EXHIBIT 99.1
PRO FORMA FINANCIAL INFORMATION
On March 25, 2002, the Registrant completed the sale of all of the share capital
of Medscreen, Limited, its London-based, wholly owned subsidiary ("Medscreen")
for approximately $10.0 million in cash (the "Sale") to Newincco 140 Limited,
a newly formed investee company (created to acquire Medscreen) of Sagitta
European Private Equity Partners, II L.P. ("Newincco"). Medscreen, a certified
laboratory, provided drug testing services to customers in Europe and the United
Kingdom. Of the $10.0 million consideration, $1.8 million was used to repay
Medscreen's indebtedness to its bank, as of the business date prior to the
closing of the Sale. In the event Newincco sells Medscreen within 12 months of
the date of the closing of the Sale, the Registrant would, during the first six
months, be entitled to 50% of the excess of the new selling price over the $10.0
million received by the Company (as adjusted pursuant to the terms of the
agreement) and 25% of such excess during the second six months. The
consideration for the Sale was determined through arms length negotiations
between the Registrant and Newincco. There is no relationship between the
Registrant, any of its affiliates, any of its directors or officers, or any
associates of such directors and officers, and Newincco.
The sale of the Medscreen, Limited business results in the disposal of
approximately 23% of consolidated net assets and 17% of consolidated net sales.
This will result in the Registrant presenting the operations of Medscreen,
Limited as Discontinued Operations under SFAS No. 144 in our future 10-Q and
10-K filings. Accordingly, the accompanying pro forma condensed consolidated
financial statements illustrate the effect of the disposition ("Pro Forma") on
the Registrant's financial position as of December 31, 2001 and results of its
operations for each of the years in the three-year period ended December 31,
2001, as if the disposition occurred on January 1, 1999.
The pro forma condensed financial statements have been prepared pursuant to
Article XI of Regulation S-X and may not be indicative of what the actual
operating results would have been had the transaction occurred at the earlier
date assumed in the pro forma statements of operations.
The accompanying condensed consolidated pro forma financial statements should be
read in connection with the historical consolidated financial statements of
PharmChem, Inc. and subsidiary.
PHARMCHEM, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
UNAUDITED
(IN THOUSANDS)
PRO FORMA PRO
HISTORICAL ADJUSTMENTS(1) FORMA
---------- -------------- -------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................. $ 1,137 $ 7,026 $ 8,163
Accounts receivable, net .............................. 6,402 (1,024) 5,378
Inventory ............................................. 2,304 (144) 2,160
Deferred tax asset .................................... 390 -- 390
Prepaids and other current assets ..................... 839 (301) 538
-------- -------- --------
TOTAL CURRENT ASSETS .............................. 11,072 5,557 16,629
-------- -------- --------
PROPERTY AND EQUIPMENT, net ............................. 14,199 (1,284) 12,915
OTHER ASSETS ............................................ 791 (28) 763
GOODWILL, net of accumulated amortization ............... 2,435 (1,706) 729
-------- -------- --------
$ 28,497 $ 2,539 $ 31,036
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit .............................. $ 4,544 $ -- $ 4,544
Current portion of long-term debt ..................... 3,149 (481) 2,668
Accounts payable ...................................... 6,312 (377) 5,935
Accrued compensation, collectors and other liabilities 3,320 (1,026) 2,294
-------- -------- --------
TOTAL CURRENT LIABILITIES ......................... 17,325 (1,884) 15,441
-------- -------- --------
LONG TERM DEBT, net of current portion .................. 4,336 (1,306) 3,030
OTHER NONCURRENT LIABILITIES ............................ 98 (98) --
-------- -------- --------
TOTAL LIABILITIES ................................. 21,759 (3,288) 18,471
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, 25,000 shares
authorized, 5,853 issued and outstanding at
December 31, 2001.................................... 6 -- 6
