OPERATION
    
    
    
    
    
    9,611Total
      liabilities
    
    
    15,057
    
    
    30,761COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS
      EQUITYPreferred
      stock, par value $.10 pershare
      - authorized, 1,000,000 shares;issued,
      noneCommon
      stock, par value $.10 per share -authorized,
      16,000,000 shares; issuedand
      outstanding 10,771,939 shares atNovember
      27, 2004 and 10,698,216 sharesat
      May 29, 2004 (excluding 86,288 and83,062
      shares held in treasury at November27,
      2004 and May 29, 2004, respectively)
    
    
    1,077
    
    
    1,070Additional
      paid-in capital
    
    
    27,222
    
    
    38,445Retained
      earnings
    
    
    50,243
    
    
    70,638Accumulated
      other comprehensive income
    
    
    5,638
    
    
    1,622Total
      stockholders equity
    
    
    84,180
    
    
    111,775$
    99,237
    
    $
    142,536The accompanying notes are an
integral part of these statements.


-4-
E-Z-EM, Inc. and
Subsidiaries




CONSOLIDATED
STATEMENTS OF EARNINGS(unaudited)(in thousands, except per share data)



Thirteen
      weeks ended
    
    Twenty-six
      weeks endedNovember
      27,
      2004
    
    November
      29,
      2003
    
    November
      27,
      2004
    
    November
      29,
      2003Net
      sales
    $
    26,222
    
    $
    25,287
    
    $
    50,234
    
    $
    47,929Cost
      of goods sold
    
    14,360
    
    
    14,812
    
    
    28,356
    
    
    29,048Gross
      profit
    
    11,862
    
    
    10,475
    
    
    21,878
    
    
    18,881Operating
      expensesSelling
      and administrative
    
    8,788
    
    
    7,553
    
    
    17,269
    
    
    15,270Plant
      closing and operationalrestructuring
      costs
    
    824
    
    
    628
    
    
    1,425
    
    
    1,200Research
      and development
    
    1,469
    
    
    1,129
    
    
    2,498
    
    
    2,182Total
      operating expenses
    
    11,081
    
    
    9,310
    
    
    21,192
    
    
    18,652Operating
      profit
    
    781
    
    
    1,165
    
    
    686
    
    
    229Other
      income (expense)Interest
      income
    
    80
    
    
    243
    
    
    147
    
    
    510Interest
      expense
    
    (81
    )
    
    (78
    )
    
    (165
    )
    
    (153
    )Other,
      net
    
    324
    
    
    521
    
    
    1,026
    
    
    550Earnings
      from continuingoperations
      before incometaxes
    
    1,104
    
    
    1,851
    
    
    1,694
    
    
    1,136Income
      tax provision
    
    281
    
    
    670
    
    
    240
    
    
    589Earnings
      from continuingoperations
    
    823
    
    
    1,181
    
    
    1,454
    
    
    547Earnings
      from discontinuedoperation,
      net of income taxprovision
    
    608
    
    
    588
    
    
    1,228
    
    
    923NET
      EARNINGS
    $
    1,431
    
    $
    1,769
    
    $
    2,682
    
    $
    1,470Basic
      earnings per common shareFrom
      continuing operations
    $
    0.08
    
    $
    0.11
    
    $
    0.14
    
    $
    0.05From
      discontinued operation,net
      of income tax provision
    
    0.05
    
    
    0.06
    
    
    0.11
    
    
    0.09Net
      earnings
    $
    0.13
    
    $
    0.17
    
    $
    0.25
    
    $
    0.14Diluted
      earnings per common shareFrom
      continuing operations
    $
    0.08
    
    $
    0.11
    
    $
    0.14
    
    $
    0.05From
      discontinued operation,net
      of income tax provision
    
    0.05
    
    
    0.06
    
    
    0.11
    
    
    0.09Net
      earnings
    $
    0.13
    
    $
    0.17
    
    $
    0.25
    
    $
    0.14Weighted
      average common sharesBasic
    
    10,749
    
    
    10,272
    
    
    10,741
    
    
    10,217Diluted
    
    10,936
    
    
    10,545
    
    
    10,934
    
    
    10,475The accompanying notes are an
integral part of these statements.


-5-
E-Z-EM, Inc. and
Subsidiaries




CONSOLIDATED STATEMENT
OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME


Twenty-six weeks ended
November 27, 2004(unaudited)(in thousands, except share data)


Common
      stock
    
    Additional
      paid-in 
      capital
    
    Retained
      earnings
    
    Accumulated 
      other 
      comprehensive
      income
    
    Total
    
    Compre-
      hensive
      incomeShares
    
    AmountBalance
      at May 29, 2004
    
    10,698,216
    
    $
    1,070
    
    $
    38,445
    
    $
    70,638
    
    $
    1,622
    
    $
    111,775Exercise
      of stock options,net
      of 3,226 shares tenderedto
      satisfy withholding taxes
    
    65,303
    
    
    6
    
    
    219
    
    
    
    
    
    
    
    
    225Income
      tax benefits onstock
      options exercised
    
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    
    286Compensation
      related tostock
      option plans, net ofincome
      tax benefit
    
    
    
    
    
    
    
    408
    
    
    
    
    
    
    
    
    408Issuance
      of stock
    
    8,420
    
    
    1
    
    
    103
    
    
    
    
    
    
    
    
    104Proceeds
      from subsidiarysinitial
      public offering, netof
      financing costs andminority
      interest
    
    
    
    
    
    
    
    1,442
    
    
    
    
    
    
    
    
    1,442Net
      earnings
    
    
    
    
    
    
    
    
    
    
    2,682
    
    
    
    
    
    2,682
    
    $
    2,682Cash
      dividend ($.30 percommon
      share)
    
    
    
    
    
    
    
    
    
    
    (3,220
    )
    
    
    
    
    (3,220
    )Net
      book value of discontinuedoperation
      at date of spin-off
    
    
    
    
    
    
    
    (13,681
    )
    
    (19,857
    )
    
    173
    
    
    (33,365
    )Unrealized
      holding gain on debtand
      equity securitiesArising
      during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,151
    
    
    1,151
    
    
    1,151Reclassification
      adjustmentfor
      gains included innet
      earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,406
    )
    
    (1,406
    )
    
    (1,406
    )Decrease
      in fair market valueon
      interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55
    )
    
    (55
    )
    
    (55
    )Foreign
      currency translationadjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,153
    
    
    4,153
    
    
    4,153Comprehensive
      income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,525Balance
      at November 27, 2004
    
    10,771,939
    
    $
    1,077
    
    $
    27,222
    
    $
    50,243
    
    $
    5,638
    
    $
    84,180The accompanying notes are an
integral part of this statement.


-6-
E-Z-EM, Inc. and
Subsidiaries




CONSOLIDATED
STATEMENTS OF CASH FLOWS(unaudited)(in thousands)


Twenty-six
      weeks endedNovember
      27,
      2004
    
    November
      29,
      2003Cash flows
      from operating activities:Net
      earnings
    $
    2,682
    
    $
    1,470Adjustments
      to reconcile net earnings to netcash
      provided by (used in) operatingactivitiesEarnings
      from discontinued operation,net
      of tax
    
    (1,228
    )
    
    (923
    )Depreciation
      and amortization
    
    1,515
    
    
    1,450Gain
      on sale of investments
    
    (1,406
    )
    
    (336
    )Provision
      for doubtful accounts
    
    48
    
    
    42Deferred
      income tax provision(benefit)
    
    67
    
    
    (34
    )Other
      non-cash items
    
    483
    
    
    (312
    )Changes
      in operating assets and liabilities,net
      of business divestedAccounts
      receivable
    
    (712
    )
    
    (1,161
    )Inventories
    
    (4,607
    )
    
    (1,533
    )Other
      current assets
    
    486
    
    
    1,147Other
      assets
    
    (315
    )
    
    (308
    )Accounts
      payable
    
    190
    
    
    (1
    )Accrued
      liabilities
    
    (52
    )
    
    886Accrued
      income taxes
    
    316
    
    
    (984
    )Other
      noncurrent liabilities
    
    74
    
    
    93Net
      cash provided by operating activitiesof
      discontinued operation
    
    567
    
    
    729Net
      cash provided by (used in)operating
      activities
    
    (1,892
    )
    
    225Cash flows
      from investing activities:
        Additions to property, plant andequipment,
      net
    
    (2,234
    )
    
    (1,158
    )Available-for-sale
      securitiesPurchases
    
    (18,280
    )
    
    (12,667
    )Proceeds
      from sale
    
    15,926
    
    
    15,743Net
      cash used in investing activitiesof
      discontinued operation
    
    (11,140
    )
    
    (321
    )Net
      cash provided by (used in)investing
      activities
    
    (15,728
    )
    
    1,597The accompanying notes are an
integral part of these statements.


