Star Scientific, Inc. Announces Third Quarter Record Sales and Profits
PETERSBURG, Va.--(BUSINESS WIRE)--Nov. 10, 1999--
Waiting Lists for Farmers Wanting Star's New Curing Barns
Expands as Star Exceeds Expectations for StarCure(TM)
Processed Leaf Production
Star Scientific, Inc. (OTC-BB: STSI) announced record third quarter revenues for sales and earnings. Revenues for the three months ending September 30, 1999 were $27.7 million, as compared to 1998 third quarter revenues of $4.4 million, an increase of 523%. Record net income of $3.4 million for the third quarter of 1999 was in sharp contrast to the 1998 third quarter loss of $1.2 million. Year to date revenues for 1999 are $58.9 million, with net income of $6.2 million, compared to 1998 revenues of $11.3 million, which generated a loss of $3.2 million for the comparable period. James A. McNulty, CPA, Star's Chief Financial Officer, said: "We have solidified our supplier and distribution network of over 300 businesses who understand how Star differentiates itself in its unique market niche. The combination of our lean manufacturing operations and a dramatic increase in sales yielded an excellent margin and another profitable quarter. We move into our final quarter with the challenge of an expanded demand for our products which we anticipate will translate into increased profits by December 31, 1999."
"A portion of Star's impressive sales and profit performance can be attributed to Star's leaf processing operation in Chase City, Virginia, which produced and delivered over 3 million pounds of low nitrosamine (TSNA) StarCure(TM) processed tobacco as a result of the expansion of Star's alliance with tobacco farmers," said Malcolm "Mac" Bailey. Mac Bailey, a 5th generation tobacco farmer who is also President of the Virginia Agricultural Grower's Association, added that "Star achieved record StarCure(TM) leaf processing sales to Brown
Williamson Tobacco Corporation ("B&W") of approximately $4.2 million in the third quarter, which contributed approximately $1.4 million to Star's gross margin." " In October Star has added another $4.0 million in leaf sales and corresponding gross margins of approximately $1.4 million, as the tobacco growing season is about to close," Bailey said.
"Star has now placed over 235 specially equipped new curing barns with its farmers' waiting list for additional barns expanding on a daily basis," commented Bailey. Star has now provided farmers with new curing barns in Virginia, North and South Carolina, Florida, Georgia and in Ontario, Canada. Bailey said "the 2-step StarCure(TM) method involves barn processing and microwave treatment to produce low nitrosamine (TSNA) tobacco."
Star's recently announced multi-year, major supply agreement with B&W, which also covers British American Tobacco, P.L.C. ("BAT") and its affiliates (BAT is the second largest tobacco company in the world, and B&W is BAT's largest affiliate.), will allow Star to add at least 1,000 additional barns in the next 12-15 months, because that agreement includes a credit facility for expanded barn construction. Bailey anticipates that Star will be able to process at least 25 million pounds of low TSNA tobacco in next year's growing season, which will enable Star to respond to an anticipated increase in demand, as well as meet its commitment to integrate into its own brands low TSNA StarCure(TM) tobacco over the next 24-30 months.
Jonnie R. Williams, Star's founder and the primary inventor of the StarCure(TM) patented process for reducing TSNA's to virtually undetectable levels, said that he was particularly proud that Star has helped the hardworking and family oriented tobacco farmers to be part of the solution to the dilemma of long term smoked tobacco use. Williams said "Star wants to make sure farmers are financially rewarded for their contributions to working toward the development of less hazardous tobacco products."
James (Jim) Jennings, a Chase City flue-cured Virginia tobacco farmer, said "Star's innovative concept will help me and other U.S. tobacco growers to secure a solid foundation to produce a legal agricultural commodity well into the next century. This is a win-win for myself and my family and for the industry."
Professor Robert J. DeLorenzo, M.D., Ph.D., M.P.H., Star's Chairman and CEO (and Chairman of the Department of Neurology at Virginia Commonwealth University) said "we believe Star Scientific, although in the tobacco business, is a very different kind of company. Star fully accepts the bio-medical evidence demonstrating inextricable links between smoking conventional tobacco and a variety of diseases and premature death. Star believes it is unlikely that the health risks of smoked tobacco can ever be completely eliminated. However, we at Star are committed to developing ways to reduce the toxicity of tobacco and tobacco smoke. We are proud that Star now has a patented unique process which largely precludes the formation of the known carcinogenic tobacco specific nitrosamines (TSNAs) in the tobacco and tobacco smoke." Dr. DeLorenzo added: "As a long time scientist, clinician and medical professor, I was particularly gratified to read the comment of Dr. Bridgett Garrett from the Center for Disease Control and Prevention, Office of Smoking and Health (published in the November 4, 1999 edition of Drug Store News) to the effect that Star's process is 'a fantastic public health breakthrough' because 'any reduction in carcinogens would serve a good purpose.'"
Dr. DeLorenzo emphasized that Star recognizes that there must be much more research conducted to determine whether the removal or elimination of the known carcinogenic TSNAs from the tobacco leaf will reduce the incidence of cancer from smoked tobacco and tobacco smoke and that such work will require many years. "Star's increased revenues will better allow us to expand our research into these daunting questions," Dr. DeLorenzo said:
This press release reflects certain information previously included in Star's Forms 10-QSB and 10-KSB, as well as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company has tried, wherever possible, to identify these forward-looking statements using words such as"anticipates","believes","estimates","expects","plans","intends" and similar expressions. These statements reflect the Company's current beliefs and are based upon information currently available to it. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the Company's actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties and contingencies include, without limitation the continued development and commercialization of the Company's proprietary patented process for reducing and/or virtually eliminating TSNAs in the processing of tobacco leaf, potential disputes concerning the Company's intellectual property, potential delays in obtaining any necessary government approvals of the Company's proposed reduced risk tobacco products, market acceptance of the Company's products, competition from companies with greater resources than Star, the Company's decision not to join the Master Settlement Agreement
("MSA"), the adoption of required state statutes and any subsequent modification of the Master Settlement Agreement. The impact of potential litigation, if initiated against or by individual states that have adopted the MSA, is a risk factor to be considered by potential investors. The Company undertakes no obligation to update or advise upon any such forward-looking statements which may be made to reflect events or circumstances after the date of the filing of its most recent 10-KSB and 10-QSB or to reflect the occurrence of unanticipated events.
CONTACT:
Star Scientific, Inc.
James A. McNulty, CFO
804/861-0681
Fax: 804/861-0933
STARSCIENTIFIC.COM
KEYWORD: VIRGINIA
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