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Section 1: 8-K (FORM 8-K)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

Current Report

Pursuant To Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) August 2, 2017

 

PSYCHEMEDICS CORPORATION

(Exact Name of Registrant As Specified In Its Charter)

 

 

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

1-13738

(Commission File Number)

 

 58-1701987

  (I.R.S. Employer Identification No.)

     

  125 Nagog Park, Acton, Massachusetts

  01720
(Address of Principal Executive Offices)   (Zip Code)
     

   

  (978) 206-8220

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former name or former address, if changed since last report)    

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨Pre-commencement communications pursuant to Rule 13e4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

On August 2, 2017, Psychemedics Corporation issued a press release announcing preliminary results for the Second Quarter of 2017. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

 

Limitation on Incorporation by Reference. The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

 

Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in the press release attached as an exhibit hereto, the press release contains forward-looking statements which involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary note in the press release regarding these forward-looking statements.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

 

(d) Exhibits

 

99.1 Press Release dated August 2, 2017

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Dated: August 2, 2017 PSYCHEMEDICS CORPORATION  
     
  By: /s/ Neil Lerner  
    Neil Lerner  
    Vice President, Finance  

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

Psychemedics Corporation Announces Q2 Earnings



DECLARES 84th CONSECUTIVE QUARTERLY DIVIDEND

ACTON, Mass., Aug. 2, 2017 /PRNewswire/ -- Psychemedics Corporation (NASDAQ: PMD) today announced second quarter financial results for the period ended June 30, 2017. The Company also announced a quarterly dividend of $0.15 per share payable to shareholders of record as of August 14, 2017, to be paid on August 24, 2017. This will be the Company's 84th consecutive quarterly dividend.

The Company's revenue for the quarter ended June 30, 2017 was $9.7 million versus $9.7 million for the quarter ended June 30, 2016. Net income for the quarter ended June 30, 2017 was $0.9 million or $0.16 per diluted share, versus $1.6 million or $0.30 per diluted share, for the comparable period last year, a decrease of 44%. The Company's revenue for the six months ended June 30, 2017 was $19.9 million versus $16.4 million for the six months ended June 30, 2016, an increase of 22%. Net income for the six months ended June 30, 2017 was $2.4 million or $0.44 per diluted share, versus $1.6 million or $0.30 per diluted share, for the comparable period last year, an increase of 50%.

Raymond C. Kubacki, Chairman and Chief Executive Officer, said,

"Our 2Q 2017 results represent the first year-to-year comparison where Brazil driver revenues were in last year's results, as 2Q 2016 was the first quarter to include Brazil driver testing. While on the surface this quarter's financial results may appear to be disappointing, we believe our business fundamentals are intact and the results do not reflect the underlying long-term strength of our company.

"As in past reports, I would like to again point out the following regarding the Brazil driver market:

1) It is a large and expanding market. The Brazil professional driver market is large by law (all professional drivers must pass a hair test in securing and renewing their driver's license), and it is also expanding by law (the law requires that in September 2018, professional drivers must renew their licenses every 2½ years, instead of the current every 5 years). This virtually doubles the size of that major portion of the market. At the same time, the great success of this professional driver program (highlighted below) has the government discussing and considering possibly requiring a hair test for some other types of drivers licenses. These factors and results have given us confidence in the long-term attractiveness of this market.

2) We have recognized from the beginning that there are greater uncertainties and continual challenges that accompany any new, large market as it develops, and we plan to address them, as they may occur. In the past quarter, we have made a number of strategic decisions and are implementing a number of strategic initiatives that we believe are in the best long-term interests of the company. Our market share remains strong and we have taken further strategic actions to solidify and strengthen our long-term position in the market. In addition, we now have established a wholly-owned subsidiary in Brazil and have brought on a Country Manager, a Brazilian national to manage our business in Brazil and work with our distributor. We believe in the long-term attractiveness of this market and are willing to make short-term investments and sacrifices. As you know, public companies are often criticized for managing too much for the short term. With these strategic initiatives, we believe we are managing the company for the long term.

"The results of this Brazil driver program have had a major positive impact for the people of Brazil. Recent published data from the Brazil Federal Highway Police shows that in the first year of the program, the numbers of highway deaths and disabilities have been reduced by 39% --- a reduction of approximately 39,000! In addition, 31% of professional drivers chose not to renew their license, showing this test to be a major deterrent as well. The Brazil Center for Research and Economics of Insurance (CPGS) also estimated that with the 32% reduction of traffic accidents in 2016, this represented a savings of billions (BRL $70 billion or US $22 billion).

"At the same time, our domestic business is gaining strength. The Oil and Gas market segment continues to improve, and we are also seeing a meaningful pickup in the transportation market segment. We remain optimistic about continued improvement in our domestic business and are putting plans in place to accelerate our growth.

"The Company's balance sheet remains strong with $3.0 million in cash and $6.5 million of working capital. The total equipment financing obligation outstanding was $1.6 million as of June 30, 2017. This reflects additional payments of $1.3 million, on top of our normal payments, made during the second quarter of 2017. Our directors share our confidence in the future of Psychemedics and remain committed to rewarding shareholders and sharing the financial success of the Company with them as we grow. Therefore, we are pleased to declare a quarterly dividend of $0.15 per share. This dividend represents our 84th consecutive quarterly dividend."

