PharmChem Reports 2000 Results


MENLO PARK, Calif., Feb. 20, 2001 (PRIMEZONE) -- PharmChem, Inc. (Nasdaq:PCHM) today reported sales of $12,688,000 for the fourth quarter ended December 31, 2000, an increase of 12.3% over 1999 sales of $11,294,000. The Company's net income in the quarter was $302,000, or $0.05 per diluted share, compared to pro forma net income last year of $295,000, or $0.05 per diluted share. The pro forma fourth quarter 1999 results exclude $787,000, or $0.13 per diluted share, representing the reversal of a deferred tax valuation reserve and other tax benefits. Including these items, fourth quarter 1999 net income was $1,082,000, or $0.18 per diluted share.

Sales for 2000 were $46,832,000, an increase of 5.3% over 1999's sales of $44,487,000. The Company reported net income of $1,361,000, or $0.22 per diluted share, for the year versus pro forma net income in 1999 of $1,677,000, or $0.28 per diluted share. Last year's pro forma results exclude an income tax credit of $336,000, or $0.06 per diluted share, recorded in the first quarter, as well as the reversal in the fourth quarter of the deferred tax valuation reserve and other tax benefits noted above. With these items, net income for 1999 was $2,800,000, or $0.47 per diluted share.

Joe Halligan, PharmChem's President and Chief Executive Officer, stated, "The year 2000 was tough but nevertheless a good one for us." Highlights of our U.S. operations include:


 -- Average laboratory selling prices rose 6.2% in the fourth quarter
    and 2.4% for the year versus the same periods in 1999.
 
 -- Product revenue rose 54% for the year and our Web-based systems 
    and other related services generated sales in 2000 nearly five 
    times greater than last year.  These two categories now account 
    for 15% of our domestic revenues.

However, laboratory specimen volume fell 144,000 specimens or 5.4% reflecting a slow down in laboratory drug testing due, we believe, to the tight labor market and a migration to more on-site drug testing. This decline was offset by our continued emphasis on products (anchored by PharmChek(R) and PharmScreen(R)) and services.

Commenting on Medscreen, the Company's London-based subsidiary, Mr. Halligan said, "They performed quite well with gains in specimen volume of nearly 13% and a total revenue increase of 12.5%. Average laboratory pricing for the year was up 2.3% while fourth quarter prices advanced 13.7%. The lower rate of exchange reduced U.S. dollar equivalents versus 1999 by 11.9% and 6.6% in the fourth quarter and full year, respectively.

On a consolidated basis, the Company's gross margin fell slightly in the fourth quarter to 27.5% from 28.1% last year but, for the year, rose to 29.7% from 29.5% in 1999. The pressure on margins reflects a significant rise in specimen collection costs.

Mr. Halligan stated, "Our employees continue to perform at exceptional levels to generate more savings from operational efficiencies and absolute spending. At the same time, quality performance by our laboratories and customer service department continues to improve. We are staying with our philosophy to maintain pricing and to invest aggressively, but prudently, in our sales and marketing strategy. We offer a multitude of services under our Premium Comprehensive Management (PCM(R)) programs. These services include order processing, forms printing, collection scheduling, specimen tracking and results reporting-all automated through a secure Internet transmission. On a consolidated basis, sales in 2000 of products and other non-laboratory services comprised 14% of total sales compared to 8.1% in 1999."

David Lattanzio, the Company's Chief Financial Officer, reported, "We recently completed two debt financings totaling $2.9 million which reflects our strong balance sheet and solid franchise. Capital expenditures were $3.4 million this year versus $3.0 million last year. EBITDA was $4.6 million this year (9.9% of sales), down slightly from $4.8 million last year (10.9% of sales). Depreciation and amortization were about $2.3 million in 2000 and $2.2 million in 1999.

The foregoing may include certain forward-looking statements which involve risks and uncertainties including, without limitation, competitive conditions, 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, 2000.

The Company's Annual Meeting of Stockholders will be held on May 15, 2001 for stockholders of record on April 2, 2001. Proxies and related material will be mailed on or about April 16, 2001.

PharmChem is a leader in the field of providing services to clients seeking to detect and deter the use of illegal drugs. PharmChem operates fully certified forensic drug testing laboratories in Menlo Park, Calif.; Fort Worth, Texas; and London, England.


                          PHARMCHEM, INC.
                  Consolidated Income Statements
             (000s omitted except per share amounts)

                      Three Months Ended       Twelve Months Ended
                         December 31,             December 31,
                     -------------------      --------------------
                        2000       1999          2000        1999
                     --------   --------      --------    --------
 Net sales           $ 12,688   $ 11,294      $ 46,832    $ 44,487
 Cost of sales          9,204      8,116        32,915      31,374
                     --------   --------      --------    --------
 Gross profit           3,484      3,178        13,917      13,113
 Operating expenses
  and goodwill
  amortization          2,872      2,648        11,526      10,359
                     --------   --------      --------    --------
 Income from
 operations               612        530         2,391       2,754
                     --------   --------      --------    --------
 Interest expense          54         84           281         284
 Other expense
  (income), net            37         (9)          (23)        (36)
                     --------   --------      --------    --------
                           91         75           258         248
                     --------   --------      --------    --------
 Income before
  income taxes            521        455         2,133       2,506
 Provision for
  (benefit from)
  income taxes            219       (627)(a)       772        (294)(b)
                     --------   --------      --------    --------
 Net income          $    302   $  1,082      $  1,361    $  2,800
                     ========   ========      ========    ========
 Net earnings
  per diluted share  $   0.05   $   0.18(a)   $   0.22    $   0.47(b)
                     ========   ========      ========    ========
 Weighted average
  shares                6,063      5,960         6,069       5,954
                     ========   ========      ========    ========
 EBITDA(c) Amount    $  1,211   $  1,097      $  4,644    $  4,847
                     ========   ========      ========    ========
   Margin                 9.5%       9.7%          9.9%       10.9%
                     ========   ========      ========    ========

 (a) Includes the reversal of a deferred tax valuation reserve and
     utilization of net operating loss (NOL's) tax carryforwards
     totaling $787,000, or $0.13 per diluted share.
 
 (b) Includes the reversal of the deferred tax valuation reserve and
     utilization of NOL's described above of $787,000, or $0.13 per
     diluted share, and the reversal of a tax liability in the first
     quarter of 1999 of $336,000, or $0.06 per diluted share.
 
 (c) Earnings before interest, other expense (income), taxes,
     depreciation and amortization. 
 

                             PHARMCHEM, INC.
                 Condensed Consolidated Balance Sheets
                            (000s omitted)

                                                 December 31,
                                     -------------------------------
                                         2000              1999
                                     ------------     --------------
 Current assets                           $ 12,793            $11,599
 Non-current assets                         14,472             13,447
                                      ------------     --------------
       Total                              $ 27,265            $25,046
                                      ============     ==============
 
 Current liabilities                      $ 10,386            $ 8,559
 Non-current liabilities                     1,884              2,790
 Stockholders' equity                       14,995             13,697
                                      ------------     -------------- 
       Total                              $ 27,265            $25,046
                                      ============     ==============


            

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