-7-
E-Z-EM, Inc. and
Subsidiaries


CONSOLIDATED
STATEMENTS OF CASH FLOWS (continued)(unaudited)(in thousands)

Twenty-six
      weeks endedNovember
      27,
      2004
    
    November
      29,
      2003Cash flows
      from financing activities:Repayments
      of debt
    $
    (183
    )
    $
    (188
    )Proceeds
      from issuance of debt
    
    92Proceeds
      from repayment of debt by discontinuedoperation
    
    3,000Dividends
      paid
    
    (3,220
    )
    
    (2,552
    )Proceeds
      from exercise of stock options
    
    225
    
    
    1,075Purchase
      of treasury stock
    
    
    
    
    (417
    )Proceeds
      from issuance of stock in connection with the stock purchase plan
    
    6Cash
      distributed with discontinued operation
    
    (8,453
    )Net
      cash provided by (used in) financingactivities
      of discontinued operation
    
    18,958
    
    
    (408
    )Net
      cash provided by (used in) financingactivities
    
    10,425
    
    
    (2,490
    )Effect
      of exchange rate changes oncash
      and cash equivalents
    
    2,685
    
    
    957INCREASE
      (DECREASE) IN CASH ANDCASH
      EQUIVALENTS
    
    (4,510
    )
    
    289Cash and
      cash equivalentsBeginning
      of period
    
    12,334
    
    
    8,520End
      of period
    $
    7,824
    
    $
    8,809Supplemental
      disclosures of cash flowinformation:Cash
      paid during the year for:Interest
    $
    69
    
    $
    126Income
      taxes
    $
    1,526
    
    $
    586The accompanying notes are an
integral part of these statements.


-8-
E-Z-EM, Inc. and
Subsidiaries




NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE A 
NATURE OF BUSINESS AND BASIS OF PRESENTATION


Nature
of BusinessE-Z-EM,
Inc. and its subsidiaries (the Company or E-Z-EM) is a leading
provider of medical products used by radiologists, gastroenterologists and speech
language pathologists primarily in screening for and diagnosing diseases and disorders of
the gastrointestinal (GI) tract. Products are used for colorectal cancer screening,
evaluation of swallowing disorders (dysphagia), and testing for other diseases and
disorders of the GI system. The Company is also a third-party contract manufacturer, a
business that enables the Company to leverage its capacity in quality control, process,
automation and manufacturing. Prior to the spin-off of AngioDynamics, Inc. (AngioDynamics)
on October 30, 2004, the Company was also a provider of innovative medical devices used
in minimally invasive, image-guided procedures to treat peripheral vascular disease, or
PVD. AngioDynamics designed, developed, manufactured and marketed a broad line of
therapeutic and diagnostic devices that enabled interventional physicians (interventional
radiologists, vascular surgeons and others) to treat PVD and other non-coronary diseases.Basis
of PresentationThe
consolidated balance sheet as of November 27, 2004, the consolidated statement of
stockholders equity and comprehensive income for the period ended November 27,
2004, and the consolidated statements of earnings and cash flows for the periods ended
November 27, 2004 and November 29, 2003, have been prepared by the Company without audit.
The consolidated balance sheet as of May 29, 2004 was derived from audited consolidated
financial statements. In the opinion of management, all adjustments (which include only
normally recurring adjustments) necessary to present fairly the financial position,
changes in stockholders equity and comprehensive income, results of operations and
cash flows at November 27, 2004 (and for all periods presented) have been made.Certain
information and footnote disclosures, normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States of
America, have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements and notes
thereto included in the Annual Report on Form 10-K for the fiscal year ended May 29, 2004
filed by the Company on August 27, 2004. The results of operations for the periods ended
November 27, 2004 and November 29, 2003 are not necessarily indicative of the operating
results for the respective full years.The
consolidated financial statements include the accounts of E-Z-EM, Inc. and all wholly
owned subsidiaries, as well as the accounts of AngioDynamics through its spin-off on
October 30, 2004. As a result of the spin-off, AngioDynamics is reported separately as a
discontinued operation for all periods presented within the consolidated financial
statements (see Note B. Discontinued
Operation).  All significant intercompany balances and transactions have been eliminated.-9-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE B 
DISCONTINUED OPERATION


On
May 27, 2004, AngioDynamics sold 1,950,000 shares of its common stock at $11.00 per share
through an initial public offering (IPO). Proceeds from the IPO, net of
certain financing costs, totaling $19,949,000 were received by AngioDynamics on June 2,
2004. At May 29, 2004, E-Z-EM owned 9,200,000 shares, or 82.5% of the 11,150,000 shares
outstanding. On June 15, 2004, the underwriters of the IPO exercised their over-allotment
option and acquired 292,500 shares at $11.00 per share, less underwriting discounts and
commissions, and on June 18, 2004, AngioDynamics received net proceeds of $2,992,000. At
June 15, 2004, E-Z-EMs ownership interest in AngioDynamics decreased to 80.4% (see
Note L).On
November 4, 2004, the Company announced the completion of the spin-off of AngioDynamics
by means of a tax-free distribution of the Companys remaining 80.4% ownership of
AngioDynamics. In February 2004, the Company received a favorable private letter ruling
from the Internal Revenue Service regarding the tax-free treatment of the distribution of
E-Z-EMs remaining ownership in AngioDynamics. The pro rata distribution of
9,200,000 shares of AngioDynamics was made on October 30, 2004 to E-Z-EM shareholders of
record as of October 11, 2004 (the Record Date). Based on the shares
outstanding of each company on the Record Date, E-Z-EM shareholders received
approximately .856377 shares of AngioDynamics stock for each share of E-Z-EM stock they
owned on the Record Date. For all periods presented, AngioDynamics is accounted for as a
discontinued operation in the Companys financial statements in accordance with
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting
for Impairment and Disposal of Long-Lived Assets. Amounts in the financial
statements and related notes for all periods shown have been reclassified to reflect the
discontinued operation.In
fiscal 2004, E-Z-EM entered into three agreements with AngioDynamics  a master
separation and distribution agreement, a corporate agreement and a tax allocation and
indemnification agreement  that relate to its relationship with AngioDynamics both
before and after the separation of AngioDynamics from the Company. All of the agreements
between the Company and AngioDynamics were made in the context of a parent-subsidiary
relationship and were negotiated in the overall context of the spin-off.-10-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE B 
DISCONTINUED OPERATION (continued)


Summarized
results of operations for AngioDynamics, including minority interest, as reported in
earnings from discontinued operation in the accompanying consolidated statements of
earnings are as follows:Thirteen
      weeks ended
    
    Twenty-six
      weeks endedNovember
      27,
      2004
    
    November
      29,
      2003
    
    November
      27,
      2004
    
    November
      29,
      2003(in
      thousands)Net salesFrom
      unaffiliated customers
    $
    9,484
    
    $
    11,651
    
    $
    22,342
    
    $
    22,066From
      affiliates
    
    173
    
    
    200
    
    
    420
    
    
    415Total net
      sales
    $
    9,657
    
    $
    11,851
    
    $
    22,762
    
    $
    22,481Earnings
      before income taxes
    $
    1,338
    
    $
    932
    
    $
    2,628
    
    $
    1,647Income tax
      provision
    
    579
    
    
    344
    
    
    1,103
    
    
    724Earnings
      before minorityinterest
    
    759
    
    
    588
    
    
    1,525
    
    
    923Minority
      interest
    
    151
    
    
    
    
    
    297Earnings
      from discontinuedoperation
    $
    608
    
    $
    588
    
    $
    1,228
    
    $
    923For
the thirteen weeks ended November 27, 2004, the results of operations for AngioDynamics
represented nine weeks activity. For the twenty-six weeks ended November 27, 2004,
the results of operations for AngioDynamics represented twenty-two weeks activity.-11-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE B 
DISCONTINUED OPERATION (continued)


The
following table represents summarized balance sheet information for AngioDynamics,
including minority interest, as of the date of the spin-off, and is provided to assist in
understanding the impact of the disposition on the consolidated balance sheet of the
Company (amounts in thousands):ASSETSCash
      and cash equivalents
    $
    10,238Debt and
      equity securities
    
    11,407Accounts
      receivable
    
    7,202Inventory
    
    9,200Other current
      assets
    
    1,363Property,
      plant and equipment
    
    7,559Other assets
    
    1,954Total assets
    $
    48,923LIABILITIES
      AND STOCKHOLDERS EQUITYCurrent
      maturities of long-term debt
    $
    160Accounts
      payable
    
    1,947Accrued
      liabilities
    
    2,278Accrued
      income taxes
    
    44Long-term
      debt
    
    3,060Minority
      interest
    
    8,133Stockholders
      equity
    
    33,301Total liabilities
      and stockholders equity
    $
    48,923-12-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE C 
STOCK-BASED COMPENSATION


