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CHEMDESIGN UPDATES OUTLOOK FOR SECOND QUARTER AND REMAINDER OF THE YEAR

 FITCHBURG, Mass., June 29 /PRNewswire/ -- ChemDesign Corporation's (NASDAQ: CDCC) Chairman and Chief Executive Officer, Richard E.T. Brooks, will meet with analysts by conference call tomorrow morning to discuss the company's outlook for the second quarter and the remainder of the year. Brooks will make the following comments in his prepared remarks:
 "We expect to release second quarter numbers in mid-July, but we now have sufficient insight into the quarter to update the market. Currently published analysts estimate that ChemDesign's second quarter earnings will be 8 cents or 9 cents. Although we are confident that the company will be profitable for the second quarter and the year, several factors have combined at quarter end that indicate that second quarter earnings will be off substantially from these estimates."
 "The primary cause is the large volume, custom Ag intermediate that we began production of in October 1992. We resolved the principal production problems during the first quarter but encountered new, end product quality problems during the second quarter and incurred a downward inventory adjustment. The cumulative effect of the quality problems has been to limit substantially the amount of product qualified to be shipped at quarter end. Thus, although production output of this product has increased during the quarter, substantial shipments scheduled for June were postponed."
 "The cause of the quality problem has been identified and resolved for future production. We remain confident that we are close to resolving all of the manufacturing challenges of this product and should be able to meet the customer's unchanged volume requirements for the year. In the meantime, however, our second quarter operating results have been adversely affected and we will not achieve the record Ag sales we were expecting in the second quarter."
 "The other disappointment that arose unexpectedly at quarter end relates to the new, proprietary (non-custom) pharmaceutical intermediate we have been producing at our Wisconsin subsidiary. Export shipments of this product proceeded as scheduled, and we anticipated that our principal domestic customer would have completed its product approval process during the second quarter, thus allowing us to make a sizable shipment from inventory before quarter end. Unfortunately, the customer did not complete its qualification process and no shipments of that product will likely be made now until the fourth quarter of this year. This delay, combined with the previously described postponement of shipments of the custom Ag intermediate, reduces expected second quarter revenues and, as one would expect, also has a dampening effect on earnings."
 "It should also be noted that heavy demand for electronics products, especially from new customers for qualifying quantities and commercial runs, resulted in less efficient use of our specialized process equipment. Accordingly, approximately $600,000 of expected electronics revenues were not realized in the second quarter, some portion of which are likely to be lost for the year. Thus, second quarter electronics sales will likely fall short of 1992 fourth quarter levels, though we still expect them to be significantly higher than those reported for the first quarter of 1993."
 "The reduced second quarter revenues and resulting earnings shortfall which we now anticipate have the additional effect of preventing the company from meeting certain of the covenants in its principal lending agreements. We are having discussions with our principal lenders regarding this and believe that mutually acceptable accommodations will be promptly reached."
 "We are obviously disappointed that the second phase of the company's recovery has been delayed this quarter. We are working diligently to put these new product and growth challenges behind us and are confident that we will be successful in that. We view the second quarter as a setback that, though it will clearly adversely affect our outlook for full year results, should not prevent the company from achieving growth over 1992 on both the top line and the bottom line."
 -0- 6/29/93
 /CONTACT: Michael J. O'Donnell, senior vice president and chief financial officer or Steven E. Borgeson, senior vice president and general counsel, both of ChemDesign, 508-345-9999/
 (CDCC)


CO: ChemDesign Corporation ST: Massachusetts IN: CHM SU: ERP

DJ -- NE002 -- 6918 06/29/93 17:39 EDT
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Publication:PR Newswire
Date:Jun 29, 1993
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