Revenue and Profits Decline Compared to Q399 Company Announces Downsizing of BBI Source Scientific with Charges to Earnings
WEST BRIDGEWATER, Mass., Nov. 15 /PRNewswire/ -- Boston Biomedica, Inc. (Nasdaq: BBII) today announced that revenue for the third quarter ended September 30, 2000 was $6,501,145, a decrease of $978,797 or 13.1%, compared with revenue of $7,479,942 for the same period in 1999. Net loss for the quarter was $(4,765,983), or $(0.85) per diluted share, compared with a net loss of $(257,118), or $(0.05) per diluted share, for the same period last year. The net loss for Q32000 includes charges for three significant items totaling $(0.59) per share, consisting of an impairment to BBI Source Scientific's goodwill of $1,464,220 or $(0.26) per diluted share, a charge for the establishment of a full valuation allowance for deferred tax assets of $1,725,347 or $(0.31) per diluted share, and a charge for non-cash interest expense of $136,603 or $(0.02) per diluted share in connection with a beneficial conversion feature in the Convertible Debentures issued in August, 2000.
Revenue for the first nine months of FY2000 was $21,085,866, a decrease of $377,898, or 1.8%, compared with revenue of $21,463,764 for the same period in 1999. Net loss for the nine months ended September 30, 2000 was $(5,728,742), or $(1.02) per diluted share, compared with a net loss of $(719,296), or $(0.15) per diluted share, for the same period last year. Included in the FY2000 nine-month results were the charges for impairment of intangible asset, establishment of a full valuation allowance for deferred tax assets, and non- cash interest expense, for a total of $3,326,170, or $(0.59) per diluted share, as detailed above.
"Although we were disappointed with the results of the quarter, we realize that a significant portion of our loss was from unusual charges," said Kevin W. Quinlan, President and Chief Operating Officer of BBI. "From an operating viewpoint, overall revenue reported was below our expectations and impacted our results across all business units. Product revenue was down and service revenue flat when compared to previous quarters. Specific reasons for these shortfalls include the effects of consolidation of customers and testing platforms in the IVD market, as well as some customers' decisions to bring molecular testing in-house. We also spent more than expected for professional fees in connection with the impending sale of the majority of our drug discovery company (Panacos Pharmaceuticals) and for public filings for our various deals. Additionally, the magnitude of the loss sustained at BBI Source Scientific was beyond our expectations."
As noted above, three unusual items adversely affected the financial results of the third quarter. First, following consultation with the Company's Board of Directors and its advisors, and based on BBI Source's revised business plan, it was necessary to write-down the majority of the goodwill of BBI Source, the Company's instrument manufacturing and service business unit. Second, during Q32000 the Company established a full valuation allowance for its deferred tax assets based on the applicable accounting standards and in consideration of incurring three consecutive years of losses, resulting in a charge of $1,725,347. In previous quarters during this time, the Company recorded an income tax benefit at a combined rate of approximately 38%. And third, interest expense increased by $160,777 due to the amortization of the beneficial conversion feature, the warrants, and the discount associated with the Company's August 2000 issuance of $3,250,000 3% senior subordinated convertible debentures.
With respect to the goodwill write-down, and as part of its overall plan to return to profitability, the Company and BBI Source senior management have taken steps to restructure BBI Source to a size consistent with its current level of business. This reduction should better enable BBI Source to meet the needs and demands of its customers going forward and to increase its potential to achieve profitability over the near term, while still allowing the instrument manufacturing and service unit the opportunity to play an important role in the development of the Company's pressure cycling technology (PCT). These changes included a staff reduction of approximately 20%, salary cuts and freezes, and the subleasing of a significant portion of BBI Source's facility through an arrangement that will allow them to remain in the facility at a greatly reduced cost. As a result, the Company has written off approximately 85% of the goodwill of BBI Source, due to the expected impact of the downsizing of the business unit.
Richard T. Schumacher, Founder, CEO and Chairman of Boston Biomedica, Inc. commented: "Despite the disappointing third quarter financial results, we remain steadfast in our optimism for the future of BBI. The restructuring of BBI Source, concomitant with the impending sale of the majority of Panacos Pharmaceuticals, will allow us time to refocus our efforts on our core businesses in infectious disease diagnostics and clinical laboratory services, while at the same time, significantly reducing future losses from BBI Source and Panacos. We believe that the growth potential in our core business areas remains high. We remain committed to continuing the development of our exciting pressure cycling technology (PCT). As always, we will continue to evaluate financing options, as well as other strategic alternatives in order to maximize shareholder value. And finally, we are more committed than ever to returning BBI to profitability in the very near future."
