- U.S. Business Shows 9% Increase In Revenues - - Florida Upholds Contract Award To Orchid Cellmark For Multi-Year Paternity Testing -
PRINCETON, N.J., July 31 /PRNewswire-FirstCall/ -- Orchid Cellmark Inc.
(Nasdaq: ORCH), a leading worldwide provider of identity DNA testing services,
today reported its financial results for the second quarter of 2008.
Total revenues were $15.2 million for the second quarter of 2008 compared
to $15.7 million for the second quarter of 2007 and $14.5 million for the
first quarter of 2008. The decrease in total revenues for the second quarter
of 2008 compared to the second quarter of 2007 was largely due to lower
revenues in the U.K.
Orchid Cellmark recorded increases in its U.S. business that generates DNA
profiles for the federal CODIS (Combined DNA Index System) and state DNA
databases and in its U.S. paternity testing business, partially offset by
lower revenues from its U.S. forensic casework business. Overall, U.S.
revenues increased by 9% over the comparable quarter in 2007, largely as a
result of the ReliaGene acquisition. The decrease in U.K.-based revenues in
the second quarter of 2008, compared to the comparable period in 2007, was due
to lower volumes of animal DNA testing for scrapie susceptibility and
immigration identity testing, as well as reduced forensic revenue. The
decrease was partially offset by increased revenues in the paternity testing
business. Lower revenue for the U.K. forensics business was primarily due to
the loss of revenue from the company's previous arrangement with LGC, which
essentially ended in April 2008, as previously reported.
Excluding cost of service revenue, operating expenses for the quarter were
$6.6 million compared to $6.2 million for the second quarter of 2007. The
operating expense increase was primarily due to general and administrative
expenses, which were impacted by professional fees, including non-recurring
legal fees related to the successful upholding of Orchid's contract to provide
state-wide paternity testing for the State of Florida, which was
unsuccessfully protested by a competitor.
Operating loss for the second quarter of 2008 was $1.6 million compared to
a $701 thousand loss for the second quarter of 2007. The operating loss
increase was principally due to increased general and administrative expenses
and a decrease in gross margin. Gross margin for the U.S. business increased
for the second quarter of 2008 compared to the second quarter of 2007 largely
as a result of a 9% increase in U.S. revenues and improvement in the company's
U.S. operations. The company's overall gross margin was negatively impacted
by the decrease in gross margin associated with the U.K. operations. U.K.
gross margin during the quarter was adversely impacted by lower DNA testing
volumes related to the loss of former LGC business and the buildup of capacity
in the U.K. to service the significant business the company won under the
North West/South West and Wales regional forensics services tender.
Orchid Cellmark reported a net loss of $1.2 million, or $(0.04) per share,
for the second quarter of 2008 compared to a net loss of $745 thousand, or
$(0.03) per share, for the second quarter of 2007. Net loss for the second
quarter of 2008 and 2007 includes charges of $1.2 million and $1.1 million,
respectively, for depreciation and amortization.
At June 30, 2008, cash and cash equivalents were $17.3 million.
Thomas Bologna, president and chief executive officer of Orchid Cellmark
commented, "The second quarter of this year was quite significant for our
company and the results reflect the transition we are undergoing and the core
strengths of our business."
"While we were absorbing the substantial impact of the loss of revenue in
the U.K. from our previous arrangement with LGC, we ramped up DNA testing and
other forensics services work for a number of U.K. police forces under the new
North West/South West and Wales regional forensic tender," Mr. Bologna
explained. "Due to these new sources of revenue, even though the LGC-related
business decreased by approximately $2.6 million, total U.K. revenue in this
quarter only decreased by approximately $1.2 million. As expected, the work
from the North West/South West and Wales regional forensics tender has started
to flow significantly into our U.K. facility. Also, we anticipate forensics
work through the National Procurement Plan will begin to be tendered and
awarded in the fourth quarter of 2008 with work beginning in the first quarter
of 2009. This is ahead of our earlier estimates."
