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Tuesday March 30, 8:11 pm Eastern Time
Company Press Release
SOURCE: Gum Tech International, Inc.
Gum Tech Announces Fourth Quarter and Year End Results; Records $1.13 Million in One-Time Charges for Fourth Quarter
PHOENIX, March 30 /PRNewswire/ -- Gum Tech International, Inc. (Nasdaq: GUMM - news) reported record sales of $1.67 million for the fourth quarter of 1998, up almost 30% over the third quarter and up over 40% from the fourth quarter 1997. The company showed a loss of $1.8 million for the quarter, of which $1.13 million consisted of one-time charges.
Gum Tech's Chief Financial 0fficer, William Hemelt, said, ''The fourth quarter caps off what was a very important year for Gum Tech. The company restructured its management, changed its strategy to emphasize contract manufacturing, prepared for significant anticipated future growth, established several long-term manufacturing partnerships, and made significant investments in capital improvements.''
According to Hemelt, ''We recorded charges for several large, non-recurring expenses during the quarter. We took a non-cash charge of $732,000 in connection with the resolution of a dispute over options granted to a customer in late 1997. The settlement of the dispute provided for the grant of 200,000 options at an exercise price of $9. We also wrote off or reserved approximately $260,000 for inventory obsolescence. Finally, we elected to write off over $136,000 in expenses from legal fees, settlements, and reserves, all related to changes in management. We made every effort to finish the year with all significant financial issues related to the change in management fully recognized, and we believe that any remaining issues should not impact future financial results.''
Hemelt continued, ''Factoring out these non-recurring adjustments, we had $697,000 in losses on an operating basis. Approximately $150,000 of this was the result of higher than normal research and development costs due to the initial production of 15 new gum formulations during the quarter. In particular, the validation process necessary to get the AcuTrim® diet gum approved as a new over-the-counter product proved to be a significant expense. We believe that sales from these new formulations over the coming months will more than justify the initial start-up costs associated with putting them into production.
''Also included in the fourth quarter loss was $40,000 in expenses associated with the launch of the ZICAM(TM) nasal gel product. There were no sales of ZICAM(TM) in the fourth quarter,'' said Hemelt.
''After these additional adjustments, our operating loss was $507,000,'' said Hemelt. ''Although high relative to our sales for the quarter, the loss can be attributed primarily to the expansion of our production facilities in anticipation of increased order volume in future quarters.
''With regard to the year, we reached net sales of just over $5.2 million with a total loss of roughly $6.2 million. While we are encouraged that net sales increased 40% over the previous year, it is difficult to make too many direct comparisons to the prior period because of the corporate shifts near the beginning of 1998,'' cautioned Hemelt. ''As an example, over half of our losses for the year consisted of non-recurring non-cash expenses and one-time restructuring charges.''
Hemelt concluded, ''Gum Tech achieved much during both the quarter and the year. Our new manufacturing partnerships began to pay off as we grew net sales 30% over the prior quarter, and we expanded our production capacity through additional space and equipment in order to handle what we believe will be significant increases in future order volume.''
Summarized below are the company's fourth quarter and year-end financial figures for 1998.
($000's) 4th Qtr 1998 4th Qtr 1997 12 mos. 12 mos.
12/31/98 12/31/97
Net Sales $1,669 1,184 5,273 3,777
Cost of sales 1,542 1,249 4,357 4,198
Gross Profit 127 (65) 916 (421)
Operating Expenses 1,629 1,670 6,164 3,881
Research and Development 252 117 667 210
Income (Loss) from
operations (1,754) (1,852) (5,915) (4,512)
Interest and other income 19 55 128 204
Interest Expense (90) (111) (474) (1,091)
Provision (benefit) for
income taxes 0 0 0 0
Net Income (Loss) (1,825) (1,908) (6,261) (5,399)
Net Income (Loss)
per share ($0.97) ($1.02)
Shares Outstanding
(millions) 6.4 5.3
Gum Tech's President, Gary Kehoe, said, ''We are pleased with the progress we have made during the year, especially over the past months, in changing the direction of the company. Net sales grew for the fourth quarter in a row, and we expect sales for the first quarter of 1999 will also show a continued and steady increase.
''We developed some very significant relationships in 1998 with companies such as Breath Asure, Inc., Ranir/DCP Corp., Heritage Consumer Products, and Pharma Green Ltd., and we are pleased to see a steadily increasing level of reorders from these customers in the first quarter of 1999,'' said Kehoe. ''Breath Asure began a national advertising campaign in support of its dental gums, Ranir continues to bring in new private label customers, Pharma Green had a very successful rollout of several gums in Israel, and Heritage initiated a national advertising campaign for AcuTrim® gum. On the manufacturing side, we spent almost $1 million over the course of the year on capital improvements that will enable us to handle large volumes in the dental and nicotine areas.''
Kehoe said, ''Finally, the test marketing of the ZICAM(TM) homeopathic cold remedy, in preparation for next year's cold season, is going exceptionally well. We have received greater interest from retail chains than we had expected this year, and the product is selling well. Most importantly, informal customer feedback with regard to the product's efficacy appears to be consistent with the results indicated by the initial clinical research. We continue to be optimistic about the significant growth in our business from our recently developed manufacturing relationships, and we are particularly optimistic about the potential sales growth represented by the marketing of ZICAM(TM). Together, these developments will make 1999 a pivotal year in the history of this company.''
Gum Tech develops, manufactures, and distributes specialty chewing gum products designed to provide health benefits to consumers. The company partners with major food, pharmaceutical, or marketing companies to develop and manufacture gum products under contract manufacturing agreements and supports its own line of branded gums. Gum Tech operates one of the most advanced chewing gum manufacturing plants in the U.S. and is the only stainless steel gum manufacturing facility registered with the Food and Drug Administration to manufacture gum with over-the-counter drug products.
Gum Tech is located at 246 East Watkins Street, Phoenix, Arizona 85004. E-mail: Brown@gum-tech.com
Gum Tech Forward-Looking Statement:
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's anticipated growth in business and future results of operations. These forward-looking statements are based on the Company's expectations and are subject to a number of risks and uncertainties, many of which cannot be predicted or quantified and are beyond the Company's control. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Factors that could cause actual results to differ materially from the Company's expectations include less than anticipated demand for the Company's chewing gum products, lack of market acceptance for or uncertainties concerning the efficacy of ZICAM, a decrease in the level of reorders from existing customers, financial difficulties encountered by one or more of the Company's principal customers, difficulties in obtaining additional capital for marketing, research and development, and other expenses, the possibility of material charges incurred as a result of prior activities, aggressive pricing and marketing efforts by rival gum manufacturers, unavailability of third-party material products at reasonable prices, inventory obsolescence due to shifts in market demand, and material litigation involving product liabilities and consumers issues.
SOURCE: Gum Tech International, Inc. |