At
November 27, 2004, the Company had three stock-based compensation plans. The Company
accounts for these plans under the recognition and measurement principles of APB Opinion
No. 25, Accounting for Stock Issued to Employees and related interpretations.
Accordingly, no compensation expense has been recognized under these plans concerning
options granted to key employees and to members of the Board of Directors, as all such
options granted had an exercise price equal to or greater than the market value of the
underlying common stock on the date of grant. For the thirteen weeks ended November 27,
2004 and November 29, 2003, compensation expense of $397,000 and $1,000, respectively,
was recognized under these and certain AngioDynamics plans for options granted to
consultants. For the twenty-six weeks ended November 27, 2004 and November 29, 2003,
compensation expense of $411,000 and $2,000, respectively, was recognized under these and
certain AngioDynamics plans for options granted to consultants.The
following table illustrates the effect on net earnings and earnings per share if the
Company had applied the fair value recognition provisions of SFAS No. 123 to options
granted under these plans to key employees and to members of the Board of Directors:Thirteen
      weeks ended
    
    Twenty-six
      weeks endedNovember
      27,
      2004
    
    November
      29,
      2003
    
    November
      27,
      2004
    
    November
      29,
      2003(in
      thousands, except per share data)Net
      earnings, as reported
    $
    1,431
    
    $
    1,769
    
    $
    2,682
    
    $
    1,470Deduct:
      Total stock-basedemployee
      compensation expensedetermined
      under the fair valuebased
      method for all awards,net
      of income tax effects
    
    (222
    )
    
    (141
    )
    
    (580
    )
    
    (280
    )Pro forma
      net earnings
    $
    1,209
    
    $
    1,628
    
    $
    2,102
    
    $
    1,190Earnings
      per common shareBasic
      - as reported
    $
    .13
    
    $
    .17
    
    $
    .25
    
    $
    .14Basic
      - pro forma
    
    .11
    
    
    .16
    
    
    .20
    
    
    .12Diluted
      - as reported
    $
    .13
    
    $
    .17
    
    $
    .25
    
    $
    .14Diluted
      - pro forma
    
    .11
    
    
    .15
    
    
    .19
    
    
    .11-13-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE D 
EARNINGS PER COMMON SHARE


Basic
earnings per share are based on the weighted average number of common shares outstanding
without consideration of potential common stock. Diluted earnings per share are based on
the weighted average number of common and potential common shares outstanding. The
calculation takes into account the shares that may be issued upon exercise of stock
options, reduced by the shares that may be repurchased with the funds received from the
exercise, based on the average price during the period.The
following table sets forth the reconciliation of the weighted average number of common
shares:Thirteen
      weeks ended
    
    Twenty-six
      weeks endedNovember
      27,
      2004
    
    November
      29,
      2003
    
    November
      27,
      2004
    
    November
      29,
      2003(in
      thousands)Basic
    
    10,749
    
    
    10,272
    
    
    10,741
    
    
    10,217Effect
      of dilutive securities(stock
      options)
    
    187
    
    
    273
    
    
    193
    
    
    258Diluted
    
    10,936
    
    
    10,545
    
    
    10,934
    
    
    10,475Excluded
from the calculation of earnings per common share, are options to purchase 5,305 shares
of common stock for the thirteen and twenty-six weeks ended November 29, 2003, as their
inclusion would be anti-dilutive. At November 29, 2003, the exercise price on the
excluded options was $12.49 per share.-14-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE E 
EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS


In
November 2004, the Financial Accounting Standards Board (FASB) issued
SFAS No. 151, Inventory Costs, an amendment of ARB No. 43,
Chapter 4. The amendments made by SFAS No. 151 will improve financial reporting by
clarifying that abnormal amounts of idle facility expense, freight, handling costs, and
wasted materials (spoilage) should be recognized as current-period charges and by
requiring the allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities. SFAS No. 151 is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Earlier application is
permitted for inventory costs incurred during fiscal years beginning after
November 24, 2004. The Company is currently evaluating the impact of adoption of SFAS
No. 151 on its financial position and results of operations.In
December 2004, the FASB issued SFAS No. 123 (R), Accounting for Stock-Based
Compensation. SFAS No. 123 (R) establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or services.
This statement focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. SFAS No. 123 (R) requires that the
fair value of such equity instruments be recognized as an expense in the historical
financial statements as services are performed. Prior to SFAS No. 123 (R), only certain
pro forma disclosures of fair value were required. SFAS No. 123 (R) shall be effective for
the Company as of the beginning of the first interim reporting period that begins after
June 15, 2005. The adoption of this statement is expected to have a material impact on the
financial statements of the Company commencing with the second quarter ending December 3,
2005.-15-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE F 
COMPREHENSIVE INCOME


The
components of comprehensive income, net of related tax, are as follows:Thirteen
      weeks ended
    
    Twenty-six
      weeks endedNovember
      27,
      2004
    
    November
      29,
      2003
    
    November
      27,
      2004
    
    November
      29,
      2003(in
      thousands)Net
      earnings
    $
    1,431
    
    $
    1,769
    
    $
    2,682
    
    $
    1,470Unrealized
      holding gain on debtand
      equity securities:Arising
      during the period
    
    776
    
    
    1,678
    
    
    1,151
    
    
    1,822Reclassification
      adjustmentfor
      gains included in netearnings
    
    (688
    )
    
    (212
    )
    
    (1,406
    )
    
    (212
    )Increase
      (decrease) in fairvalue
      on interest rate swaparising
      during the period
    
    
    
    
    (24
    )
    
    (55
    )
    
    131Foreign
      currency translationadjustments
      arising duringthe
      period
    
    3,277
    
    
    1,649
    
    
    4,153
    
    
    1,347Comprehensive
      income
    $
    4,796
    
    $
    4,860
    
    $
    6,525
    
    $
    4,558The
components of accumulated other comprehensive income, net of related tax, are as follows:November
      27,
      2004
    
    May 29,
      2004(in
      thousands)Unrealized
      holding gain on debt and equitysecurities
    $
    2,175
    
    $
    2,430Fair value
      on interest rate swap
    
    
    
    
    (118
    )Cumulative
      translation adjustments
    
    3,463
    
    
    (690
    )Accumulated
      other comprehensive income
    $
    5,638
    
    $
    1,622-16-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE G 
PLANT CLOSINGS AND OPERATIONAL RESTRUCTURINGS


In
the fourth quarter of fiscal 2004, the Company completed the closing of its device
manufacturing facility in San Lorenzo, Puerto Rico as well as its heat-sealing operation
in Westbury, New York, each of which was part of the E-Z-EM segment. The Company currently
outsources these operations to a third-party manufacturer. This realignment was part of
the Companys strategic plan of restructuring its operations to achieve greater
efficiency. The Company has begun realizing the savings it had anticipated from this
project during the first quarter of fiscal 2005. For the thirteen and twenty-six weeks
ended November 29, 2003, project costs, primarily severance relating to 98 employees,
aggregated $628,000 and $1,200,000, respectively. At November 27, 2004 and November 29,
2003, the liability for the plant closing and operational restructuring, which is included
in accrued liabilities, approximated $15,000 and $947,000, respectively.In
June 2004, the Company announced a plan to further streamline its operations in the E-Z-EM
segment, specifically by moving its powder-based barium production to its manufacturing
facility in Montreal, Canada. The Company expects the project to take 12 months to
complete, and to generate savings beginning in fiscal 2006. An expected pre-tax charge to
earnings of $2,800,000 will be recorded in fiscal 2005 as a result of this program. Of the
$2,800,000 in project costs, approximately $1,600,000 is severance relating to 71
employees and the balance relates primarily to training, relocation and regulatory costs.
For the thirteen and twenty-six weeks ended November 27, 2004, project costs aggregated
$824,000 and $1,425,000, respectively. At November 27, 2004, the liability for this
restructuring, which is included in accrued liabilities, approximated $876,000.NOTE H 
INVENTORIES


Inventories
consist of the following:November
      27,
      2004
    
    May 29,
      2004(in
      thousands)Finished
      goods
    $
    12,236
    
    $
    9,850Work in
      process
    
    377
    
    
    252Raw materials
    
    10,959
    
    
    8,799$
    23,572
    
    $
    18,901-17-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE I 
DEBT AND EQUITY SECURITIES


During
the thirteen and twenty-six weeks ended November 27, 2004, the Company sold 100,000 shares
and 200,000 shares, respectively, of its investment in Cedara Software Corporation. The
Company recognized gains on these sales totaling $690,000 and $1,406,000, respectively,
during the thirteen and twenty-six weeks ended November 27, 2004, which are included in
the consolidated statements of earnings under the caption Other, net.NOTE J 
INCOME TAXES


For
the thirteen and twenty-six weeks ended November 27, 2004, the Companys effective
tax rates of 25% and 14%, respectively, differed from the Federal statutory tax rate of
34% due primarily to the reversal of a valuation allowance, relating to an impairment of a
non-core equity security, partially offset by non-deductible expenses, including stock
option compensation costs of $377,000.NOTE K 
CONTINGENCIES