Mr. Bologna continued, "During the second quarter, we believe we made
significant progress on a broad array of operational matters in the U.S. We
substantially completed the integration of the ReliaGene acquisition in the
U.S. and eliminated duplicate costs associated with capacity from that
acquisition. We fully expect the ReliaGene acquisition to be accretive in the
second half of this year. In addition, we saw significant increases in our
government paternity and CODIS businesses in the U.S., and we again ended the
quarter with a large influx of new casework into our Dallas facility. We also
prevailed in litigation in Florida against Laboratory Corporation of America
(LabCorp) in connection with a contract awarded to Orchid Cellmark to conduct
all of the publicly-funded paternity testing for the State of Florida. The
costs of this lawsuit increased our operating expenses in the second quarter
of 2008. Were it not for the legal costs incurred relative to this bid
dispute, our net loss in the second quarter of 2008 would have been $(0.03)
per share as opposed to the reported net loss of $(0.04) per share. We
believe this contract has a potential revenue value of approximately $1.2
million annually."
Mr. Bologna concluded, "We believe the company is poised for growth due to
the ramp up of the regional tender business in the U.K., our win over LabCorp
in Florida on the statewide paternity contract, the accretive growth from our
ReliaGene acquisition and a continued inflow of U.S. casework. We also
believe that we have a firm hand on those business factors under our control
and that, with our strong balance sheet and our continued focus on operating
efficiencies, the company is on the right path to achieve growth and
profitability."
Conference Call Information
A conference call with Orchid Cellmark management will be held on
Thursday, July 31, 2008 at 10:00 a.m. EDT. To listen to the conference call,
please dial (877) 266-0703 or (706) 643-7682 and ask for the Orchid Cellmark
conference call, conference number 57573304. To listen to the live or
archived webcast via the Internet, please visit the Investors section of the
company's web site.
About Orchid Cellmark
Orchid Cellmark (Nasdaq: ORCH) is a leading international provider of DNA
testing services primarily for forensic and family relationship applications.
Orchid Cellmark is one of the largest providers of forensic DNA testing
services and its DNA results are used by the criminal justice system to assist
with the identification of perpetrators, the exclusion of suspects and the
exoneration of wrongfully convicted individuals. The company provides DNA
family relationship testing to numerous child services organizations and
individuals seeking to verify parentage. Orchid Cellmark also serves
immigration and security authorities for DNA testing of individuals. In the
agriculture field, the company provides DNA testing services for selective
trait breeding. Orchid Cellmark's strong market positions in these areas
reflect the company's accredited laboratories in the U.S. and U.K., its
innovative genetic analysis technologies and expertise, and the company's
reputation for exceptional quality, reliability and customer service for
nearly two decades. More information on Orchid Cellmark can be found at
http://www.orchidcellmark.com.
All statements in this press release that are not historical are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, but not limited to, statements
regarding: expectations regarding Orchid Cellmark's business operations and
outlook; the belief that we made significant progress on a broad array of
operational matters in the second quarter; the anticipation that the forensics
work through the National Procurement Plan will begin to be tendered and
awarded in the fourth quarter of 2008 with work beginning in the first quarter
of 2009; the expectation that the acquisition of ReliaGene will be accretive
in the second half of this year; the belief that the contract to conduct all
of the publicly-funded paternity testing for the State of Florida has a
potential revenue value of approximately $1.2 million annually; the belief
that the company is poised for growth due to the ramp up of the regional
tender business in the U.K., our win over LabCorp in Florida on the statewide
paternity contract, the accretive growth from our ReliaGene acquisition, and a
continued inflow of U.S. casework; and the belief that we have a firm hand on
those business factors under our control, and that, with our strong balance
sheet and our continued focus on operating efficiencies, the company is on the
right path to achieve revenue growth and profitability. Such statements are
subject to the risks and uncertainties that could cause actual results to
differ materially from those projected, including, but not limited to, the
risk that the amount of revenue resulting from the paternity testing for the
State of Florida is not significant, the risk that we are not able to replace
the work that we previously provided to several police forces in the U.K.