Additional paid-in capital ............................ 19,589 -- 19,589
Accumulated other comprehensive loss .................. (279) 279 --
Accumulated deficit ................................... (12,578) 5,548 (7,030)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY ........................ 6,738 5,827 12,565
-------- -------- --------
$ 28,497 $ 2,539 $ 31,036
======== ======== ========
PHARMCHEM, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO
HISTORICAL ADJUSTMENTS(2) FORMA
---------- -------------- --------
NET SALES ............................................ $ 43,977 $ (7,411) $ 36,566
COST OF SALES ........................................ 36,544* (4,014) 32,530*
-------- -------- --------
GROSS PROFIT ......................................... 7,433 (3,397) 4,036
-------- -------- --------
OPERATING EXPENSES:
Selling, general and administrative ............ 13,590* (1,778) 11,812*
Amortization of goodwill ....................... 185 (55) 130
Provision for doubtful accounts ................ 187 5 192
Restructuring charge ........................... 1,029 -- 1,029
-------- -------- --------
Total operating expenses ................... 14,991 (1,828) 13,163
-------- -------- --------
LOSS FROM OPERATIONS ................................. (7,558) (1,569) (9,127)
OTHER EXPENSE, net ................................... 447 (11) 436
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES... (8,005) (1,558) (9,563)
PROVISION FOR (BENEFIT FROM) INCOME TAXES ............ 471 (511) (40)
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS ...................... (8,476) (1,047) (9,523)
DISCONTINUED OPERATIONS:
Income from discontinued operations, after
applicable income taxes of $511 ................ -- 1,047 1,047
-------- -------- --------
NET LOSS ............................................. $ (8,476) $ -- $ (8,476)
======== ======== ========
NET INCOME (LOSS) PER COMMON SHARE:
BASIC:
Continuing Operations $ (1.45) $ (1.63)
Discontinued Operations ............ -- 0.18
-------- --------
Net Loss ........................... $ (1.45) $ (1.45)
======== ========
DILUTED:
Continuing Operations $ (1.45) $ (1.63)
Discontinued Operations ............ -- 0.18
-------- --------
Net Loss ........................... $ (1.45) $ (1.45)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC .......................................... 5,851 5,851
======== ========
DILUTED ........................................ 5,851 5,851
======== ========
* Includes non-recurring expenses associated with the Company's relocation to
Texas of $4,106 in cost of sales and $1,761 in selling, general and
administrative expenses.
PHARMCHEM, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO
HISTORICAL ADJUSTMENTS(2) FORMA
---------- -------------- --------
NET SALES ............................................. $ 46,832 $ (7,438) $ 39,394
COST OF SALES ......................................... 32,915 (3,946) 28,969
-------- -------- --------
GROSS PROFIT .......................................... 13,917 (3,492) 10,425
-------- -------- --------
OPERATING EXPENSES:
Selling, general and administrative ............. 11,460 (1,755) 9,705
Amortization of goodwill ........................ 185 (55) 130
Reduction of allowance for doubtful accounts .... (119) (88) (207)
-------- -------- --------
Total operating expenses .................... 11,526 (1,898) (9,628)
-------- -------- --------
INCOME FROM OPERATIONS ................................ 2,391 (1,594) 797
OTHER EXPENSE, net .................................... 258 (19) 239
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES . 2,133 (1,575) 558
PROVISION FOR INCOME TAXES ............................ 772 (522) 250
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS ..................... 1,361 (1,053) 308
DISCONTINUED OPERATIONS:
Income from discontinued operations, after
applicable income taxes of $522.................. -- 1,053 1,053
-------- -------- --------
NET INCOME ............................................ $ 1,361 $ -- $ 1,361
======== ======== ========
NET INCOME PER COMMON SHARE:
BASIC: Continuing Operations................ $ 0.23 $ 0.05
Discontinued Operations.............. -- 0.18
-------- --------
Net Income........................... $ 0.23 $ 0.23
======== ========
