Exhibit 99.1
April 14, 2003, Redmond, WA ---Alcide Corporation (NASDAQ:ALCD) today released financial results for its fiscal third quarter and nine-month periods ended February 28, 2003.
Third quarter significant events include:
• SANOVA® system installed at the first ground beef operation during quarter (start up on March 3rd).
• SANOVA system installed at the first sausage operation (start up on March 5th).
• Received formal approval for use of SANOVA on meat, poultry, fruits and vegetables and fish in Chile. Expect sales to the aquaculture industry in FY ‘04.
• Negotiated a SANOVA distribution arrangement with Agrotec for meat and poultry in Chile. Expect sales to begin in early FY ‘04.
• The animal health products licensing arrangement with IBA is achieving anticipated results. Gross margin earned by Alcide increased 47% for the third quarter as compared to the third quarter last year.
• Marketing programs initiated one year ago concurrent with appointment of a new distributor in France are beginning to pay off. Third quarter sales by the distributor to farmers in France are 42% higher than the distributor’s sales to farmers in the second quarter of FY ‘03.
• Severe economic conditions in the US poultry industry caused SANOVA sales to be an estimated $468,000 lower than they otherwise would have been. (See Table below.)
For the quarter, Alcide earned $280,000 or $0.10 per diluted share on revenues of $5.5 million. In the third quarter a year ago, Alcide earned $540,000, or $0.20 per diluted share, on revenues of $5.5 million. In the first nine months of the fiscal year, Alcide generated net income of $776,000, or $0.29 per diluted share, on revenues of $16.3 million compared to $1.3 million or $0.48 per diluted share, on revenues of $16.6 million in the like period a year earlier.
The Company will host a conference call at 11:00 am PDT (2:00 pm EDT) on April 15, 2003. Interested parties should check the website at www.alcide.com.
SANOVA Food Safety
Sales of SANOVA food antimicrobial to the poultry and red meat industries totaled $3,223,735 for the quarter ended February 28, 2003, $28,083 lower than the third fiscal quarter last year. At the end of the fiscal 2003 quarter, SANOVA systems were contracted for and installed at 38 poultry plants and 10 red meat plants. Three of the poultry plants were using SANOVA applications both pre-chill and post-chill, thus bringing the total to 51 operations at quarter’s end. Two of the poultry operations and 3 of the red meat operations did not contribute significant revenue during the quarter. SANOVA sales for the nine-month period ended February 28, 2003 were $10,121,193, an increase of $1,275,176, or 14%, compared to the equivalent nine-month period last year.
SANOVA sales to the poultry industry during the fiscal 2003 three-month and nine-month periods would have been higher had they not been adversely affected by economic conditions within the poultry industry, which in turn, have caused SANOVA customers to reduce their use of SANOVA, discontinue using antimicrobial interventions altogether, or in the case of one plant, switch to lower priced competition, as expressed in the table below:
Estimated Negative Impact on Fiscal 2003 Sales
| | Quarter Ended
February 28, 2003 | | Nine Months Ended
February 28, 2003 | |
| | | | | |
3 plants discontinued SANOVA use | | $ | 272,000 | | $ | 826,000 | |
1 plant switched to competitor’s product | | $ | 55,000 | | $ | 119,000 | |
Reduced production at several plants | | $ | 141,000 | | $ | 146,000 | |
| | | | | |
| | $ | 468,000 | | $ | 1,091,000 | |
John Richards, President of Alcide Corporation commented that, “We had clearly hoped for a stronger economic scenario in the poultry industry. Within this climate however, Alcide has improved its competitive position. During the nine-month period we installed 13 new operations of which 6 were in the poultry sector. Equally important, we negotiated contract extensions with 16 of our existing poultry customers and lost only 1 customer in a very competitive market place. Three of our new customers switched from competitive products to SANOVA’s superior technology.”
