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EXHIBIT 99.1
[PHARMCHEM LOGO]
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4600 N. Beach Street * Haltom City * Texas 76137 * (817)605-5300 * Fax (817)581-2049
FOR IMMEDIATE RELEASE CONTACT Joseph W. Halligan
President and CEO
(817) 605-6601
David A. Lattanzio
Vice President and CFO
(817) 605-6602
PHARMCHEM REPORTS 2002 RESULTS
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.
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EXHIBIT 99.1
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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.
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EXHIBIT 99.1
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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
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EXHIBIT 99.1
[PHARMCHEM LOGO]
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 19, 2003.
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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.
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EXHIBIT 99.1
[PHARMCHEM LOGO]
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,
---------------------- -----------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net sales $ 7,227 $ 8,078 $ 30,085 $ 36,566
Cost of sales 5,306 6,667 23,013 32,530 *
-------- -------- -------- --------
Gross profit 1,921 1,411 7,072 4,036
-------- -------- -------- --------
Operating expenses 1,716 2,066 7,855 12,004 *
Amortization of goodwill -- 33 -- 130
Restructuring charge -- -- -- 1,029
-------- -------- -------- --------
1,716 2,099 7,855 13,163
-------- -------- -------- --------
Income (loss) from operations 205 (688) (783) (9,127)
-------- -------- -------- --------
Interest expense 145 178 651 457
Other expense (income) 11 4 (71) (22)
-------- -------- -------- --------
156 182 580 435
-------- -------- -------- --------
Income (loss) from continuing operations before income taxes 49 (870) (1,363) (9,562)
Benefit from income taxes -- (46) (69) (87)
-------- -------- -------- --------
Income (loss) from continuing operations 49 (824) (1,294) (9,475)
-------- -------- -------- --------
Discontinued operations:
Income from operations of Medscreen, Ltd. (less income
taxes of $197 for the three months ended December 31, 2001
and $193 and $558 for the twelve months ended December 31,
2002 and 2001, respectively) -- 277 359 999
Gain on sale of Medscreen (less income taxes of $1,116) -- -- 4,277 --
-------- -------- -------- --------
Net income (loss) $ 49 $ (547) $ 3,342 $ (8,476)
======== ======== ======== ========
Net income (loss) per common share:
Continuing operations $ 0.01 $ (0.14) $ (0.22) $ (1.62)
Discontinued operations -- 0.05 0.79 0.17
-------- -------- -------- --------
Net income (loss) $ 0.01 $ (0.09) $ 0.57 $ (1.45)
======== ======== ======== ========
Weighted average shares outstanding: 5,853 5,853 5,859 5,851
-------- -------- -------- --------
EBITDA:**
Amount $ 758 $ (152) $ 1,468 $ (203)
======== ======== ======== ========
Margin 10.5% (1.9%) 4.9% (0.6%)
-------- -------- -------- --------
* Includes $4,106 in cost of sales and $1,761 in operating expenses of
nonrecurring costs associated with relocating to Texas.
** Earnings from continuing operations before taxes, interest, other expense
(income), depreciation and amortization, and, for 2001, before
nonrecurring costs and restructuring charge.
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EXHIBIT 99.1
[PHARMCHEM LOGO]
PHARMCHEM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(000'S OMITTED)
(UNAUDITED)
DECEMBER 31, DECEMBER 31,
2002 2001*
------------ ------------
Cash and cash equivalents $ 4,213 $ 197
Other current assets 5,611 8,992
------- -------
Total current assets 9,824 9,189
Property and equipment, net 12,074 12,915
Non-current assets 769 3,105
------- -------
Total $22,667 $25,209
======= =======
Line of credit and current portion
of long-term debt $ 5,722 $ 7,212
Other current liabilities 5,772 8,229
------- -------
Total current liabilities 11,494 15,441
Long-term debt 814 3,030
Stockholders' equity 10,359 6,738
------- -------
Total $22,667 $25,209
======= =======
* The December 31, 2001 balance sheet has been reclassified to include
Medscreen's excess of net current ($526) and non-current ($1,613) assets
over liabilities in "other current assets" and "non-current assets" above.
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