DILUTED: Continuing Operations................ $ 0.22 $ 0.05
Discontinued Operations.............. -- 0.17
-------- --------
Net Income........................... $ 0.22 $ 0.22
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 5,822 5,822
======== ========
DILUTED.......................................... 6,069 6,069
======== ========
PHARMCHEM, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO
HISTORICAL ADJUSTMENTS(2) FORMA
---------- -------------- --------
NET SALES ............................................. $ 44,487 $ (7,076) $ 37,411
COST OF SALES ......................................... 31,374 (3,875) 27,499
-------- -------- --------
GROSS PROFIT .......................................... 13,113 (3,201) 9,912
-------- -------- --------
OPERATING EXPENSES:
Selling, general and administrative ............. 10,033 (1,891) 8,142
Amortization of goodwill ........................ 185 (55) 130
Provision for doubtful accounts ................. 141 (36) 105
-------- -------- --------
Total operating expenses .................... 10,359 (1,982) 8,377
-------- -------- --------
INCOME FROM OPERATIONS ................................ 2,754 (1,219) 1,535
OTHER EXPENSE, net .................................... 248 (43) 205
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,506 (1,176) 1,330
BENEFIT FROM INCOME TAXES ............................. (294) (421) (715)
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS ..................... 2,800 (755) 2,045
DISCONTINUED OPERATIONS:
Income from discontinued operations, after
applicable income taxes of $421.................. -- 755 755
-------- -------- --------
NET INCOME ............................................ $ 2,800 $ -- $ 2,800
======== ======== ========
NET INCOME PER COMMON SHARE:
BASIC: Continuing Operations................ $ 0.48 $ 0.35
Discontinued Operations.............. -- 0.13
-------- --------
Net Income .......................... $ 0.48 $ 0.48
======== ========
DILUTED: Continuing Operations................ $ 0.47 $ 0.34
Discontinued Operations.............. -- 0.13
-------- --------
Net Income .......................... $ 0.47 $ 0.47
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC............................................ 5,786 5,786
======== ========
DILUTED.......................................... 5,954 5,954
======== ========
NOTES TO PRO FORMA FINANCIAL INFORMATION
(1) Pro Forma Condensed Consolidated Balance Sheet Adjustments
The pro forma condensed consolidated balance sheet assumes that the sale of the
share capital of the Company's wholly-owned, London-based subsidiary, Medscreen,
Ltd., to Newincco occurred as of December 31, 2001. The pro forma adjustments
reflect the sale on a discontinued operations basis and include:
(a) The estimated net cash proceeds resulting from the sale of Medscreen,
Ltd. to Newincco are shown below (000's omitted):
$10,020 Sales price.
-------
Less: $ (391) Estimated costs resulting directly from the sale,
------- including transaction fees, legal, accounting and
professional fees.
$(1,663) Debt extinguished
-------
$ 7,966 Estimated net cash proceeds
-------
(b) The estimated pre-tax gain resulting from the sale of Medscreen, Ltd.
to Newincco is as follows (000's omitted):
$10,020 Sales price.
-------
Less: $ (391) Estimated costs resulting directly from the sale,
------- including transaction fees, legal, accounting and
professional fees.
$(4,081) Net operating assets of Medscreen, Ltd. as of
------- December 31, 2001
$ 5,548 Estimated gain before income taxes
-------
The extinguishment of debt has been included in the adjustments to the condensed
consolidated balance sheet, as repayment of the debt was necessary in order to
release the liens on the assets of Medscreen, Ltd.
(2) Pro Forma Condensed Consolidated Statements of Operations Adjustments
The pro forma condensed consolidated statements of operations assume that the
sale of the Company's London-based wholly-owned subsidiary, Medscreen, Ltd.,
occurred as of January 1 of each fiscal year presented. The statements of
operations do not include the gain on disposal or costs related to the sale. The
pro forma adjustments reflect the sale on a discontinued operations basis and
remove from the historical results the continuing operations of Medscreen, Ltd.