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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) October 24, 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 October 24, 2017, Psychemedics Corporation issued a press release announcing preliminary results for the Third 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

 

99.1Press Release dated October 24, 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: October 24, 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 Q3 Earnings



DECLARES 85TH CONSECUTIVE QUARTERLY DIVIDEND

ACTON, Mass., Oct. 24, 2017 /PRNewswire/ -- Psychemedics Corporation (NASDAQ: PMD) today announced third quarter financial results for the period ended September 30, 2017. The Company also announced a quarterly dividend of $0.15 per share payable to shareholders of record as of November 6, 2017, to be paid on November 17, 2017. This will be the Company's 85th consecutive quarterly dividend.

The Company's revenue for the quarter ended September 30, 2017 was $10.0 million versus $11.8 million for the quarter ended September 30, 2016, a decrease of 15%. Net income for the quarter ended September 30, 2017 was $1.4 million or $0.25 per diluted share, versus $2.7 million or $0.49 per diluted share, for the comparable period last year, a decrease of 50%. The Company's revenue for the nine months ended September 30, 2017 was $29.9 million versus $28.2 million for the nine months ended September 30, 2016, an increase of 6%. Net income for the nine months ended September 30, 2017 was $3.8 million or $0.68 per diluted share, versus $4.3 million or $0.79 per diluted share, for the comparable period last year, a decrease of 13%.

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

"Our 3rd Quarter contained some disappointing short-term financial results compared to last year's all-time record quarter for the Company. The revenue and earnings results are not where we want to be, as we believe they do not reflect the underlying fundamentals and long-term strength of our Company. At the same time, we also achieved some significant long-term positives.

"The Brazilian market continues to evolve, and, as in any new and large market, short-term challenges and uncertainty are to be expected. We will continue to address those challenges with initiatives that are in the best long-term interests of the Company. This is a large market that will be expanding by law (the law required that in September 2018, professional drivers must renew their license every 2 ½ years, instead of the current every 5 years). This will represent a virtual doubling of this large market in the not-too-distant future. In addition, the results of this government mandated testing program have been so favorable for the people of Brazil in terms of the significant reduction in highway accidents and fatalities that the government is discussing and considering requiring a hair test for other types of driver's licenses. We intend to continue to be a major factor in the development of this large and growing market.

"At the same time, we were unfavorably impacted by a fall-off in our Oil and Gas sector, partially as a result of Hurricane Harvey. This sector had been up nicely in the 1st half and we expect this business to recover in the near term.

"During the quarter, we also achieved some major positives, which will continue to expand our market opportunity and help drive future growth. We were excited to announce a number of "FIRSTS" again for our Company:

"Psychemedics has been the hair testing pioneer and global scientific leader for over thirty years. We believe the continued advancement in the science of hair testing is important to the Company and our clients, and is a significant tool for addressing one of the major issues of our time --- drug abuse. The development of these new hair tests provides the market with unique and reliable tests to identify and measure drugs over a period of time. Drug abuse is a significant issue in our society, and as a scientific leader in drug testing, we at Psychemedics continue to advance the science and use our top flight scientific team and R&D resources to develop new tests that will deter people from abusing both prescription and illegal drugs.

"The Company's balance sheet remains strong with $5.6 million in cash and $7.7 million of working capital. The total equipment financing obligation outstanding was $1.5 million as of September 30, 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 85th consecutive quarterly dividend."

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

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



Nine Months Ended


September 30,



September 30,


2017


2016



2017


2016



















Revenues

$     10,049


$   11,849



$     29,942


$      28,216

Cost of revenues

4,928


4,744



14,896


13,164










Gross profit

5,121


7,105



15,046


15,052



















Operating Expenses:









   General & administrative

1,471


1,278



4,278


3,716

   Marketing & selling

1,065


1,375



3,552


3,804

   Research & development

353


348



1,005


1,059










Total Operating Expenses

2,889


3,001



8,835


8,579










Operating income

2,232


4,104



6,211


6,473

Interest income (expense), net

13


(34)



(22)


(104)










Net income before provision for income taxes

2,245


4,070



6,189


6,369










Provision for income taxes

881


1,362



2,418


2,051










Net income

$       1,364


$     2,708



$       3,771


$        4,318










Earnings per common share (basic)

$0.25


$0.50



$0.69


$0.79

Earnings per common share (diluted)

$0.25


$0.49



$0.68


$0.79










Dividends declared per share

$0.15


$0.15



$0.45


$0.45










Other comprehensive income:









  Foreign currency translation (gross)

$         108


$          -



$            37


$             -

    Total comprehensive income

$       1,472


$     2,708



$       3,808


$        4,318










Psychemedics Corporation

Consolidated Balance Sheets

(in thousands, except par value)

(UNAUDITED)



September 30,


December 31,


2017


2016





ASSETS




 Current Assets:




   Cash and cash equivalents

$         5,604


$         3,938

   Accounts receivable, net of allowance for doubtful accounts




       of $62 in 2017 and $50 in 2016

5,421


5,837

   Prepaid expenses and other current assets

1,351


1,079





Total Current Assets

12,376


10,854





Fixed Assets, net of accumulated amortization and depreciation




    of $10,961 in 2017 and $8,900 in 2016

12,258


13,358

Other assets

818


820





Total Assets

$       25,452


$       25,032





LIABILITIES AND SHAREHOLDERS' EQUITY








Current Liabilities:




   Accounts payable

$         1,103


$         1,363

   Accrued expenses

2,905


1,988

   Current portion of debt

542


1,144





Total Current Liabilities

4,550


4,495





   Long-term debt

928


2,237

   Deferred tax liabilities, long-term

2,742


2,693

Total Liabilities

8,220


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




       6,160 shares issued in 2017 and 6,128 shares issued in 2016 

31


31

   Accumulated other comprehensive gain

37


--

   Additional paid-in capital

30,885


30,603

   Accumulated deficit

(3,639)


(4,945)

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

(10,082)


(10,082)





Total Shareholders' Equity

17,232


15,607





Total Liabilities and Shareholders' Equity

$       25,452


$       25,032







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