AngioDynamics,
our former subsidiary, and E-Z-EM have been named as co-defendants in an action entitled
Duhon, et. al vs. Brezoria Kidney Center, Inc. et. al, case no. 27084 filed
in the District Court of Brezoria County, Texas, 239th Judicial District on
December 29, 2003. The complaint alleges that AngioDynamics and its co-defendants, E-Z-EM
and Medical Components, Inc. or Medcomp, designed, manufactured, sold, distributed and
marketed a defective catheter that was used in the treatment of, and caused the death of,
a hemodialysis patient, as well as committing other negligent acts. The complaint seeks
compensatory and other monetary damages in unspecified amounts. Under AngioDynamics
distribution agreement with Medcomp, Medcomp is required to indemnify AngioDynamics
against all its costs and expenses, as well as losses, liabilities and expenses (including
reasonable attorneys fees) that relate in any way to products covered by the
agreement. The Company has tendered the defense of the Duhon action to Medcomp and Medcomp
has accepted defense of the action. Based upon its prior experience with Medcomp, the
Company expects Medcomp to honor its indemnification obligation to AngioDynamics if it is
unsuccessful in defending this action.-18-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE K 
CONTINGENCIES (continued)


On January 6, 2004, Diomed, Inc. filed an action against AngioDynamics entitled
Diomed, Inc., vs. AngioDynamics, Inc., civil action no. 04 10019 RGS in the U.S.
District Court for the District of Massachusetts. Diomeds complaint alleges
that AngioDynamics has infringed on Diomeds U.S. patent no. 6,398,777 by
selling a kit for the treatment of varicose veins (now called the VenaCure
Procedure Kit) and two diode laser systems: the Precision 980 Laser and the
Precision 810 Laser, and by conducting a training program for physicians in the
use of the VenaCure  Procedure Kit. The complaint alleges that AngioDynamics
actions have caused, and continue to cause, Diomed to suffer substantial
damages. The complaint seeks to prohibit AngioDynamics from continuing to market
and sell these products, as well as conducting training programs, and seeks
compensatory and treble money damages, reasonable attorneys fees, costs and
pre-judgment interest. AngioDynamics believes that the product does not infringe
the Diomed patent. AngioDynamics purchases the lasers and laser fibers for its
laser systems from biolitec, Inc. under a supply and distribution agreement.
biolitec has engaged counsel on AngioDynamics behalf to defend this action.In
accordance with the Master Separation and Distribution Agreement between AngioDynamics and
E-Z-EM, AngioDynamics has agreed to indemnify E-Z-EM from any claims which arise out of
the business operations of AngioDynamics prior to its spin-off (October 30, 2004) in which
E-Z-EM is a named defendant solely because E-Z-EM was the sole stockholder of
AngioDynamics.The
Company has been notified by a competitor that it believes specific claims contained in
issued United States patents owned by this competitor may be relevant to certain features
of the Companys Empower CT injector. Management is currently in discussions to
resolve this matter, and the extent of any liability is not estimable at this time.The
Company is party to other claims, legal actions and complaints that arise in the ordinary
course of business. We believe that any liability that may ultimately result from the
resolution of these matters will not, individually or in the aggregate, have a material
adverse effect on our financial position or results of operations.-19-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE L 
COMMON STOCK


AngioDynamics
Initial Public OfferingOn
May 27, 2004, the Companys AngioDynamics subsidiary sold 1,950,000 shares of its
common stock at $11.00 per share through an initial public offering (IPO).
Proceeds from the IPO, net of certain financing costs, totaling $19,949,000 were received
by AngioDynamics on June 2, 2004. At May 29, 2004, the Company owned 9,200,000 shares, or
82.5% of the 11,150,000 shares outstanding. At May 29, 2004, the Company has recorded a
credit to common stock and additional paid-in capital of $12,174,000 which is net of
financing costs of $1,279,000 and minority interest of $6,496,000. On June 15, 2004, the
underwriters of the IPO exercised their over-allotment option and acquired 292,500 shares
at $11.00 per share, less underwriting discounts and commissions, and on June 18, 2004,
AngioDynamics received net proceeds of $2,992,000. At June 15, 2004, the Companys
ownership interest in AngioDynamics decreased to 80.4%. For the twenty-six weeks ended
November 27, 2004, the Company has recorded a credit to common stock and additional
paid-in capital of $1,442,000 which is net of financing costs of $225,000 and minority
interest of $1,325,000.AngioDynamics
Spin-offOn
November 4, 2004, the Company announced the completion of the spin-off of AngioDynamics
by means of a tax-free distribution of the Companys remaining 80.4% ownership of
AngioDynamics. In February 2004, the Company received a favorable private letter ruling
from the Internal Revenue Service regarding the tax-free treatment of the distribution of
E-Z-EMs remaining ownership in AngioDynamics. The pro rata distribution of
9,200,000 shares of AngioDynamics was made on October 30, 2004 to E-Z-EM shareholders of
record as of October 11, 2004 (the Record Date). Based on the shares outstanding of
each company on the Record Date, E-Z-EM shareholders received approximately .856377
shares of AngioDynamics stock for each share of E-Z-EM stock they owned on the Record
Date.Stock
Repurchase ProgramIn
March 2003, the Board of Directors authorized the repurchase of up to 300,000 shares of
the Companys common stock at an aggregate purchase price of up to $3,000,000.
During the thirteen and twenty-six weeks ended November 27, 2004, no shares were
repurchased under this program. In aggregate, the Company has repurchased 74,234 shares
of common stock for approximately $716,000 under this program.-20-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE L 
COMMON STOCK (continued)


Cash
DividendsIn
June 2003, the Companys Board of Directors declared a cash dividend of $.25 per
outstanding share of the Companys common stock. The dividend was distributed on
August 1, 2003 to shareholders of record as of July 15, 2003. In June 2004, the Companys
Board of Directors declared a cash dividend of $.30 per outstanding share of the Companys
common stock. The dividend was distributed on July 1, 2004 to shareholders of record as
of June 15, 2004. Future dividends are subject to Board of Directors review of
operations and financial and other conditions then prevailing.NOTE M 
STOCK COMPENSATION PLANS


In
connection with the completion of the AngioDynamics spin-off, as of October 30, 2004, all
outstanding stock options (E-Z-EM Pre-spin Options) were adjusted and/or
exchanged with E-Z-EM options (the E-Z-EM Post-spin Options) and
AngioDynamics options (the AngioDynamics Post-spin Options), collectively
referred to as (the Replacement Options).The
exercise price and the number of shares subject to each of the Replacement Options was
established pursuant to a formula designed to ensure that: (1) the aggregate intrinsic
value (i.e., the difference between the exercise price of the option and the market
price of the common stock underlying the option) of the Replacement Option did not exceed
the aggregate intrinsic value of the outstanding E-Z-EM Pre-spin Option which is replaced
by such Replacement Option immediately prior to the spin-off, and (2) the ratio of the
exercise price of each option to the market value of the underlying stock immediately
before and after the spin-off was preserved.Substantially
all of the other terms and conditions of each Replacement Option, including the time or
times when, and the manner in which, each option is exercisable, the duration of the
exercise period, the permitted method of exercise, settlement and payment, the rules that
apply in the event of the termination of employment of the employee, is the same as those
of the replaced E-Z-EM Pre-spin Option, except that (1) in some cases, the exercise
period of the AngioDynamics Post-spin Options are shorter than the exercise period of the
E-Z-EM Pre-spin Options and (2) option holders who are employed by one company are
permitted to exercise, and are subject to all of the terms and provisions of, options to
acquire shares in the other company as if such holder was an employee of such other
company.-21-
E-Z-EM, Inc. and
Subsidiaries


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


November 27, 2004 and
November 29, 2003(unaudited)


NOTE M 
STOCK COMPENSATION PLANS (continued)


Under
the 1983 and 1984 Stock Option Plans, options for 20,000 shares were granted at $16.02 per
share, options for 68,529 shares were exercised at prices ranging from $3.64 to $8.08 per
share, options for 25,984 shares expired at $4.22 per share, and options for 14 shares
were forfeited at prices ranging from $3.66 to $12.49 per share during the twenty-six
weeks ended November 27, 2004. Under the 2004 Stock and Incentive Award Plan which was
adopted on October 26, 2004, options for 372,000 shares were granted at prices ranging
from $14.23 to $14.51 per share and no options were exercised, forfeited or expired during
the twenty-six weeks ended November 27, 2004.Effective
October 26, 2004, the Company extended the exercise period of expiring stock options of a
former director who currently provides the Company with consulting services. The Company
recorded a compensation charge of $385,000 during the thirteen weeks ended November 27,
2004 in connection with this extension.NOTE N 
OPERATING SEGMENT


The
Company currently operates in one reportable segment: the E-Z-EM segment. Prior to
October 30, 2004, the Company operated in two reportable segments: the E-Z-EM segment and
the AngioDynamics segment, through its majority-owned subsidiary, AngioDynamics, Inc.
Effective as of October 30, 2004, E-Z-EM spun off AngioDynamics by distributing to E-Z-EMs
shareholders 9,200,000 shares of AngioDynamics common stock then held by E-Z-EM. As
discussed in Note B. Discontinued Operation, the AngioDynamics segment is being reported
as a discontinued operation and the E-Z-EM segment is being reported as the Companys
continuing operations.In
the E-Z-EM segment, the Company develops, manufactures and markets medical products used
by radiologists, gastroenterologists and speech language pathologists primarily in
screening for and diagnosing diseases and disorders of the gastrointestinal (GI) tract.
Products in this segment are used for colorectal cancer screening, evaluation of
swallowing disorders (dysphagia), and testing for other diseases and disorders of the GI
system. The Company is also a third-party contract manufacturer, a business that enables
the Company to leverage its capacity in quality control, process, automation and
manufacturing. The entire business is focused in the following general areas: X-ray
fluoroscopy, CT imaging, contract manufacturing, virtual colonoscopy, gastroenterology
and accessory medical devices.-22-
Item 2.
    Managements
      Discussion and Analysis of Financial Condition and Results of OperationsThe following information should be
read together with the consolidated financial statements and the notes thereto and other
information included elsewhere in this Quarterly Report on Form 10-Q.


