Exhibit 99.1
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NEWS RELEASE
FOR IMMEDIATE RELEASE Company Contact:
Arthur A. Koch, Jr.
Chief Operating Officer
Chief Financial Officer
(302) 456-6789
www.sdix.com
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Strategic Diagnostics Reports Third Quarter and Nine Month Results
NEWARK, Del., October 24, 2002 - Strategic Diagnostics Inc. (Nasdaq: SDIX) - a
leading provider of antibody products and analytical test kits for the food
safety and water quality markets, today reported financial results for the third
quarter and nine months ended September 30, 2002.
Revenue for the third quarter of 2002 was $6.1 million, compared with $8.5
million in the third quarter of 2001, which included record levels of
StarLink(TM) test kit sales which have declined significantly as StarLink(TM) is
being removed from the nation's grain supply. Net income in the third quarter
totaled $121,000 or $0.01 per diluted share, compared to net income of $896,000
or $0.05 per diluted share, in the prior year quarter. For the nine months ended
September 30, 2002, revenues were $17.4 million, versus $22.8 million in the
prior year (a decrease of 23 percent), which prior year included higher levels
of StarLink(TM) sales. Net loss for the nine months totaled $799,000, or $0.04
per share, down from net income of $1.9 million, or $0.11 per diluted share in
the prior year.
Revenues increased by approximately $543,000 or 10% over the second quarter of
2002 due primarily to increases in food safety product sales and antibody
revenues as described below.
Food safety revenues totaled $1.6 million in the third quarter of 2002 versus
$3.3 million in the third quarter of 2001 which included the higher levels of
StarLink(TM) sales and $1.2 million in the second quarter of 2002. The Company
believes its leadership position in GMO testing is continuing to grow. The
Company believes that the reliance on GMO technology continues to grow both in
the U.S. and abroad, and the demand for the Company's testing products is
increasing as well. Sales of GMO tests for cottonseed increased during the
quarter over the second quarter of 2002 and SDI believes it now supplies every
major cottonseed company (in terms of seed sales) in the U.S. and Australia (two
principal regions in the world where GMO technology is utilized). Overall, sales
of GMO tests to the seed industry, which includes the cottonseed sales, are
expected to grow throughout the rest of the second half of 2002 over the prior
year. In addition, the Company believes the outlook for GMO sales in South
America is strengthening. One major distributor is expecting as much as a 30%
increase in sales to as many as 400,000 tests in South America during 2003 from
more than 300,000 tests expected in 2002. The drivers behind this increase
include increased concern, particularly in Brazil, over the importation of
Roundup(R) Ready seeds from other South American growing regions. Certain state
governments in Brazil have begun creating legislation to address these concerns.
The state of Parana, an important agricultural state in Brazil, has created
legislation requiring that all soy seed and beans grown in Parana or transported
through its ports, be tested for the presence of GMOs.
Since the launch of RapidChek(R) lateral flow test for E. coli, several
companies with large testing requirements have initiated validation studies, and
initial results are favorable. In one such evaluation, the customer conducted
tests on more than 400 samples performing side-by-side comparisons against each
of four competing products. SDI's RapidChek(R) lateral flow test for E. coli
outperformed the competing products in both sensitivity and specificity. In
another evaluation, Mr. Kurt Westmoreland, Division Vice President for business
operations of Silliker Laboratories had the following comment, "RapidChek(R) is
easier to read than other visually-read immunoassay on the market that we have
evaluated. Cleaner and clearer lines mean fewer questionable results that have
to undergo confirmation, which saves time for our clients and minimizes lab
costs." The Company expects certain of these evaluations to be completed during
the fourth quarter of 2002 and increased sales thereafter. In addition, the
Company has participated in an evaluation of its proprietary RapidChek(R) Media
against other enrichment media and RapidChek(R) Media was shown to support and
accelerate growth better in samples of E. Coli O157:H7.
Additionally, the Company's research and product development efforts are
continuing toward the completion of new products, including tests for the
additional food pathogens salmonella and listeria, as well as for proteins in
animal feed that are linked to the transmission of BSE, or mad cow disease. The
method for animal feed has been designed with multiple tests per strip to
address the various analytical requirements throughout the world. In one
evaluation, SDI's product was shown to detect as little as 0.1% bovine
meat-and-bone meal in feed as well as the same sensitivity for poultry meal in
feed. These product features are important to comply with customer
specifications and governmental regulations throughout the U.S., Europe and
Japan.
The development of the method for salmonella is complete and the Company is
proceeding with the submission for a third party validation by the AOAC.
Concurrently, the Company is preparing for commercial launch and scaling-up
production of the reagents (production in commercial quantities under standard
operating procedures) as well as the production of the test kit under SDI's
standard manufacturing practices and completing the enrichment protocol. The
Company is also completing a licensing agreement of a lateral flow reading
instrument to read and record test results from its lateral flow strip tests.
The Company is also developing a test for listeria that are expected to reach
the marketplace in the first quarter of 2003.