Psychemedics Corporation is the world's largest provider of hair testing for the detection of drugs of abuse. The Company's patented process is used by thousands of U.S. and international clients, including over 10% of the Fortune 500 companies, for pre-employment and random drug testing. Major police departments, Federal Reserve Banks, schools, and other public entities also rely on our unique patented drug testing process. We strongly believe our drug testing method to be superior to any other product currently in use, including traditional urine testing and other hair testing methods.

The Psychemedics web site is www.psychemedics.com

Cautionary Statement for purposes of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995: From time to time, information provided by Psychemedics may contain forward-looking information that involves risks and uncertainties. In particular, statements contained in this release that are not historical facts (including but not limited to statements concerning earnings, earnings per share, revenues, cash flows, dividends, future business, growth opportunities, profitability, pricing, new accounts, customer base, market share, test volume, sales and marketing strategies, U.S. and foreign drug testing laws and regulations and the enforcement of such laws and regulations, required investments in plant, equipment and people and new test development) may be "forward looking" statements. Actual results may differ from those stated in any forward-looking statements. Factors that may cause such differences include but are not limited to risks associated with the development of markets for new products and services offered, costs of capacity expansion, U.S. and foreign government regulation, including but not limited to FDA regulations, Brazilian laws and regulations, proposed laws and regulations, currency risks, R&D spending, competition (including, without limitation, competition from other companies pursuing the same growth opportunities), the Company's ability to maintain its reputation and brand image, the ability of the Company to achieve its business plans, cost controls, leveraging of its global operating platform, risks of information technology system failures and data security breaches, the uncertain global economy, the Company's ability to attract, develop and retain executives and other qualified employees and independent contractors, including distributors, the Company's ability to obtain and protect intellectual property rights, litigation risks, general economic conditions and other factors disclosed in the Company's filings with the Securities and Exchange Commission. The forward-looking statements contained herein speak only of the Company's expectations as of the date of this press release. The Company express­ly disclaims any obligation or undertaking to release publicly any updates or revi­sions to any such statement to reflect any change in the Company's expectations or any change in events, conditions, or circumstances on which any such statement is based.

Psychemedics Corporation

Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share amounts)

(UNAUDITED)






Three Months Ended


Six Months Ended


June 30,


June 30,


2017


2016


2017


2016

















Revenues

$       9,684


$     9,700


$     19,893


$      16,367

Cost of revenues

5,075


4,491


9,968


8,420









Gross profit

4,609


5,209


9,925


7,947

















Operating Expenses:








   General & administrative

1,334


1,186


2,809


2,438

   Marketing & selling

1,244


1,302


2,487


2,430

   Research & development

321


350


651


710









Total Operating Expenses

2,899


2,838


5,947


5,578









Operating income

1,710


2,371


3,978


2,369

Interest expense, net

(12)


(35)


(34)


(70)









Net income before provision for income taxes

1,698


2,336


3,944


2,299









Provision for income taxes

791


702


1,537


689









Net income

$         907


$     1,634


$       2,407


$        1,610









Earnings per common share (basic)

$0.17


$0.30


$0.44


$0.30

Earnings per common share (diluted)

$0.16


$0.30


$0.44


$0.30









Dividends declared per share

$0.15


$0.15


$0.30


$0.30









Other comprehensive loss:








  Foreign currency translation (gross)

$          (71)


$            -


$          (71)


$                -

    Total comprehensive income

$         836


$     1,634


$       2,336


$        1,610

















Psychemedics Corporation

Consolidated Balance Sheets

(in thousands, except par value)

(UNAUDITED)






June 30,


December 31,


2017


2016





ASSETS




 Current Assets:




   Cash and cash equivalents

$         2,961


$         3,938

   Accounts receivable, net of allowance for doubtful accounts




       of $56 in 2017 and $50 in 2016

5,230


5,837

   Prepaid expenses and other current assets

1,293


1,079

   Income tax receivable

595


--





Total Current Assets

10,079


10,854





Fixed Assets, net of accumulated amortization and depreciation




    of $10,263 in 2017 and $8,900 in 2016

12,749


13,358

Other assets

800


820





Total Assets

$       23,628


$       25,032





LIABILITIES AND SHAREHOLDERS' EQUITY








Current Liabilities:




   Accounts payable

$            397


$         1,363

   Accrued expenses

1,993


1,988

   Accrued income taxes

432


--

   Current portion of long-term debt

542


1,144





Total Current Liabilities

3,364


4,495





   Long-term debt

1,063


2,237

   Deferred tax liabilities, long-term

2,780


2,693

Total Liabilities

7,207


9,425





Shareholders' Equity:




   Preferred stock, $0.005 par value, 873 shares authorized,




        no shares issued or outstanding

--


--

   Common stock, $0.005 par value; 50,000 shares authorized




       6,157 shares issued in 2017 and 6,128 shares issued in 2016

31


31

   Accumulated other comprehensive loss

(71)


--

   Additional paid-in capital

30,722


30,603

   Accumulated deficit

(4,179)


(4,945)

   Less - Treasury stock, at cost, 668 shares in 2017 and 2016

(10,082)


(10,082)





Total Shareholders' Equity

16,421


15,607





Total Liabilities and Shareholders' Equity

$       23,628


$       25,032





Contact:
Neil Lerner
Vice President of Finance
(978) 206-8220
Neill@psychemedics.com



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