FOR IMMEDIATE RELEASE
Haltom City, TX; March 20, 2003 -- PharmChem, Inc. (NASDAQ: PCHM) today reported net sales
from continuing operations of $7,227,000 for the fourth quarter ended December
31, 2002, a decrease of 10.5% from 2001 net sales of $8,078,000. The Company’s net income from continuing
operations in the quarter was $49,000, or $0.01 per share, compared to a net
loss from continuing operations last year of $824,000, or $0.14 per share.
The prior year results include $33,000 of goodwill amortization which, under SFAS No. 142, adopted by the Company effective January 1, 2002, is no longer required. Excluding the amortization of goodwill, the net loss from continuing operations for 2001’s fourth quarter, on a pro forma basis, would have been $791,000, or $0.14 per share.
Net sales from continuing
operations for 2002 were $30,085,000, a decrease of 17.7% from last year’s
net sales of $36,566,000. The Company
reported a net loss from continuing operations of $1,294,000, or $0.22 per
share, for the year versus a loss last year from continuing operations of
$9,475,000, or $1.62 per share.
Last
year’s results include $5,867,000 of nonrecurring costs related to the
Company’s relocation to Texas, a $1,029,000 restructuring charge and
$130,000 of goodwill amortization. As
previously reported, in connection with the closure of the Menlo Park, California
facility, the Company recorded a restructuring charge of $1,029,000 in the
second quarter of 2001 which included severance, clean up, remediation, repairs,
legal and other estimated costs. As
of December 31, 2002, $795,000 had been charged against this accrual.
Excluding these nonrecurring
costs, the restructuring charge and the amortization of goodwill, the net
loss from continuing operations in 2001, on a pro forma basis, would have
been $2,449,000, or $0.42 per share.
These amounts exclude the
results of Medscreen, which, as previously reported, was sold in March 2002,
and are being reported as discontinued operations. The net loss in the fourth quarter of 2001 after the inclusion of
income from discontinued operations of $277,000, or $0.05 per share, was $547,000,
or $0.09 per share. There were no
discontinued operations in the fourth quarter of 2002.
After
including Medscreen’s net income of $359,000 in 2002 (which represents
three months of operations) versus $999,000 in 2001 (representing twelve months
of operations), and the net gain in 2002 on the sale of Medscreen of $4,277,000,
the Company reported net income of $3,342,000, or $0.57 per share, for 2002,
compared to a net loss of $8,476,000, or $1.45 per share, for the same period
last year.
Specimen volume was lower
by 16.1% in the fourth quarter this year versus the same period last year. Volume declines were experienced in each of
the customer classes in the fourth quarter and the full year as a result of
the economic downturn and the use, by some customers, of competitive products.
Net
sales of products and other non-laboratory services in the U.S. rose 4.8%
in the fourth quarter. For the year, these sales were lower, however,
by 5.1%. Sales of products and other
non-laboratory services were 21.7% of net sales in 2002 compared to 18.8%
in 2001.
For 2002, cost of sales and operating expenses amounted to $30,868,000, versus, on a pro forma basis, $38,667,000 for the same period a year ago (excluding nonrecurring costs, the restructuring charge and amortization of goodwill). This represents a 20.2% reduction in expenses compared to a net sales decline of 17.7%. Since August 2001, the Company has laid off 30% of its U.S. workforce. The annualized savings resulting from these layoffs are estimated to be $2.7 million.
Capital expenditures for 2002 were $1,415,000 versus
$5,275,000 last year; depreciation and amortization expenses were $2,251,000
this year compared to $2,028,000 last year; and EBITDA was $1,468,000 (4.9%
of net sales) in 2002 and negative $203,000 (0.6% of net sales) in 2001. EBITDA is before income from discontinued operations,
the gain on the sale of Medscreen and, in 2001, $6,896,000 of nonrecurring
costs related to the Company’s relocation and the restructuring charge.
On
February 20, 2003, the Company received notification from Nasdaq that, for
the past 30 consecutive trading days, the Company’s common stock has
not maintained a minimum market value of publicly held shares of $1 million
as required for inclusion by Marketplace Rule 4310(c)(7).
Publicly held shares exclude shares held directly or indirectly by
any officer or director of the Company or by any person who is beneficial
owner of more than 10% of total shares outstanding.
As a result, the Company will be provided with 90 calendar days, or
until May 21, 2003, to regain compliance.
If, at anytime before May 21, 2003, such market value is $1,000,000
or more for a minimum of 10 consecutive trading days, Nasdaq will provide
written notification that the Company is in compliance. If compliance cannot be demonstrated by May 21, 2003, Nasdaq will
provide written notification that the Company’s securities will be delisted. At that time, the Company may appeal to a Listing
Qualifications Panel.
In
addition, as previously reported, the Company is not in compliance with the
$1.00 minimum bid price as required for listing on the Nasdaq SmallCap Market. The Company has been granted a grace period
until April 7, 2003, to comply with this rule.
On January 30, 2003, Nasdaq announced plans to extend its pilot program
governing bid price rules whereby the grace period for Nasdaq SmallCap issuers
demonstrating compliance with initial listing criteria would be extended up
to 540 days from 180 days. Such plan
will be presented to the Securities and Exchange Commission for approval.
The
foregoing may include certain forward-looking statements which involve risks
and uncertainties including, without limitation, competitive conditions, economic
conditions, credit availability, customer concentration, the possibility that
contracts may be terminated or not renewed, and regulatory issues. These and
other factors affecting operating results will be included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2002.
The Company’s Annual
Meeting of Stockholders will be held on May 13, 2003 for stockholders of record
on April 1, 2003. Proxies and related
material will be mailed on or about April ญญญ19, 2003.
PharmChem is a leader in the field of providing services to clients seeking to detect and deter the use of illegal drugs. PharmChem operates a certified forensic drug testing laboratory in Haltom City, Texas.
