MEDTOX Scientific, Inc. (MEDTOX Scientific) has reported revenues of $85.8 million for the full year of 2008, compared with the revenues of $80.8 million in the previous year-end. It has also reported a net income of $5.6 million, or $0.62 per diluted share, for the full year of 2008, compared with the net income of $6.7 million, or $0.75 per diluted share, in the previous year-end.
For the fourth quarter period, revenues were $20.8 million, against $19.7 million from the prior-year period. The company recorded operating income of $1.1 million for the three-month period, against $1.9 million for the prior-year period. The company recorded net income of $0.4 million for the three-month period, against $1.4 million for the prior-year period. Earnings per diluted share were $0.05, against $0.16 in the fourth quarter of 2007.
The company recorded operating income of $9.6 million for the twelve-month period, against $10.0 million for the prior-year period. The effective income tax rate for 2008 was 35.6% against an effective tax rate of 28.1% in 2007. The lower rate in 2007 equates to $0.08 per diluted share and was primarily due to a tax benefit from a favorable resolution of a state tax examination.
Gross margin for the year was 42.3%, against 45.3% for the prior year. Margins were negatively impacted by reduced revenue from existing clients in lab based drugs-of-abuse testing due to economic conditions affecting reduced hiring, and the company’s increased investment related to clinical laboratory expansion. Total operating expenses as a percentage of sales improved to 31.1% for the year, against 32.8% for the prior year. The company’s balance sheet also continues to improve. At December 31, 2008, the revolving line of credit had no outstanding balance, and continued repayment of long-term debt has reduced the balance from $1.0 million at December 31, 2007 to $0.3 million at December 31, 2008. Also, the company made capital expenditures of $8.5 million during the year, financed from internally generated cash, down from $9.0 million in the prior year. Operating cash flows for the year were a record $12.3 million.
In the Laboratory Segment, revenues from drugs-of-abuse testing increased 3.5%, to $40.0 million from $38.7 million in the prior year. The increase is a result of strong new business activity. Revenues from existing clients were down 18% for the quarter and 11.1%, or $4.2 million, for the year, due to economic conditions in the employment market. Our clinical laboratory expansion initiated in 2008 continues to gain momentum with record revenues of $7.4 million for the quarter and $26.1 million for the year, against $5.7 million and $22.6 million, respectively, for the prior periods. This is a quarterly increase of 30.0% and annual increase of 15.3%. Within the clinical laboratory, Clinical Trial Services (CTS) revenues increased to a record $2.1 million for the quarter and to $6.8 million for the year. This represents 85% and 50% increases, respectively. The CTS backlog consists of signed protocols and awarded business expected to be in excess of $10 million going into 2009.
In the Diagnostic Segment, revenues were up 3.7% year over year. While the company experienced growth in both the hospital and government market segments, revenues from our workplace drugs-of-abuse clients were down 8.2% year over year.The company also experienced lower revenues from other diagnostic products due to the phase-out of agricultural testing products in late 2007.
Notwithstanding the negative revenue impact from existing clients in workplace drugs-of-abuse testing, we achieved a positive growth number in our forensic lab as a result of strong new business activity. Results for the quarter and the year in our clinical lab were very strong, and gained momentum in the second half of the year as the company had expected. Total selling, general and administrative expenses for the year were 28.3% of revenues, down from 29.6% for the prior year. New account activity in the clinical laboratory for the quarter was encouraging and continues to strengthen our long term view of clinical laboratory diversification efforts.
There will be a continuing negative impact on our drugs-of-abuse testing revenues caused by economic conditions affecting hiring in 2009. This should be mitigated by the company expectation of strong on-going new business activity in this market segment in 2009. Gains in drugs-of-abuse testing market share in 2007, 2008 and anticipated in 2009, will have a strong impact on our performance when economic conditions improve, since our client attrition rate has been minimal.
The company enters 2009 with increasing momentum in our clinical laboratory business, strong new business initiatives in the drugs-of-abuse markets, minimal debt, strong cash flow, and the best cash position in the history of the company.