under an arrangement with LGC, the risk that the amount of revenue resulting
from the North West/South West and Wales regional tender in the U.K. is not
significant, Orchid Cellmark's ability to timely and successfully integrate
ReliaGene's business, uncertainties relating to technologies, product
development, manufacturing, market acceptance, cost and pricing of Orchid
Cellmark's products and services, dependence on government funding and
collaborations, regulatory approvals, competition, intellectual property of
others, patent protection, litigation, the timing of release of federal funds,
the timing and amount of contracts put up for bid, and Orchid Cellmark's
ability to successfully offer its services directly to U.K. police forces.
These risks and other additional factors affecting these forward-looking
statements and Orchid Cellmark's business are discussed under the headings
"Risks Related to Our Business" and "Risks Associated with Our Common Stock"
in Orchid Cellmark's Annual Report on Form 10-K for the year ended December
31, 2007, as filed with the Securities and Exchange Commission, and in other
filings made by Orchid Cellmark with the Securities and Exchange Commission
from time to time. Orchid Cellmark expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in Orchid
Cellmark's expectations with regard thereto or any change in events,
conditions, or circumstances on which any such statements are based, except as
may be required by law.
Information contained in our press releases should be considered accurate
only as of the date of the release. Information in any press release may be
superseded by more recent information we have disclosed in later press
releases, filings with the Securities and Exchange Commission or otherwise.
Press releases may contain forward-looking statements based on the
expectations of our management as of the date of the release. Actual results
may materially differ based on several factors, including those described in
the press release.
Orchid Cellmark Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three months and six months ended June 30, 2008 and 2007
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Revenues:
Service revenues $15,164 $15,694 $29,559 $29,589
Other revenues 60 38 192 175
Total revenues 15,224 15,732 29,751 29,764
Operating expenses:
Cost of service revenues 10,223 10,206 20,659 19,725
Research and development 206 289 426 568
Marketing and sales 1,5511,5133,1232,997
General and administrative 4,3593,9809,0517,916
Amortization of intangible assets 477 445 955 890
Total operating expenses16,816 16,433 34,214 32,096
Operating loss (1,592)(701) (4,463) (2,332)
Other income (expense), net368 309 719 516
Loss before income tax expense (1,224)(392) (3,744) (1,816)
Income tax expense (benefit)(3) 353 (249) 612
Net loss $(1,221) $(745) $(3,495) $(2,428)
Basic and diluted net loss per share$(0.04) $(0.03) $(0.12) $(0.08)
Shares used in computing basic and
diluted net loss per share:29,935 29,322 29,935 29,321
Orchid Cellmark Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 2008 and December 31, 2007
(In thousands)
(Unaudited)
June 30,December 31,
2008 2007
Assets:
Current assets
Cash and cash equivalents$17,254 $20,918
Accounts receivable, net 11,297 9,516
Inventory 1,766 1,443
Prepaids and other current assets 1,890 2,151
Total current assets 32,20734,028
Fixed assets, net 6,703 7,440
Goodwill9,664 9,519
Other intangibles, net 8,736 9,694
Restricted cash - 958
Other assets 502 490
Total assets $57,812 $62,129
Liabilities and Stockholders' Equity:
Current liabilities
Accounts payable $1,681$2,027
Accrued expenses and other current
liabilities 4,705 4,611
Income taxes payable - 543
Short-term debt and current portion of
long-term debt 451 428
Deferred revenue 991 964
Total current liabilities 7,828 8,573
Other liabilities 471 1,123
Total liabilities 8,299 9,696
Total stockholders' equity 49,51352,433
Total liabilities and stockholders' equity$57,812 $62,129
Contact:
Investors:Media:
Mary Bashore Rick Anderson
Orchid Cellmark Inc. The Torrenzano Group
(609) 750-2324(212) 681-1700
ir@orchid.com randerson@torrenzano.com
SOURCE Orchid Cellmark Inc.