Forward-Looking
Statements and Risk Factors


Our disclosure and analysis in this
report, including but not limited to the information discussed in this Quarterly Report on
Form 10-Q, contain forward-looking information about our companys financial results
and estimates, business prospects and products in research that involve substantial risks
and uncertainties. From time to time, we also may provide oral or written forward-looking
statements in other materials we release to the public. Forward-looking statements give
our current expectations or forecasts of future events. You can identify these statements
by the fact that they do not relate strictly to historic or current facts. They use words
such as anticipate, estimate, expect,
project, intend, plan, believe,
will, and other words and terms of similar meaning in connection with any
discussion of future operating or financial performance. In particular, these include
statements relating to future actions, prospective products or product approvals, future
performance or results of current and anticipated products, sales efforts, expenses,
interest rates, foreign exchange rates, the outcome of contingencies, such as legal
proceedings, and financial results. Among the factors that could cause actual results to
differ materially are the following:



our
pricing flexibility is constrained by the formation of large Group Purchasing
Organizations;
if
we fail to adequately protect our intellectual property rights, our business may suffer;
if
third parties claim that our products infringe their intellectual rights, we may be
forced to expend significant financial resources and management time defending against
such actions and our results of operations could suffer;
if
we fail to develop new products and enhance existing products, we could lose market share
to our competitors and our results of operations could suffer;
the
market dynamics and competitive  environment in the healthcare industry are subject to
rapid change,  which may affect              our operations;
the
adoption rate of virtual colonoscopy as a screening modality for colon cancer has been
slower than we anticipated;
the
market potential for Reactive Skin Decontamination Lotion is uncertain;
if
we cannot obtain approval from governmental agencies, we will not be able to sell our
products; and
inadequate
levels of reimbursement from governmental or other third-party payors for procedures
using our products may cause our revenues to decline.-23-
We cannot guarantee that any
forward-looking statement will be realized, although we believe we have been prudent in
our plans and assumptions. Achievement of future results is subject to risks,
uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties
materialize, or should underlying assumptions prove inaccurate, actual results could vary
materially from past results and those anticipated, estimated or projected. Investors
should bear this in mind as they consider forward-looking statements.


We undertake no obligation to
publicly update forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any further disclosures we make
on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange
Commission. Our Form 10-K filing for the 2004 fiscal year listed various important factors
that could cause actual results to differ materially from expected and historic results.
We note these factors for investors as permitted by the Private Securities Litigation
Reform Act of 1995. Readers can find them in Item 7 of that filing under the heading
Risk Factors. We incorporate that section of that Form 10-K in this filing and
investors should refer to it. You should understand that it is not possible to predict or
identify all such factors. Consequently, you should not consider any such list to be a
complete set of all potential risks or uncertainties.


Overview


We are a leading provider of medical
products used by radiologists, gastroenterologists and speech language pathologists
primarily in screening for and diagnosing diseases and disorders of the gastrointestinal
(GI) tract. Products are used for colorectal cancer screening, evaluation of swallowing
disorders (dysphagia), and testing for other diseases and disorders of the GI system. We
are also a third-party contract manufacturer, a business that enables us to leverage our
capacity in quality control, process, automation and manufacturing. The entire business is
focused in the following general areas: X-ray fluoroscopy, CT imaging, contract
manufacturing, virtual colonoscopy, gastroenterology and accessory medical devices.


Prior to our spin-off of
AngioDynamics on October 30, 2004, we were also a provider of innovative medical devices
used in minimally invasive, image-guided procedures to treat peripheral vascular disease,
or PVD. AngioDynamics designed, developed, manufactured and marketed a broad line of
therapeutic and diagnostic devices that enabled interventional physicians (interventional
radiologists, vascular surgeons and others) to treat PVD and other non-coronary diseases.


AngioDynamics
Initial Public Offering


On May 27, 2004, our AngioDynamics
subsidiary sold 1,950,000 shares of its common stock at $11.00 per share through an
initial public offering (IPO). Proceeds from the IPO, net of certain financing
costs, totaling $19,949,000 were received by AngioDynamics on June 2, 2004. At May 29,
2004, we owned 9,200,000 shares, or 82.5% of the 11,150,000 shares outstanding. On June
15, 2004, the underwriters of the IPO exercised their over-allotment option and acquired
292,500 shares at $11.00 per share, less underwriting discounts and commissions, and on
June 18, 2004, AngioDynamics received net proceeds of $2,992,000. At June 15, 2004, our
ownership interest in AngioDynamics decreased to 80.4%.


-24-
AngioDynamics
Spin-off


On November 4, 2004, we announced the
completion of our spin-off of AngioDynamics by means of a tax-free distribution of our
remaining 80.4% ownership of AngioDynamics. In February 2004, we received a favorable
private letter ruling from the Internal Revenue Service regarding the tax-free treatment
of the distribution of our remaining ownership in AngioDynamics. The pro rata distribution
of 9,200,000 shares of AngioDynamics was made on October 30, 2004 to our shareholders of
record as of October 11, 2004 (the Record Date). Based on the shares
outstanding of each company on the Record Date, our shareholders received approximately
..856377 shares of AngioDynamics stock for each share of E-Z-EM stock they owned on the
Record Date. For all periods presented, AngioDynamics is accounted for as a discontinued
operation in our financial statements in accordance with SFAS No. 144, Accounting
for Impairment and Disposal of Long-Lived Assets.


Results of Operations


Quarters ended
November 27, 2004 and November 29, 2003


Our quarters ended November 27, 2004
and November 29, 2003 both represent thirteen weeks.


Consolidated Results
of Operations


For the quarter ended November 27,
2004, we reported net earnings of $1,431,000, or $.13 per common share on both a basic and
diluted basis, compared to net earnings of $1,769,000, or $.17 per common share on both a
basic and diluted basis, for the comparable period of last year.


Both the current quarter and the
comparable quarter of the prior year included charges for restructuring our manufacturing
operations. The current quarter included $824,000, or $.05 per basic share, in plant
closing and operational restructuring costs related to the moving of our powder-based
barium production to our manufacturing facility in Montreal, Canada. We expect the project
to be completed by the end of fiscal 2005, and to generate projected annual pre-tax
savings of $2,200,000 beginning in fiscal 2006. An expected pre-tax charge to earnings of
$2,800,000 (inclusive of the $601,000 and $824,000 charges for the first and second
quarters, respectively), approximately half of which is severance related, will be
recorded in the current year as a result of this program. The comparable quarter of the
prior year included $628,000, or $.05 per basic share, in plant closing and operational
restructuring costs related to the closings of our device manufacturing facility in San
Lorenzo, Puerto Rico, and our heat-sealing operation in Westbury, New York, which were
completed in the fourth quarter of fiscal 2004.


Excluding the effect of the plant
closings and operational restructurings, operating results declined by $188,000 due to
increased operating expenses, partially offset by increased sales and improved gross
profit.


Continuing
Operations


Net sales for the quarter ended
November 27, 2004 increased 4%, or $935,000, compared to the quarter ended November 29,
2003 due to foreign currency exchange rate fluctuations, which increased the translated
amounts of our foreign subsidiaries sales to U.S. dollars for financial reporting
purposes by $448,000, and sales volume increases. On a product line basis, increased sales
of CT imaging contrast products, particularly our CT Smoothie lines, and CT injector
systems totaling $2,403,000 and virtual colonoscopy products of $245,000 were partially
offset by continued declines in sales of X-ray fluoroscopy products of $889,000 and
declines in sales of contract manufacturing products of $835,000. Price increases
accounted for less than 1% of net sales for the current quarter.


-25-
Net sales in international markets,
including direct exports from the U.S., remained relatively flat at $9,346,000 for the
current quarter versus $9,373,000 from the comparable period of last year. Foreign
currency exchange rate fluctuations, which increased the translated amounts of foreign
subsidiaries sales to U.S. dollars for financial reporting purposes by $448,000,
offset lower sales volumes.