International registrations of SANOVA are proceeding faster than originally expected. Kere Kemp, the Company’s Chief Scientific Officer, stated that, “The formal approval for SANOVA use in Chile presents a major opportunity in the world’s second largest fish exporter which supplies more than half of the farm-raised salmon consumed in the United States. The sales and marketing effort has now begun in Chile to the aquaculture, poultry and red meat markets. In Canada, SANOVA contracts have been presented to and are under consideration by several large poultry and red meat processors.” Dr. Kemp went on to say, “We have been notified by the authorities in Australia and New Zealand that Alcide’s petition has been accepted and is under final review. Approval is expected late this calendar year. Likewise, our petition for use on fish has been accepted by the United States Food and Drug Administration and we expect approval later this year.”
Animal Health and Surface Disinfectants
The Company’s animal health and surface disinfectant revenues for the quarter ended February 28, 2003 were $2,279,859, including $330,722 in license revenue, which did not exist prior to the first fiscal quarter of 2003. Net revenue including license revenue for the third fiscal 2003 quarter was $31,425 higher than for the third fiscal quarter last year. Nine-month fiscal 2003 animal health and surface disinfectant sales and license revenue of $6,206,145 were $1,579,900 lower than for the nine-month period last year reflecting primarily changes in distributor inventory levels which occurred during the first four months of the Company’s fiscal year 2003. In the United Kingdom, the Company established a new distributor relationship with Agri-Lloyd beginning September 15, 2002, while the Company’s previous distributor liquidated its inventory of Alcide products resulting in a $280,000 sales reduction from the prior year. In the United States, Alcide introduced UDDERgold 5-Star, an advanced new product, in early October 2002, intended to maintain the Company’s performance edge in the mastitis prevention market. In anticipation of the new product launch, U.S. distributors delayed their purchases, accounting for a reduction of an estimated $350,000 in sales activity during the first four months of fiscal 2003. Lastly, IBA, the Company’s largest distributor, transitioned from a distributor arrangement with Alcide to a licensing arrangement and this transition had the effect of reducing sales to IBA by an estimated $800,000 during the first nine-month period of fiscal year 2003. The gross margin impact of the sales reduction is estimated at $200,000, attributable entirely to inventory reduction. This reduction occurred in the first quarter of fiscal year 2003 as IBA sold through its existing inventory of Alcide produced products and began making IBA produced products.
“The severe winter in the upper Midwest and Northeast had a very positive impact on animal health sales in the third quarter.”, said James Winter, Corporate VP, and General Manager Animal Health. “The new WOOLOVER ULTRA calf blanket was a hot item as newborn calves were under severe stress from the cold weather. Also, the cold and wind creates severe chapping of bovine teats without a good conditioning teat dip like 4XLA. Our 4XLA sales thru IBA and Select Sires were up 32% for the third quarter.” Winter concluded that, “We experienced a weak first quarter with animal health and disinfectant revenue of $1.7 million as we took action to strengthen Alcide’s distribution network. The second and third quarters with sales of $2.2 million and $2.3 million are beginning to reflect a more normal sales pattern consistent with distributors’ sales to dairy farmers.”
Balance Sheet and Cash Flow
Alcide’s balance sheet remains strong. On February 28, 2003, the Company had $3.7 million in cash and cash equivalents, no long-term debt and had drawn $2 million on its line of credit (repaid during March 2003). Net cash provided by operating activities was $2.7 million for the nine-months ended February 28, 2003, up 2% as compared to the same nine-month period last fiscal year.
About Alcide
Alcide Corporation develops and markets unique biocidal products based on its patented technology. Alcide currently sells anti-infective products to the animal health market, disinfecting products to medical industries and SANOVA antimicrobial for controlling food borne pathogens and spoilage microorganisms on poultry, red meat, fish, and fruits and vegetables.
This earnings report includes forward looking statements which involve risk and uncertainty including, without limitation, risk of dependence on third party suppliers, market acceptance of and demand for the Company’s products, distribution capabilities and development of technology and regulatory approval thereof.
Investors are encouraged to refer to the Company’s 10-Q report for the quarter and nine-month periods ended February 28, 2003 for a more detailed explanation of financial performance.