Revenues for the water quality category totaled $1.8 million in the third
quarter, a decrease from the $2.2 million in the prior year quarter when the
events of September 11, 2001 resulted in a spike in sales of the Microtox(R)
toxicity screening methods and is about the same as the $1.8 million reported in
the second quarter of 2002. Sales of the Microtox(R) systems have been steadily
increasing in 2002 with more than 30 North American cities utilizing the system
for drinking water. Reagent sales have increased by 500% since the second
quarter of 2001 before the events of September 11, 2001 and are estimated to
continue to grow at more than 25% per year. The Company continues to work with
customers as they assess their vulnerability to threats of intentional
contamination as currently required under U.S. law and is expanding its efforts
in the food and beverage industry. The increase in Microtox(R) sales has offset
a decrease in sales of tests in the remediation market. Sales in this category
have been slower due to weak general economic conditions.
Revenues in the antibody segment totaled $2.6 million in the third quarter of
2002 versus $2.8 million in the third quarter of 2001 and were up 6% from the
$2.4 million reported in the second quarter of 2002. Several new or expanded
customer relationships were established during the quarter as customers and
prospects had the opportunity to validate manufacturing and quality procedures
at the expanded manufacturing facilities in Maine. These relationships will
develop into increasing sales, as the antibody division earns additional
projects under these relationships. The Company's project to develop a
point-of-treatment diagnostic test for Bayer's new product Repinotan(TM) is
continuing with Bayer's Phase III clinical trials, expected to complete during
2003.
Third quarter manufacturing expenses, which include costs of goods sold, were
$2.7 million in the third quarter of 2002 compared to $3.7 million in the prior
year third quarter. For the nine months, these expenses totaled $8.7 million in
2002 down from $10.2 million in 2001. The decrease for the quarter and nine
months is primarily attributable to the lower StarLink(TM) related lower sales
volume in 2002. Gross margins were slightly lower in the third quarter of 2002
than the prior year quarter as the Company's utilization of its manufacturing
capacity was less on the StarLink(TM) related lower sales volume in the third
quarter of 2002. These margins have improved over the second quarter of 2002 as
the Company's efforts to control expenses and consolidate its antibody
manufacturing operations as well as the utilization of its capacity at the
higher level of activity all have had a positive impact on gross margins.
Research and development expenses increased slightly to $804,000 in the third
quarter of 2002 compared to $718,000 in the prior year third quarter. For the
nine months these expenses totaled $2.4 million in 2002 versus $2.1 million in
2001. These increases are primarily due to continued investment in the
previously announced animal feed test for McDonald's Corporation and the lateral
flow food pathogen tests. Selling, general and administrative expenses decreased
to $2.4 million in the third quarter of 2002 from $2.7 million in the prior year
third quarter primarily due to the Company's efforts to lower its expenses,
including the consolidation of its antibody facilities in Maine. For the nine
months, these expenses totaled $7.9 million in 2002 up from $7.3 million in
2001. These increases in prior quarters were necessary primarily to plan and
prepare for the commercial launch of new products including the RapidChek(R)
lateral flow test for E. coli.
President and CEO Richard C. Birkmeyer commented, "We are pleased to return to
profitability and positive cash flow from operations. We have accomplished this
with revenue increases and reductions in expenses and we believe we are well on
our way to increased sales and profits performance for the second half of 2002.
In the food safety category, the industry response to our first food pathogen
test kit, the RapidChek(R) lateral flow test for E. coli, has been exciting.
Never in our history have we been able to enter a market with leaders of the
food manufacturing industry conducting product validations of the scale
currently underway. Our product is performing well and we expect these programs
to result in revenue opportunities for the fourth quarter and beyond. We remain
optimistic concerning our additional product developments. In the water quality
category, our market penetration continues to expand and we are now making
inroads to introduce new product applications of Microtox(R) to include food and
beverage customers. These prospective customers utilize significant volumes of
water in the course of their production and we are demonstrating the benefits of
testing these supplies throughout the manufacturing process.
"Furthermore, in an effort to stimulate international sales, we have recruited
Ms. Anne Cavanaugh, a cofounder of SDI, to run the European sales office. Anne
will manage many key distributor relationships from this office. In addition,
Anne will oversee our efforts to expand our base water quality business to
include our GMO, food pathogen and antibody products throughout the world. Anne
is thoroughly acquainted with the Company and its products, and we are excited
to see her resume a key management role. In summary, across all of our markets,
we believe we are well positioned to grow our business.
"In other news, I am pleased to report that Mr. Stanley J. Musial has accepted
the position of Chief Financial Officer effective November 1, 2002. Stan brings
a wealth of business, finance and management experience to our team and we are
looking forward to his contribution as we continue to build SDI. Stan joins our
Company from Continuum Healthcare where he held the CFO's position and his prior
experience includes other emerging businesses in healthcare, environmental
services and five years with KPMG, where his responsibilities increased to audit
manager in the Philadelphia office. Stan holds a MBA in Finance from Temple
University, a B.S. degree in Accounting from The Pennsylvania State University,
and is a Certified Public Accountant. We are delighted to have attracted an
individual of this caliber to our management team."
