HALTOM CITY, Texas, April 12, 2002 (PRIMEZONE) -- PharmChem, Inc. (Nasdaq:PCHM) today reported net sales of $10,029,000 for the fourth quarter ended December 31, 2001, a decrease of 21.0% from 2000 net sales of $12,688,000. The Company's net loss in the quarter was $548,000, or $0.09 per share, compared to net income last year of $302,000, or $0.05 per share.
Net sales for 2001 were $43,977,000, a decrease of 6.1% from 2000's net sales of $46,832,000. The Company reported a net loss of $8,476,000, or $1.45 per share, for the year versus net income in 2000 of $1,361,000, or $0.22 per share.
The year-to-date loss for 2001 includes non-recurring expenses associated with the relocation to Texas of $5,867,000, or $1.00 per share, as well as a restructuring charge recorded in the second quarter of $1,029,000, or $0.18 per share, to provide for costs related to closing the Company's main facility in Northern California, including severance, environmental evaluation and clean-up, legal and related expenses. On a pro-forma basis, the net loss for 2001 would have been $1,580,000, or $0.27 per share, if these non-recurring expenses and the restructuring provision were excluded.
Domestic revenues were lower by 25.2% in the fourth quarter this year versus the same period last year as specimen volume decreased by 27.3%. Declines in workplace volume comprised most of the decrease in specimen volume in the fourth quarter and the full year as the overall economic downturn, which worsened after September 11, caused a slow down of pre-employment testing. This weakness has continued in 2002. For the year, domestic net sales were lower than those in 2000 by 7.2%.
Net sales of products and other non-laboratory services in the U.S. fell 20.7% in the fourth quarter reflecting a slow down in all phases of drug testing. For the year, these sales increased 13.8%. Consolidated sales of products and other non-laboratory services were 16.8% of net sales in 2001 compared to 14.0% in 2000.
Since November 2001, the Company has laid off 30% of its U.S. workforce. The annualized savings resulting from these layoffs are estimated to be $3 million. The layoffs in the fourth quarter of 2001 included the closure of the Company's methadone laboratory in Menlo Park, California which generated about $700,000 in annual revenue. This type of testing (performed only in California) was being de-emphasized during 2001 and will not significantly impact ongoing operations.
Medscreen, the Company's London-based subsidiary, saw its fourth quarter specimen volume rise 1.1% while total net sales increased 3.4%. On March 25, 2002, the sale of 100% of the share capital of Medscreen was completed for approximately $10.0 million. The proceeds will be used to pay down existing bank debt and for general corporate purposes. The transaction will be recorded in the first quarter of 2002. The Company recently filed a Form 8-K with the Securities and Exchange Commission including pro-forma financial statements regarding this transaction.
On March 1, 2002, the Company entered into an Amendment and Forbearance Agreement with its primary lender providing, among other things, for a partial repayment of outstanding indebtedness following the sale of Medscreen. All conditions of this Agreement have been met. The Company's primary lender has waived certain financial ratio covenant violations which existed at September 30 and December 31, 2001.
EBITDA was $419,000 (4.2% of net sales) for the fourth quarter of 2001 versus $1,210,000 (9.5% of net sales) for the same period last year. Excluding the current year's non-recurring expenses and the restructuring provision described above, EBITDA, on a pro-forma basis for 2001, would have been $1,635,000 (3.7% of sales), versus $4,643,000 (9.9% of sales) last year.
Capital expenditures were $5,345,000 in 2001, while depreciation and amortization amounted to $2,297,000.
The foregoing may include certain forward-looking statements which involve risks and uncertainties including, without limitation, competitive conditions, economic conditions, credit availability, the possibility that contracts may be terminated or not renewed, customer acceptance of new products 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, 2001.
The Company's Annual Meeting of Stockholders will be held on May 14, 2002 for stockholders of record on April 1, 2002. Proxies and related material will be mailed on or about April 22, 2002.
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.
PHARMCHEM, INC.
Consolidated Statements of Operations
(000's omitted except per share amounts and percentages)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------- -----------------
2001 2000 2001 2000
------- ------- ------- -------
Net sales $10,029 $12,688 $43,977 $46,832
Cost of sales 7,764 9,182 36,544 * 32,915
------- ------- ------- -------
Gross profit 2,265 3,506 7,433 13,917
Operating expenses and
goodwill amortization 2,451 2,894 13,962 * 11,526
Restructuring charge - - 1,029 -
------- ------- ------- -------
Subtotal 2,451 2,894 14,991 11,526
------- ------- ------- -------
Income (loss) from operations (186) 612 (7,558) 2,391
------- ------- ------- -------
Interest expense 155 54 431 281
Other expense (income), net 60 37 16 (23)
------- ------- ------- -------
215 91 447 258
------- ------- ------- -------
Income (loss) before
income taxes (401) 521 (8,005) 2,133
Provision for income taxes 147 219 471 772
------- ------- ------- -------
Net income (loss) $ (548) $ 302 $(8,476) $ 1,361
======= ======= ======= =======
Net income (loss) per share** $ (0.09) $ 0.05 $ (1.45) $ 0.22
======= ======= ======= =======
Weighted average shares** 5,853 6,063 5,851 6,069
======= ======= ======= =======
EBITDA*** Amount $ 419 $ 1,210 $ 1,635 $ 4,643
======= ======= ======= =======
Margin 4.2% 9.5% 3.7% 9.9%
======= ======= ======= =======
* Includes non-recurring expenses associated with the Company's
relocation to Texas of $4,106 in cost of sales and $1,761 in
operating expenses for twelve months ended December 31, 2001.
** Per share earnings and weighted average shares included
in this press release are on a diluted basis
*** Earnings before taxes, interest, other expense (income),
depreciation, amortization and, for the twelve months ended
December 31, 2001, before non-recurring expenses and
restructuring charge.
Condensed Consolidated Balance Sheets
(000's omitted)
(unaudited)
December 31,
--------------------
2001* 2000
-------- --------
Current assets $11,072 $12,793
Non-current assets 17,425 14,472
-------- --------
Total $28,497 $27,265
======== ========
Current liabilities $17,325 $10,386
Non-current liabilities 4,434 1,884
Stockholders' equity 6,738 14,995
-------- --------
Total $28,497 $27,265
======== ========
* Before application of proceeds from sale of Medscreen, Ltd.