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ALCIDE CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| | February 28, 2003 | | May 31, 2002 | |
Assets: | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 3,723,597 | | $ | 2,847,581 | |
Accounts receivable – trade, net | | 3,855,553 | | 2,849,103 | |
Inventory | | 2,015,538 | | 1,823,691 | |
Deferred and prepaid income taxes | | 311,204 | | 434,200 | |
Spare parts | | 838,808 | | 652,620 | |
Prepaid expenses and other current assets | | 323,266 | | 412,118 | |
Total current assets | | 11,067,966 | | 9,019,313 | |
Equipment and leasehold improvements: | | | | | |
SANOVA plant assets | | 16,638,289 | | 14,376,961 | |
Construction in progress | | 2,508,743 | | 3,009,716 | |
Office equipment | | 564,323 | | 553,539 | |
Laboratory, manufacturing equipment and vehicles | | 523,718 | | 451,824 | |
Leasehold improvements | | 73,483 | | 73,483 | |
Less: Accumulated depreciation and amortization | | (8,836,531 | ) | (6,118,278 | ) |
Total equipment and leasehold improvements, net | | 11,472,025 | | 12,347,245 | |
Goodwill | | 478,807 | | 478,807 | |
Other assets | | 16,430 | | 19,968 | |
Total Assets | | $ | 23,035,228 | | $ | 21,865,333 | |
Liabilities and Shareholders’ Equity: | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 810,074 | | $ | 743,514 | |
Accrued expenses | | 385,555 | | 626,953 | |
Line of credit payable | | 2,000,000 | | 2,000,000 | |
Total current liabilities | | 3,195,629 | | 3,370,467 | |
Deferred tax liability | | 585,500 | | 94,837 | |
Other long-term liabilities | | — | | 26,346 | |
Total Liabilities | | 3,781,129 | | 3,491,650 | |
Commitments and Contingencies | | | | | |
Redeemable Class “B” Preferred Stock – $.01 par value; authorized 10,000,000 shares; issued and outstanding:
February 28, 2003 – 63,675; May 31, 2002 – 68,425 | | 167,145 | | 179,614 | |
| | | | | |
Shareholders’ equity: | | | | | |
Class “A” Preferred Stock – no par value, authorized 1,000 shares; issued and outstanding:
February 28, 2003 – 138; May 31, 2002 – 138 | | 18,636 | | 18,636 | |
Common Stock – $.01 par value; authorized 100,000,000 shares; issued:
February 28, 2003 – 3,040,597; May 31, 2002 – 3,031,292 | | 30,406 | | 30,313 | |
| | | | | |
Common treasury stock at cost
February 28, 2003 – 375,959; May 31, 2002 - 375,959 | | (7,144,721 | ) | (7,144,721 | ) |
Additional paid-in capital | | 21,502,827 | | 21,386,417 | |
Retained earnings | | 4,679,806 | | 3,903,424 | |
Total Shareholders’ Equity | | 19,086,954 | | 18,194,069 | |
Total Liabilities and Shareholders’ Equity | | $ | 23,035,228 | | $ | 21,865,333 | |
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ALCIDE CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | For the Three Months Ended
February 28, | | For the Nine Months Ended
February 28, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
Revenue: | | | | | | | | | |
Net sales | | $ | 5,172,872 | | $ | 5,500,252 | | $ | 15,736,462 | | $ | 16,632,062 | |
License revenue | | 330,722 | | — | | 590,876 | | — | |
Total revenue | | 5,503,594 | | 5,500,252 | | 16,327,338 | | 16,632,062 | |
Expenditures: | | | | | | | | | |
Cost of goods sold | | 3,095,239 | | 2,913,369 | | 8,986,635 | | 8,643,194 | |
Research and development expense | | 520,678 | | 573,978 | | 1,674,636 | | 2,058,993 | |
Consulting expense to related parties | | 15,000 | | 15,000 | | 45,000 | | 59,000 | |
