PharmChem Announces Move to Fort Worth, Texas


MENLO PARK, Calif., March 28, 2001 (PRIMEZONE) -- PharmChem, Inc. (Nasdaq:PCHM), a leader in the field of providing drug testing, related products and web-based laboratory services to clients worldwide, announced plans to move to a new headquarters in Haltom City, Texas. An agreement has been reached to lease a new facility there. An initial move is expected to be completed by May 31 of this year whereby all specimen processing will be moved to the Company's existing laboratory in Fort Worth. When improvements are completed at the new location (estimated to be on or about July 1, 2001), PharmChem will move into its Haltom City facility.

Joe Halligan, PharmChem's President and Chief Executive Officer, said of the move, "Our strategy over the past five years has been to grow the business prudently, invest in our information systems infrastructure, expand our sales and marketing efforts to enhance our franchise, and to be the lowest cost and highest service provider. The goal of reducing our cost structure has been severely challenged in the Silicon Valley area of Northern California. While our employees have made great strides, the financial issues -- including higher wages, employee turnover, rents and insurance programs coupled with availability of electric power and the overall high cost of living here -- have all jeopardized our efforts to optimize our cost structure and, just as importantly, provide the service and care our customers have come to expect."

Halligan continued, "We think this move, while difficult, remedies most if not all of these issues for us. Over the long-term, this will be good for the company, our shareholders and our customers. Aside from the financial reasons for the move, locating ourselves in the mid-section of the Country will provide us with logistical advantages by putting us closer to the majority of our customers."

David Lattanzio, the Company's Chief Financial Officer, stated, "We have begun the orderly transferring of specimen testing and information systems to our existing Fort Worth laboratory. We are hiring people now so that training will be completed by the time the Haltom City facility is ready. While this will increase our costs in the near term, compromising customer service is not an option. We will record a one-time charge in the second quarter for severance and related costs. Relocation and other costs related to this move will be recorded as we incur them and, as a result, we'll see some pressures on margins during most of the year."

Lattanzio added, "Once we are all in the new facility, our expectations are that the financial savings will bear fruit next year and beyond."

The Company also announced that its electricity supplier (PG&E) has reclassified its Menlo Park laboratory and headquarters complex from an uninterruptible power supply to interruptible. Prior to this action by PG&E, PharmChem was located in a power grid that was exempt from rolling blackouts.

The Company has, therefore, accelerated its transfer of specimens and analyzers to its existing Fort Worth laboratory. Back-up computer systems previously installed in Fort Worth have now been designated as primary ones with back-ups now residing in Menlo Park.

Commenting on this recent event, Halligan said, "The inability of PG&E and the state to maintain a flow of power is quite disturbing. This change to a non-exempt status means electric power can be discontinued at the Company's main laboratory with little or no notice, thereby shutting down all analyzers, computers and communication operations. If such a blackout occurs, the Company may be unable to process specimens and/or provide testing results in a timely fashion. This reinforces our decision to relocate to our new Haltom City facility."

The foregoing may include certain forward-looking statements that 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 are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000.

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, Fort Worth and London.



            

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