Boston Biomedica, Inc. provides products and services for the detection and treatment of infectious diseases (ID) such as AIDS, Lyme Disease, and Viral Hepatitis. The Company has four operating business units: (1) BBI Diagnostics, an ISO 9001 certified manufacturer and seller of quality control and other diagnostic products used to increase the accuracy of in-vitro diagnostic tests, (2) BBI Clinical Laboratories, a leading specialty infectious diseases testing laboratory, (3) BBI Biotech Research Laboratories, providing R&D support for the other BBI business units as well as contract research services for third parties, and (4) BBI Source Scientific, an ISO 9001 certified manufacturer of laboratory and diagnostic instrumentation. In addition, the Company is pursuing research and development programs in the areas of pressure cycling technology (PCT) and drug discovery through its subsidiaries BBI BioSeq and Panacos Pharmaceuticals, respectively, with the goal of introducing new solutions for the detection and treatment of infectious diseases.
Statements contained in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are "forward-looking'' statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ from those projected include the possibility that due to difficulties in the implementation of its strategies, Boston Biomedica may not be able to successfully downsize BBI Source Scientific to a level that is more in line with its current business or that this downsizing may not result in the business unit becoming profitable. BBI may also not be successful in increasing the profitability of its BBI Diagnostics business unit in infectious disease diagnostics, or in returning its BBI Biotech and BBI Clinical Laboratories business units to profitability; may not be successful in establishing Panacos Pharmaceuticals as an independent Company or in developing pressure cycling technology (PCT) into commercially successful products, or such activities may take longer than currently expected. The financial results for the third quarter and for the nine months ended September 30, 2000 are not necessarily indicative of future results. Future revenues may not meet expectations due to changes in customer needs and technological innovations. Additional information concerning factors that could cause actual results to differ materially from those in the forward- looking statements is contained from time to time in the Company's SEC filings, including but not limited to the Company's report on Form 10-K for the year ended December 31, 1999 and on Form 10-Q for the periods ended March 31, June 30, and September 30, 2000. Copies of these documents may be obtained by contacting the Company or the SEC.
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BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
REVENUE:
Product sales $ 2,643,965 $ 3,649,818 $ 8,780,907 $10,597,343
Services 3,857,180 3,830,124 12,304,959 10,866,421
Total revenue 6,501,145 7,479,942 21,085,866 21,463,764
COSTS AND EXPENSES:
Cost of
product sales 1,552,374 1,780,760 4,570,407 5,411,944
Cost of services 2,868,835 2,794,385 9,390,866 7,906,037
Research and
development 717,934 891,145 2,210,788 2,382,206
Selling and
marketing 936,329 1,021,324 2,889,042 3,129,141
General and
administrative 1,621,182 1,291,832 4,368,673 3,503,497
Impairment of
intangible asset 1,464,220 - 1,464,220 -
Total operating
costs and
expenses 9,160,874 7,779,446 24,893,996 22,332,825
Loss from
operations (2,659,729) (299,504) (3,808,130) (869,061)
Interest income 8,675 2,941 9,097 3,796
Interest expense (389,582) (118,143) (794,442) (294,891)
Loss before
income taxes (3,040,636) (414,706) (4,593,475) (1,160,156)
Income tax
(expense)
benefit (1,725,347) 157,588 (1,135,267) 440,860
Net loss $(4,765,983) $(257,118) $(5,728,742) $(719,296)
Net loss
per share,
basic and diluted $ (0.85) $ (0.05) $ (1.02) $ (0.15)
Number of shares used to calculate net loss per share
Basic and Diluted 5,623,803 4,769,003 5,617,661 4,669,217
CONSOLIDATED SUMMARY BALANCE SHEETS
September 30, December 31,
2000 1999
Current assets $15,549,148 $14,958,300
Property, plant and equipment, net 8,203,128 8,295,024
Other non-current assets 1,330,106 2,909,016
Total assets $25,082,382 $26,162,340
Current liabilities $10,387,930 $ 4,904,976
Long-term debt 5,086,461 7,145,651
Other long-term liabilities 337,779 465,590
Total liabilities 15,812,170 12,516,217
Stockholders' equity 9,270,212 13,646,123
Total liabilities and
stockholders' equity $25,082,382 $26,162,340
SOURCE Boston Biomedica, Inc.
Web site: http: //www.bbii.com
CONTACT: Richard T. Schumacher, CEO/Chairman, Kevin W. Quinlan, President & COO or William R. Prather, M.D., Sr. VP Finance and Business Dvlp. of Boston Biomedica, Inc., 508-580-1900