Selling, general and administrative expense | | 1,441,805 | | 1,167,953 | | 4,421,222 | | 3,906,317 | |
Total expenditures | | 5,072,722 | | 4,670,300 | | 15,127,493 | | 14,667,504 | |
Operating income | | 430,872 | | 829,952 | | 1,199,845 | | 1,964,558 | |
Interest income | | 5,945 | | 11,693 | | 20,013 | | 63,826 | |
Interest expense | | (15,219 | ) | (20,591 | ) | (53,072 | ) | (67,549 | ) |
Other income | | 8,862 | | 10,203 | | 27,646 | | 39,142 | |
Income before provision for income taxes | | 430,460 | | 831,257 | | 1,194,432 | | 1,999,977 | |
Provision for income taxes | | 150,661 | | 290,941 | | 418,051 | | 699,992 | |
Net income | | $ | 279,799 | | $ | 540,316 | | $ | 776,381 | | $ | 1,299,985 | |
Basic earnings per common share | | $ | .11 | | $ | .20 | | $ | .29 | | $ | .49 | |
Diluted earnings per common share and equivalents | | $ | .10 | | $ | .20 | | $ | .29 | | $ | .48 | |
Weighted average common stock and dilutive potential common stock outstanding: | | | | | | | | | |
Basic | | 2,659,910 | | 2,648,614 | | 2,657,352 | | 2,640,358 | |
Diluted | | 2,682,765 | | 2,715,849 | | 2,681,962 | | 2,722,643 | |
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ALCIDE CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | For the Nine Months Ended February 28, | |
| | 2003 | | 2002 | |
Cash Flows from Operating Activities: | | | | | |
Net income | | $ | 776,381 | | $ | 1,299,985 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation | | 2,718,253 | | 1,992,899 | |
Amortization of investment premiums | | — | | 483 | |
Tax benefit from exercise of stock options | | 9,392 | | 97,820 | |
Deferred income taxes | | 418,659 | | 625,392 | |
Common stock issued to employee stock ownership plan | | 53,906 | | 138,444 | |
Decrease (increase) in assets: | | | | | |
Accounts receivable – trade, net | | (1,006,450 | ) | (1,189,038 | ) |
Inventory | | (191,847 | ) | (104,982 | ) |
Prepaid income taxes | | 195,000 | | (47,620 | ) |
Spare parts | | (186,188 | ) | (146,626 | ) |
Prepaid expenses and other current assets | | 88,852 | | 113,344 | |
Other assets | | 3,539 | | 21,205 | |
Increase (decrease) in liabilities: | | | | | |
Accounts payable | | 66,560 | | (46,864 | ) |
Accrued expenses | | (241,398 | ) | (184,016 | ) |
Other long-term liabilities | | (26,346 | ) | 43,500 | |
Net cash provided by operating activities | | 2,678,313 | | 2,613,926 | |
Cash Flows from Investing Activities: | | | | | |
Sale of investments | | — | | 1,493,196 | |
Acquisition of equipment, net | | (1,843,033 | ) | (4,543,431 | ) |
Net cash used in investing activities | | (1,843,033 | ) | (3,050,235 | ) |
Cash Flows from Financing Activities: | | | | | |
Redemption of Class “B” Preferred Stock | | (12,469 | ) | (10,763 | ) |
Borrowing on line of credit | | — | | 1,000,000 | |
Exercise of stock options | | 53,205 | | 124,935 | |
Net cash provided by financing activities | | 40,736 | | 1,114,172 | |
Net increase in cash and cash equivalents | | 876,016 | | 677,863 | |
Cash and cash equivalents at beginning of period | | 2,847,581 | | 839,103 | |
Cash and cash equivalents at end of period | | $ | 3,723,597 | | $ | 1,516,966 | |
Supplemental Disclosures of Cash Flow Information: | | | | | |
Cash paid during the period for income taxes | | $ | 10,000 | | $ | 130,000 | |
Cash paid during the period for interest | | $ | 53,072 | | $ | 67,549 | |
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