Gross profit, expressed as a
percentage of net sales, improved to 45% for the current quarter from 41% for the
comparable quarter of the prior year due primarily to the cost savings from the closings
of our device manufacturing facility in San Lorenzo, Puerto Rico, and our heat-sealing
operation in Westbury, New York, as well as reduced raw material and purchased finished
product costs.


Selling and administrative
(S&A) expenses were $8,788,000 for the quarter ended November 27, 2004
compared to $7,553,000 for the quarter ended November 29, 2003. This increase of
$1,235,000, or 16%, was due primarily to: i) increased compensation costs of $387,000, ii)
the recording of a non-cash compensation charge of $385,000, resulting from the
modification of certain stock options previously granted to one of our former directors,
and iii) foreign currency exchange rate fluctuations which increased the translated
amounts of our foreign subsidiaries S&A expenses to U.S. dollars for financial
reporting purposes by $161,000.


Research and development
(R&D) expenditures increased 30% for the current quarter to $1,469,000, or
6% of net sales, from $1,129,000, or 4% of net sales, for the comparable quarter of the
prior year due primarily to increased spending of $202,000 relating to gastroenterology
projects and $85,000 relating to virtual colonoscopy projects. Of the R&D expenditures
for the current quarter, approximately 42% relate to X-ray fluoroscopy and CT imaging
projects, 23% to general regulatory costs, 18% to gastroenterology projects, 15% to
virtual colonoscopy projects and 2% to other projects. R&D expenditures are expected
to continue at approximately current levels for the remainder of this fiscal year.


Other income, net of other expenses,
totaled $323,000 for the current quarter compared to $686,000 for the comparable period of
last year. This decline was due primarily to unfavorable changes in foreign currency
exchange gains and losses of $527,000, resulting from the weakening of the U.S. dollar,
and reduced interest income of $163,000, partially offset by increased gains of $352,000
on the sale of non-core equity securities. Interest income for the comparable period of
last year included $201,000 in imputed interest on loans to AngioDynamics. Such interest
charges were suspended in the fourth quarter of the 2003 fiscal year. Certain of these
loans were capitalized in connection with the initial public offering of AngioDynamics and
the balance was repaid in the current fiscal year.


For the quarter ended November 27,
2004, our effective tax rate of 25% differed from the Federal statutory tax rate of 34%
due primarily to the reversal of a valuation allowance, relating to an impairment of a
non-core equity security, partially offset by non-deductible expenses, including stock
option compensation costs of $377,000. For the quarter ended November 29, 2003, our
effective tax rate of 36% differed from the Federal statutory tax rate of 34% due
primarily to not currently deductible losses incurred at our Puerto Rican subsidiary and
non-deductible expenses, partially offset by the utilization of previously unrecorded net
operating loss carryforwards in certain foreign jurisdictions. The losses incurred at our
Puerto Rican subsidiary resulted from the closing of this facility and the outsourcing of
its operations.


-26-
Discontinued
Operations


We consolidated the financial
statements of AngioDynamics and reported its results as a discontinued operation in an
amount equal to our percentage of equity ownership through October 30, 2004, the spin-off
date. The results for the discontinued operation for the current quarter represent nine
weeks activity and, therefore, are not comparative to the results for the prior
years second quarter.


Summarized results of operations for
AngioDynamics, including minority interest, as reported in earnings from discontinued
operation in the accompanying consolidated statements of earnings are as follows:



Nine 
      weeks ended
      October 30, 
      2004
    
    Thirteen 
      weeks ended
      November 29,
      2003(in
      thousands)Net
      salesFrom
      unaffiliated customers
    $
    9,484
    
    $
    11,651From
      affiliates
    
    173
    
    
    200Total net
      sales
    $
    9,657
    
    $
    11,851Earnings
      before income taxes
    $
    1,338
    
    $
    932Income
      tax provision
    
    579
    
    
    344Earnings
      before minorityinterest
    
    759
    
    
    588Minority
      interest
    
    151Earnings
      from discontinuedoperation
    $
    608
    
    $
    588Six months ended
November 27, 2004 and November 29, 2003


Our six months ended November 27,
2004 and November 29, 2003 both represent twenty-six weeks.


Consolidated Results
of Operations


For the six months ended November 27,
2004, we reported net earnings of $2,682,000, or $.25 per common share on both a basic and
diluted basis, compared to net earnings of $1,470,000, or $.14 per common share on both a
basic and diluted basis, for the comparable period of last year.


Both the current six months and the
comparable six months of the prior year included charges for restructuring our
manufacturing operations. The current six months included $1,425,000, or $.09 per basic
share, in plant closing and operational restructuring costs related to the moving of our
powder-based barium production to our manufacturing facility in Montreal, Canada. The
comparable six months of the prior year included $1,200,000, or $.10 per basic share, in
plant closing and operational restructuring costs related to the closings of our device
manufacturing facility in San Lorenzo, Puerto Rico, and our heat-sealing operation in
Westbury, New York, which were completed in the fourth quarter of fiscal 2004.


-27-
Excluding the effect of the plant
closings and operational restructurings, operating results improved by $682,000 due to
increased sales and improved gross profit, partially offset by increased operating
expenses, including the recording of compensation costs of $385,000, resulting from the
modification of certain stock options previously granted to one of our former directors.


Continuing
Operations


Net sales for the six months ended
November 27, 2004 increased 5%, or $2,305,000, compared to the six months ended November
29, 2003 due to: i) a decline in distributor rebates resulting from a shift in sales from
products under contract with significant discounts to products not currently under
contract or to products under contract with lower discounts, ii) foreign currency exchange
rate fluctuations, which increased the translated amounts of our foreign
subsidiaries sales to U.S. dollars for financial reporting purposes by $777,000, and
iii) sales volume increases. On a product line basis, the net sales increase resulted from
increased sales of CT imaging contrast products, particularly our CT Smoothie lines, and
CT injector systems totaling $3,866,000 and virtual colonoscopy products of $605,000,
partially offset by continued declines in sales of X-ray fluoroscopy products of
$1,276,000 and declines in sales of contract manufacturing products of $882,000. Price
increases, excluding the decline in rebates, accounted for less than 1% of net sales for
the current period.


Net sales in international markets,
including direct exports from the U.S., remained relatively flat at $17,132,000 for the
current period versus $17,192,000 from the comparable period of last year. Foreign
currency exchange rate fluctuations, which increased the translated amounts of foreign
subsidiaries sales to U.S. dollars for financial reporting purposes by $777,000,
offset lower sales volumes.


Gross profit, expressed as a
percentage of net sales, improved to 44% for the current period from 39% for the
comparable period of the prior year due primarily to: i) the cost savings from the
closings of our device manufacturing facility in San Lorenzo, Puerto Rico, and our
heat-sealing operation in Westbury, New York; ii) the decline in distributor rebates; and
iii) reduced raw material and purchased finished product costs.


S&A expenses were $17,269,000 for
the six months ended November 27, 2004 compared to $15,270,000 for the six months ended
November 29, 2003. This increase of $1,999,000, or 13%, was due primarily to: i) increased
compensation costs of $805,000, ii) the recording of a non-cash compensation charge of
$385,000, resulting from the modification of certain stock options previously granted to
one of our former directors, and iii) foreign currency exchange rate fluctuations, which
increased the translated amounts of our foreign subsidiaries S&A expenses to
U.S. dollars for financial reporting purposes by $301,000.


R&D expenditures remained at 5%
of net sales and increased 14% for the current period to $2,498,000 from $2,182,000 for
the comparable period of the prior year due primarily to increased spending of $239,000
relating to gastroenterology projects. Of the R&D expenditures for the current period,
approximately 46% relate to X-ray fluoroscopy and CT imaging projects, 27% to general
regulatory costs, 16% to gastroenterology projects, 9% to virtual colonoscopy projects and
2% to other projects.


-28-
Other income, net of other expenses,
totaled $1,008,000 for the current period compared to $907,000 for the comparable period
of last year. This improvement was due primarily to increased gains of $1,070,000 on the
sale of non-core equity securities, almost entirely offset by unfavorable changes in
foreign currency exchange gains and losses of $549,000, resulting from the weakening of
the U.S. dollar, and reduced interest income of $363,000. Interest income for the
comparable period of last year included $420,000 in imputed interest on loans to
AngioDynamics. Such interest charges were suspended in the fourth quarter of the 2003
fiscal year. Certain of these loans were capitalized in connection with the initial public
offering of AngioDynamics and the balance was repaid in the current fiscal year.


For the six months ended November 27,
2004, our effective tax rate of 14% differed from the Federal statutory tax rate of 34%
due primarily to the reversal of a valuation allowance, relating to an impairment of a
non-core equity security, partially offset by non-deductible expenses, including stock
option compensation costs of $377,000. For the six months ended November 29, 2003, our
effective tax rate of 52% differed from the Federal statutory tax rate of 34% due
primarily to not currently deductible losses incurred at our Puerto Rican subsidiary and
non-deductible expenses, partially offset by the utilization of previously unrecorded net
operating loss carryforwards in certain foreign jurisdictions. The losses incurred at our
Puerto Rican subsidiary resulted from the closing of this facility and the outsourcing of
its operations.


