Orchid Cellmark reports 21% increase in total revenues for fourth-quarter 2009

Orchid Cellmark Inc. (Nasdaq:ORCH), a leading international provider of identity DNA testing services, today reported its financial results for the fourth quarter and full year of 2009.

Total revenues were $15.7 million for fourth quarter 2009, an increase of 21%, compared to $13.0 million for the fourth quarter of 2008. For full year 2009, revenues were $59.1 million, an increase of 3%, compared to $57.6 million for the full year of 2008.

On a constant dollar basis, total revenues for the full year 2009 increased to $64.4 million, or by 12%, compared to the full year 2008. The exchange rate movement of the British pound as compared to the U.S. dollar negatively impacted total revenue by approximately $5.3 million for the full year 2009.

The increase in 2009 fourth quarter revenues was primarily due to increases in our forensics testing services in the U.K. and forensics casework testing services in the U.S., as well as licensing revenues of $850 thousand attributable to a patent license agreement.

"Fourth quarter results demonstrate continued strong growth in our core forensics business with a 36% increase in forensic revenues in the U.K. and a 25% increase in forensic revenues in the U.S.," said Thomas Bologna, president and chief executive officer of Orchid Cellmark.  "This growth, together with the licensing revenues we received in the Illumina transaction, produced a profitable fourth quarter. We also are beginning to see positive trends in our CODIS business as there was a notable increase in both revenue and sample volume in the fourth quarter of 2009 as compared to the fourth quarter of 2008 and we anticipate a strengthening in our CODIS business in 2010," he added.

"For the full year of 2009, it appears overall results are the best the company has ever achieved since becoming a public company, as we increased gross margins, cut our operating loss by approximately 76% and lowered our net loss to $1.5 million.  The consolidation of our Nashville forensic operations into Dallas and the consolidation of our East Lansing paternity operations into our Dayton facility will lead to additional operational efficiencies and increased scalability," Mr. Bologna explained.  "We expect to realize approximately $2.4 million in aggregate annual cost savings from these consolidations which are expected to be completed by August 31, 2010. Lastly, we ended 2009 with approximately $18.1 million in cash."

Total U.K. based revenues for the fourth quarter of 2009 rose 31% compared to the fourth quarter of 2008. Revenues were boosted by a 36% increase in forensic revenues and a 53% increase in immigration testing revenues, as compared to 2008, which were partially offset by the expected lower volumes of animal DNA testing for scrapie susceptibility.  Forensic revenues in the U.S. increased 25% over the fourth quarter of 2008. This increase was offset by a decline in our government paternity business, resulting in an overall increase of 1% in U.S.-based service revenues in the fourth quarter of 2009 compared to the fourth quarter of 2008.

The increase in total revenues for the full year 2009 compared to a year ago was largely due to increased revenues from our forensics testing services in the U.K. and forensics casework testing services in the U.S., partially offset by a decrease in our CODIS business.  Total U.K. revenues for the full year 2009 rose 12% compared to the full year 2008, primarily as a result of the increases in U.K. forensic revenues and immigration testing revenues, which were partially offset by the expected lower volumes of animal DNA testing for scrapie susceptibility, decreased revenues for paternity testing and the unfavorable impact of exchange rates. In British pounds, total U.K. revenues for the full year 2009 rose 32% compared to the full year 2008. Total U.S.-based service revenues fell by 8% compared to the full year 2008, principally due to a significant decrease in CODIS business, and decreased revenues from paternity testing services, partially offset by increased revenues from our forensic casework testing services.

Excluding cost of service revenue, operating expenses for the fourth quarter of 2009 increased to $5.5 million from $5.3 million for the fourth quarter of 2008 as a result of restructuring expenses related to the consolidation of our East Lansing, Michigan paternity testing operations into our Dayton, Ohio facility. For the full year 2009, these operating expenses decreased to $22.3 million compared to $24.7 million in 2008.

Operating income for the fourth quarter of 2009 was $211 thousand compared to a $1.5 million loss for the fourth quarter of 2008. The turn to profitability was principally due to an increase in gross profit as a result of increases in forensics testing services in the U.K. and forensics casework testing services in the U.S. and licensing revenues.  The company's gross margin percentage was 33% and 30% for the fourth quarter of 2009 and 2008, respectively.

Operating loss for the full year 2009 decreased by 76% to $1.7 million compared to a $7.4 million loss for 2008.  The significant decrease in operating loss was principally due to an increase in gross margin both in the U.K. and the U.S., a decrease in general and administrative expenses and the impact of the exchange rate movement on U.K. based expenses.  Gross margin in 2009 was favorably impacted by added sample volumes for our forensics testing services in the U.K. and forensics casework testing services in the U.S., licensing revenues, productivity enhancements in the U.S. and the U.K., as well as reductions in personnel and supply expenses in the U.S.

Orchid Cellmark reported net income of $858 thousand, or $0.03 per share, for the fourth quarter of 2009, compared to a net income of $473 thousand, or $0.02 per share, for the fourth quarter of 2008.  The net loss for the full year of 2009 was $1.5 million, or $(0.05) per share, compared to a net loss of $4.5 million, or $(0.15) per share in 2008.  The fourth quarter of 2008 includes proceeds from the sale of state net operating losses of $1.5 million, which is reflected as a reduction of income tax expense in such quarter and which positively impacted our net results.  Net income for the fourth quarter of 2009 and 2008 and net loss for the full years 2009 and 2008 includes charges of $1.0 million and $1.0 million, and $3.9 million and $4.5 million, respectively, for depreciation and amortization.

At December 31, 2009, cash, cash equivalents and short-term investments were $18.1 million.  Cash, cash equivalents and short-term investments at December 31, 2009 increased by $3.1 million over 2008.