Orchid Cellmark Reports Fourth Quarter and Full Year 2008 Financial Results

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Orchid Cellmark Inc. (NASDAQ: ORCH), a leading worldwide provider of identity DNA testing services, today reported its financial results for the fourth quarter and full year of 2008.

Our results for the fourth quarter continue to reflect a challenging industry environment where adverse foreign exchange rates, pricing pressures, and, what we believe are temporary declines in U.S. CODIS volume, all contributed to the overall revenue decline despite increases in forensics casework volume.

Total revenues were $13.0 million for fourth quarter 2008 compared to $15.0 million for the fourth quarter of 2007. For full year 2008, revenues were $57.6 million compared to $60.3 million for the full year of 2007.

The decline in 2008 fourth quarter revenues was primarily due to the impact of foreign exchange rates as the dollar rose against the British pound reducing U.K. revenues by 23%, and to a lesser degree from a substantial drop in the federal CODIS (Combined DNA Index System) and state DNA databases business, which the company believes to be a temporary decline as state backlogs continue to build in the absence of outstanding bids.

Total U.K.-based revenues for the fourth quarter of 2008 rose 6.7% compared to the fourth quarter of 2007 before accounting for the exchange rates. Revenues were boosted by a 30% increase in forensic revenues from a year ago, as these gains were partially offset by lower volumes of animal DNA testing for scrapie susceptibility. U.S.-based revenues for the 2008 fourth quarter were impacted by a substantial drop in CODIS revenue that was partially offset by increased revenues in paternity testing and forensic casework businesses.

The decrease in total revenues for the full year 2008 compared to a year ago was largely due to lower revenues in the U.K. that were reduced by 8% due to unfavorable exchange rates. Total U.S.-based revenues rose by 3% over the full year 2007, principally due to increases in the U.S. paternity testing business and revenue associated with the company's acquisition of ReliaGene Technologies, Inc. The revenue gain was partially offset by lower revenues from the company's forensic casework and CODIS businesses. In addition to the impact of adverse exchange rates, the decrease in U.K.-based revenues for the full year 2008 compared to a year ago was due to lower volumes in the company's scrapie susceptibility testing, forensics and immigration businesses.

Excluding cost of service revenue, operating expenses for the quarter declined to $5.3 million from $5.8 million for the fourth quarter of 2007 as a result of continued management focus on reducing general and administrative and marketing and sales expenses. For the full year 2008, these operating expenses were $24.7 million compared to $24.2 million in 2007.

Operating loss for the fourth quarter of 2008 was $1.5 million compared to a $1.3 million loss for the fourth quarter of 2007. The operating loss increase was principally due to a decrease in gross profit as a result of lower revenues, primarily in the U.K. The company's gross margin percentage was 30% for both fourth quarters of 2008 and 2007.

Operating loss for the full year 2008 was $7.4 million compared to a $4.1 million loss for 2007. The operating loss increase was principally due to a decrease in gross margin in the U.K and an increase in general and administrative expenses. Gross margin for the U.K. business in 2008 was adversely impacted by decreased volumes in scrapie susceptibility testing and lower margin revenues replacing the DNA testing volumes related to the loss of former LGC business and the buildup of casework management capabilities in the U.K. to service the business the company won under the North West/South West and Wales regional forensics services tender.

Orchid Cellmark reported net income of $473 thousand, or $0.02 per share, for the fourth quarter of 2008, compared to a net income of $168 thousand, or $0.01 per share, for the fourth quarter of 2007. The net loss for the full year of 2008 was $4.5 million, or $(0.15) per share, compared to a net loss of $3.0 million, or $(0.10) per share in 2007. The fourth quarters of 2008 and 2007 include proceeds from the sale of state net operating losses of $1.5 million and $1.1 million, respectively, which are reflected as reductions of income tax expense in the respective quarters and which positively impacted our net results. Net income for the fourth quarter of 2008 and 2007 and net loss for the full years 2008 and 2007 includes charges of $1.0 million and $1.2 million, and $4.5 million and $4.7 million, respectively, for depreciation and amortization.

At December 31, 2008, cash and cash equivalents were $15.0 million.

Thomas Bologna, president and chief executive officer of Orchid Cellmark commented, "Our results for the fourth quarter continue to reflect a challenging industry environment where adverse foreign exchange rates, pricing pressures, and, what we believe are temporary declines in U.S. CODIS volume, all contributed to the overall revenue decline despite increases in forensics casework volume."

Mr. Bologna added, "For the year, we did achieve important gains in core business segments including U.S. paternity, U.S. forensic casework serviced from our Dallas facility, and our important win of a significant portion of the UK North West/Southwest and Wales regional tender. Largely as a result of our win in the NW/SW and Wales regional tender, and the scale-up for that business which started in the second quarter of 2008, along with other U.K. business we secured, our U.K. forensics crime revenue grew by 14% in the fourth quarter over the third quarter of this year before accounting for exchange rates. By the end of the fourth quarter of 2008, we believe we have made up completely for the loss of the LGC-related business despite the significantly adverse foreign exchange rates. This is a considerable achievement given that the LGC business represented approximately 42% of U.K. revenues for 2007."

Mr. Bologna concluded: "Our primary metric, especially in these difficult economic times, is to manage our cash judiciously, which we believe we are doing. We ended 2008 with approximately $15 million in cash. Additionally, for the most part we met or exceeded the baseline factors that we suggested for the fourth quarter of 2008 in our Q3 2008 quarterly conference call."

Conference Call Information A conference call with Orchid Cellmark management will be held on Monday, March 16, 2009 at 10:00 a.m. EDT. To listen to the conference call, please dial (877) 266-0703 (US/Canada) or (706) 643-7682 (Int'l/Local) and ask for the Orchid Cellmark conference call, conference number 88572934. To listen to the live or archived webcast via the Internet, please visit the Investors section of the company's web site.

About Orchid Cellmark:
Orchid Cellmark (Nasdaq: ORCH) is a leading international provider of DNA testing services primarily for forensic and family relationship applications. Orchid Cellmark is one of the largest providers of forensic DNA testing services and its DNA results are used by the criminal justice system to assist with the identification of perpetrators, the exclusion of suspects and the exoneration of wrongfully convicted individuals. The company provides DNA family relationship testing to numerous child services organizations and individuals seeking to verify parentage. Orchid Cellmark also serves immigration and security authorities for DNA testing of individuals. In the agriculture field, the company provides DNA testing services for selective trait breeding. Orchid Cellmark's strong market positions in these areas reflect the company's accredited laboratories in the U.S. and U.K., its innovative genetic analysis technologies and expertise, and the company's reputation for exceptional quality, reliability and customer service for nearly two decades. More information on Orchid Cellmark can be found at http://www.orchidcellmark.com or http://www.cellmark.co.uk.

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