Discontinued
Operations


We consolidated the financial
statements of AngioDynamics and reported its results as a discontinued operation in an
amount equal to our percentage of equity ownership through October 30, 2004, the spin-off
date. The results for the discontinued operation for the current six months represent only
twenty-two weeks activity and, therefore, are not comparative to the results for the prior
years first six months.


Summarized results of operations for
AngioDynamics, including minority interest, as reported in earnings from discontinued
operation in the accompanying consolidated statements of earnings are as follows:


Twenty-two
      weeks ended
      October 30, 
      2004
    
    Twenty-six
      weeks ended
      November 29,
      2003(in
      thousands)Net
      salesFrom
      unaffiliated customers
    $
    22,342
    
    $
    22,066From
      affiliates
    
    420
    
    
    415Total net
      sales
    $
    22,762
    
    $
    22,481Earnings
      before income taxes
    $
    2,628
    
    $
    1,647Income
      tax provision
    
    1,103
    
    
    724Earnings
      before minorityinterest
    
    1,525
    
    
    923Minority
      interest
    
    297Earnings
      from discontinuedoperation
    $
    1,228
    
    $
    923-29-
Liquidity and Capital
Resources


For the six months ended November 27,
2004, cash dividends, capital expenditures and working capital were funded by cash
reserves and the repayment of intercompany debt by AngioDynamics from the proceeds of its
IPO. Our policy has generally been to fund operations and capital requirements without
incurring significant debt. At November 27, 2004, debt (notes payable, current maturities
of long-term debt and long-term debt) was $718,000, as compared to $767,000 at May 29,
2004. We have available $1,701,000 under a bank line of credit of which no amounts were
outstanding at November 27, 2004.


Our contractual obligations and their
effect on liquidity and cash flows as of November 27, 2004 are set forth in the table
below. We have no variable interest entities or other off-balance sheet obligations.



Payments
      Due By Period as of November 27, 2004Total
    
    Less
      than
      1 year
    
    1-3
      years
    
    3-5
      years
    
    More
      than
      5 years(in
      thousands)Contractual
      Obligations:Long-term
      debt
    $
    270
    
    $
    124
    
    $
    146Notes
      payable
    
    380
    
    
    380Operating
      leases (1)
    
    6,340
    
    
    1,584
    
    
    2,887
    
    $
    1,362
    
    $
    507Purchase
      obligations (1)
    
    6,104
    
    
    5,980
    
    
    124Employment
      contract (1)
    
    680
    
    
    680Consulting
      contracts (1)
    
    108
    
    
    63
    
    
    45Other
      long-term liabilitiesreflected
      on theconsolidated
      balance sheetDeferred
      compensation (2)
    
    2,646
    
    
    16
    
    
    39
    
    
    49
    
    
    2,542Accrued
      retirementbenefits
    
    205
    
    
    32
    
    
    32
    
    
    
    
    
    141Total
    $
    16,733
    
    $
    8,859
    
    $
    3,273
    
    $
    1,411
    
    $
    3,190(1)
The
non-cancelable  operating leases,  purchase obligations,  and employment and consulting
contracts are not reflected on the          consolidated  balance sheet under  accounting
 principles  generally  accepted in the United  States of America.  The purchase
         obligations consist primarily of finished good product and component parts.(2)
Deferred
 compensation costs covering active employees are assumed payable after five years,
 although certain  circumstances,          such as termination, would require earlier
payment.At November 27, 2004, approximately
$24,058,000, or 24%, of our assets consisted of cash and cash equivalents and short-term
debt and equity securities. The current ratio was 6.24 to 1, with net working capital of
$58,943,000, at November 27, 2004, compared to the current ratio of 6.07 to 1, with net
working capital of $88,636,000, at May 29, 2004. The decrease in net working capital
resulted from the spin-off of AngioDynamics. We believe that our cash reserves, cash
provided from continuing operations and our existing bank line of credit will provide
sufficient liquidity to meet our current obligations for the next 12 months.


In March 2003, the Board of Directors
authorized the repurchase of up to 300,000 shares of our common stock at an aggregate
purchase price of up to $3,000,000. During the six months ended November 27, 2004, no
shares were repurchased under this program. In aggregate, we have repurchased 74,234
shares of common stock for approximately $716,000 under this program.


-30-
In June 2003, our Board of Directors
declared a cash dividend of $.25 per outstanding share of our common stock. The dividend
was distributed on August 1, 2003 to shareholders of record as of July 15, 2003. In June
2004, our Board of Directors declared a cash dividend of $.30 per outstanding share of our
common stock. The dividend was distributed on July 1, 2004 to shareholders of record as of
June 15, 2004. Future dividends are subject to our Board of Directors review of
operations and financial and other conditions then prevailing.


Critical Accounting
Policies


Our significant accounting policies
are summarized in Note A to the Consolidated Financial Statements included in our Annual
Report on Form 10-K for our fiscal year ended May 29, 2004. While all these significant
accounting policies affect the reporting of our financial condition and results of
operations, we view certain of these policies as critical. Policies determined to be
critical are those policies that have the most significant impact on our financial
statements and require us to use a greater degree of judgment and/or estimates. Actual
results may differ from those estimates.


We believe that given current facts
and circumstances, it is unlikely that applying any other reasonable judgment or estimate
methodologies would cause a material effect on our consolidated results of operations,
financial position or liquidity for the periods presented in this report. The accounting
policies identified as critical are as follows:


Revenue
Recognition


We recognize revenues in accordance
with generally accepted accounting principles as outlined in Staff Accounting Bulletin No.
104, Revenue Recognition in Financial Statements, which requires that four
basic criteria be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) the price is fixed or determinable; (3) collectibility is
reasonably assured; and (4) product delivery has occurred or services have been rendered.
Decisions relative to criterion (3) regarding collectibility are based upon our judgments,
as discussed under Accounts Receivable below. Should conditions change in the
future and cause us to determine this criterion is not met, our results of operations may
be affected. We recognize revenue on the date the product is shipped, which is when title
passes to the customer. Shipping and credit terms are negotiated on a customer-by-customer
basis. Products are shipped primarily to distributors at an agreed-upon list price. The
distributor then resells the products primarily to hospitals and, depending upon contracts
between us, the distributor and the hospital, the distributor may be entitled to a rebate.
We deduct all rebates from sales and have a provision for rebates based on historical
information for all rebates that have not yet been submitted to us by the distributors.
All product returns must be pre-approved by us and customers may be subject to a 20%
restocking charge. To be accepted, a returned product must be unadulterated, undamaged and
must have at least 12 months remaining prior to its expiration date. We record revenue on
warranties and extended warranties on a straight-line basis over the term of the related
warranty contracts, which generally cover one year. Deferred revenues related to
warranties and extended warranties are $435,000 at November 27, 2004. Service costs are
expensed as incurred.


-31-
Accounts
Receivable


Accounts receivable are generally due
within 30 to 90 days and are stated at amounts due from customers, net of an allowance for
doubtful accounts. We perform ongoing credit evaluations and adjust credit limits based
upon payment history and the customers current credit worthiness, as determined by a
review of their current credit information. We continuously monitor aging reports,
collections and payments from customers, and maintain a provision for estimated credit
losses based upon historical experience and any specific customer collection issues we
identify. While such credit losses have historically been within expectations and the
provisions established, we cannot guarantee the same credit loss rates will be experienced
in the future. We write off accounts receivable when they become uncollectible.
Concentration risk exists relative to our accounts receivable, as 29% of our total
accounts receivable balance at November 27, 2004 is concentrated in one distributor. While
the accounts receivable related to this distributor are significant, we do not believe the
credit loss risk to be significant given the distributors consistent payment
history.


Income Taxes


In preparing our financial
statements, income tax expense is calculated for each jurisdiction in which we operate.
This involves estimating actual current taxes due plus assessing temporary differences
arising from differing treatment for tax and accounting purposes that are recorded as
deferred tax assets and liabilities. Deferred tax assets are periodically evaluated to
determine their recoverability, based primarily on our ability to generate future taxable
income. Where their recovery is not likely, we establish a valuation allowance and record
a corresponding additional tax expense in our statement of earnings. If actual results
differ from our estimates due to changes in assumptions, the provision for income taxes
could be materially affected.


Inventories


We value inventories at the lower of
cost (on the first-in, first-out method) or market. On a quarterly basis, we review
inventory quantities on hand and analyze the provision for excess and obsolete inventory
based primarily on product expiration dating and our estimated sales forecast, which is
based on sales history and anticipated future demand. Our estimates of future product
demand may not be accurate and we may understate or overstate the provision required for
excess and obsolete inventory. Accordingly, any significant unanticipated changes in
demand could have a significant impact on the value of our inventory and results of
operations. At November 27, 2004, our reserve for excess and obsolete inventory was
$1,767,000.


Property,
Plant and Equipment


We state property, plant and
equipment at cost, less accumulated depreciation, and depreciate principally using the
straight-line method over their estimated useful lives. We determine this based on our
estimates of the period over which the asset will generate revenue. Any change in
condition that would cause us to change our estimate of the useful lives of a group or
class of assets may significantly affect depreciation expense on a prospective basis.


-32-
Effects of Recently
Issued Accounting Pronouncements


In November 2004, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 151, Inventory Costs, an amendment of ARB
No. 43, Chapter 4. The amendments made by SFAS No. 151 will improve financial
reporting by clarifying that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period charges
and by requiring the allocation of fixed production overheads to inventory based on the
normal capacity of the production facilities. SFAS No. 151 is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005. Earlier application
is permitted for inventory costs incurred during fiscal years beginning after
November 24, 2004. We are currently evaluating the impact of adoption of SFAS No. 151
on our financial position and results of operations.


In December 2004, the FASB issued
SFAS No. 123 (R), Accounting for Stock-Based Compensation. SFAS No. 123 (R)
establishes standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services. This statement focuses primarily on accounting
for transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123 (R) requires that the fair value of such equity instruments be
recognized as an expense in the historical financial statements as services are performed.
Prior to SFAS No. 123 (R), only certain pro forma disclosures of fair value were required.
SFAS No. 123 (R) shall be effective for us as of the beginning of the first interim
reporting period that begins after June 15, 2005. The adoption of this statement is
expected to have a material impact on our financial statements commencing with the second
quarter ending December 3, 2005.




Item 3.   Quantitative
and Qualitative Disclosures About Market Risk


We are exposed to market risk from
changes in foreign currency exchange rates and, to a much lesser extent, interest rates on
investments and financing, which could impact our results of operations and financial
position. We do not currently engage in any hedging or market risk management tools. There
have been no material changes with respect to market risk previously disclosed in our
Annual Report on Form 10-K for our 2004 fiscal year.


Foreign
Currency Exchange Rate Risk


The financial reporting of our
international subsidiaries is denominated in currencies other than the U.S. dollar. Since
the functional currency of our international subsidiaries is the local currency, foreign
currency translation adjustments are accumulated as a component of accumulated other
comprehensive income in stockholders equity. Assuming a hypothetical aggregate
change in the exchange rates of foreign currencies versus the U.S. dollar of 10% at
November 27, 2004, our assets and liabilities would increase or decrease by $3,545,000 and
$462,000, respectively, and our net sales and net earnings would increase or decrease by
$2,376,000 and $394,000, respectively, on an annual basis.


We also maintain intercompany
balances and loans receivable with subsidiaries with different local currencies. These
amounts are at risk of foreign exchange losses if exchange rates fluctuate. Assuming a
hypothetical aggregate change in the exchange rates of foreign currencies versus the U.S.
dollar of 10% at November 27, 2004, our pre-tax earnings would be favorably or unfavorably
impacted by approximately $884,000 on an annual basis.


-33-
Interest Rate
Risk


Our excess cash is invested in highly
liquid, short-term, investment grade securities with maturities of less than one year.
These investments are not held for speculative or trading purposes. Changes in interest
rates may affect the investment income we earn on cash, cash equivalents and debt
securities and therefore affect our cash flows and results of operations. As of November
27, 2004, we were exposed to interest rate change market risk with respect to our
investments in tax-free municipal bonds in the amount of $16,090,000. The bonds bear
interest at a floating rate established weekly. For the six months ended November 27,
2004, the after-tax interest rate on the bonds approximated 1.3%. Each 100 basis point (or
1%) fluctuation in interest rates will increase or decrease interest income on the bonds
by approximately $161,000 on an annual basis.


As our principal amount of fixed
interest rate financing approximated $718,000 at November 27, 2004, a change in interest
rates would not materially impact results of operations or financial position. At November
27, 2004, we did not maintain any variable interest rate financing.


As of November 27, 2004, we have
available $1,701,000 under a working capital bank line of credit. Advances under this line
of credit will bear interest at an annual rate indexed to prime. We will thus be exposed
to interest rate risk with respect to this credit facility to the extent that interest
rates rise when there are amounts outstanding under this facility.




Item 4.   Controls
and Procedures


Evaluation of
Disclosure Controls and Procedures


As of the end of the period covered
by this report, our management, under the supervision and with the participation of our
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b)
of the Securities Exchange Act of 1934, as amended (the Exchange Act). Based
on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded
that our disclosure controls and procedures as of the end of the period covered by this
report have been designed and are functioning effectively to provide reasonable assurance
that the information we (including our consolidated subsidiaries) are required to disclose
in reports filed under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commissions rules
and forms. We believe that a controls system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the controls system are met, and
no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within a company have been detected.


Changes in
Internal Controls over Financial Reporting


No significant changes were made in
our internal controls over financial reporting or in other factors that could
significantly affect these controls during the quarter ended November 27, 2004.


-34-
E-Z-EM, Inc.
and Subsidiaries


Part II:
Other Information




Item 1.   Legal Proceedings


We have been notified by a
competitor that it believes specific claims contained in issued United States patents
owned by this competitor may be relevant to certain features of our Empower CT injector.
We are currently in discussions to resolve this matter, and the extent of any liability
is not estimable at this time.


Certain other legal proceedings in
which we are involved are discussed in Part I, Item 3 of our Annual Report on Form 10-K
for the fiscal year ended May 29, 2004.




Item 2.   Unregistered Sales of
Securities and Use of Proceeds


On November 1, 2004, we issued 2,000
shares of common stock to our Chairman of the Board,  Howard S. Stern,  and 1,000 shares
of common stock to each of our following directors:  Robert J. Beckman,  Michael A.
Davis, Paul S. Echenberg,  James L. Katz, David P. Meyers and George P. Ward. All such
shares were issued in  consideration  for services  rendered as directors and were issued
 pursuant to Section 4(2) of the  Securities  Act of 1933.  The basis  upon which the
 exemption  is claimed  is that the  shares  were  issued  only to our directors in
transactions not involving any public offering.




Item 3.   Defaults Upon Senior
Securities


None.




Item 4.   Submission Of Matters to a
Vote of Security Holders


At the Annual Meeting of Shareholders
held on October 26, 2004, the following persons were elected as directors of the Company:


Class
II Directors:(until the 2007 Annual Meeting)Robert J. BeckmanPaul S. EchenbergJohn T. PrestonIn this election,  10,270,624,
 10,131,497 and 10,247,002 votes were cast for Mr. Beckman, Mr. Echenberg and Mr.
Preston, respectively, and 304,716, 443,843 and 328,338 shares were withheld from voting
for Mr. Beckman, Mr. Echenberg and Mr. Preston, respectively.


Our 2004 Stock and Incentive Award
Plan was approved by a vote of 6,264,722 in favor, 1,584,964 against, 34,203 shares
abstaining and 2,691,451 broker non-votes.


-35-
The action of the Board of Directors
in appointing Grant Thornton LLP as our independent auditors for our fiscal year ending
May 28, 2005 was ratified by a vote of 10,509,768 in favor, 17,794 against and 47,778
shares abstaining.




Item 5.   Other Information


None.




Item 6.   Exhibits



No.
    Description
    Page3.1
    Restated
      Certificate of Incorporation of the Registrant, asAmended
    (a)3.2
    Bylaws
      of the Registrant, as amended
    (b)31.1
    Certification
      pursuant to Rule 13a-14(a)/15d-14(a) as adoptedpursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002(Anthony
      A. Lombardo)
    3831.2
    Certification
      pursuant to Rule 13a-14(a)/15d-14(a) as adoptedpursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002(Dennis
      J. Curtin)
    3932.1
    Certification
      pursuant to Title 18, United States Code, Section1350
      as adopted pursuant to Section 906 of the Sarbanes-OxleyAct
      of 2002 (Anthony A. Lombardo)
    4032.2
    Certification
      pursuant to Title 18, United States Code, Section1350
      as adopted pursuant to Section 906 of the Sarbanes-OxleyAct
      of 2002 (Dennis J. Curtin)
    41(a)
Incorporated
by reference to Exhibit 3(i) to the Registrants                   Annual Report on Form
10-K for the fiscal year ended May 31,                   1997, filed under Commission
File No. 1-11479, and to Exhibit                   1 to the Registrants Registration
Statement on Form 8-A filed                   with the Commission on October 22, 2002.(b)
Incorporated
by reference to Exhibit 3(ii) to the Registrants                   Annual Report on Form
10-K for the fiscal year ended May 28,                   1994, filed under Commission
File No. 0-13003.-36-
SIGNATURES


Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

Date January 11, 2005
               
    
    E-Z-EM, Inc.
      
      
      (Registrant)
      /s/ Anthony A. Lombardo
      
      Anthony A. Lombardo, President,
      Chief Executive Officer, DirectorDate January 11, 2005
               
    
    /s/ Dennis J. Curtin
      
      Dennis J. Curtin, Senior Vice
      President - Chief Financial
      Officer (Principal Financial and
      Chief Accounting Officer)-37-