In another development, the Company reported that its commercial bank waived the
loan covenant covering the required level of EBITDA for the third quarter of
2002 and is presently drafting an amendment to establish minimum EBITDA
requirements of $700,000 for the fourth quarter of 2002 and $650,000 for the
first quarter of 2003 after which the loan agreement will revert to the original
loan convents. The Company reported cash and working capital of $1.3 million and
$12.7 million respectively at September 30, 2002.
Conference Call
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A conference call to review third quarter results is scheduled for 11:00 a.m.
EDT today. The dial-in number for the live conference call will be (703)
736-7292. A live webcast of the conference call will be available on the
company's Web site, www.sdix.com/Investor.asp, as well as www.on24.com. For
those who cannot listen to the live broadcast, an audio replay of the call will
be available on these sites for 30 days. Telephone replays of the call will be
available from 2:00 p.m. EDT on October 24, until 11:59 p.m. on October 25. To
listen to the telephone replay, dial 888-266-2081 (703-925-2533 outside the
U.S.) and enter passcode 6261875.
About Strategic Diagnostics Inc.
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SDI is a leading provider of biotechnology-based diagnostic tests for a broad
range of agricultural, industrial, and water treatment applications. Through its
antibody business, Strategic BioSolutions, Strategic Diagnostics also provides
antibody and immunoreagent research and development services. SDI's test kits
are produced in a variety of formats suitable for field and laboratory use,
offering advantages of accuracy, cost-effectiveness, portability, and rapid
response. Trait Check(TM), GMO QuickCheck(TM), and GMO Check(TM) are pending
trademarks for SDI.
This news release contains forward-looking statements reflecting SDI's current
expectations. When used in this press release, the words "anticipate", "enable",
"estimate", "intend", "expect", "believe", "potential", "will", "should",
"project" "plan" and similar expressions as they relate to SDI are intended to
identify said forward-looking statements. Investors are cautioned that all
forward-looking statements involve risks and uncertainties, which may cause
actual results to differ from those anticipated by SDI at this time. Such risks
and uncertainties include, without limitation, changes in demand for products,
delays in product development, delays in market acceptance of new products,
retention of customers and employees, adequate supply of raw materials, the
successful integration and consolidation of the Maine production facilities,
inability to obtain or delays in obtaining third party, including AOAC, or
required government approvals, the ability to meet increased market demand,
competition, protection of intellectual property, non-infringement of
intellectual property, seasonality, and other factors more fully described in
SDI's public filings with the U.S. Securities and Exchange Commission.
STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
September 30, December 31,
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2002 2001
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ASSETS
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Current Assets:
Cash and cash equivalents $ 1,330 $ 2,379
Receivables, net 4,703 4,737
Inventories 6,905 7,639
Deferred tax asset 861 861
Other current assets 805 504
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Total current assets 14,604 16,120
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Property and equipment, net 4,079 4,072
Other assets 48 351
Deferred tax asset 7,436 6,875
Intangible assets, net 7,128 4,716
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Total assets $33,295 $32,134
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Accounts payable $ 979 $ 1,620
Accrued expenses 668 1,236
Current portion of long term debt 245 1,333
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Total current liabilities 1,892 4,189
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Long-term debt 1,264 1,174
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Stockholders' Equity
Preferred stock, $.01 par value, 20,920,648 shares authorized,
no shares issued or outstanding - -
Common stock, $.01 par value, 35,000,000 shares authorized,
18,936,122 and 17,858,889 issued and outstanding
at September 30, 2002 and December 31, 2001, respectively 189 178
Additional paid-in capital 35,270 31,114
Accumulated deficit (5,295) (4,496)
Cumulative translation adjustments (25) (25)
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Total stockholders' equity 30,139 26,771
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Total liabilities and stockholders' equity $33,295 $32,134
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STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
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2002 2001 2002 2001
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NET REVENUES:
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Product related $ 5,921 $ 8,270 $ 16,959 $ 22,160
Contract and other 198 205 480 590
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Total net revenues 6,119 8,475 17,439 22,750
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OPERATING EXPENSES:
Manufacturing 2,707 3,671 8,736 10,252
Research and development 804 718 2,448 2,142
Selling, general and administrative 2,434 2,667 7,938 7,317
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Total operating expenses 5,945 7,056 19,122 19,711
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174 1,419 (1,683) 3,039
Operating income (loss)
Interest expense, net (18) (4) (51) (52)
Gain on sale of assets - - 374 76
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Income (loss) before taxes 156 1,415 (1,360) 3,063
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Income tax expense (benefit) 35 519 (561) 1,174
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Net income (loss) 121 896 (799) 1,889
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Basic net income (loss) per share $ 0.01 0.05 $ (0.04) $ 0.11
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Shares used in computing basic net income
net income (loss) per share 18,581,000 16,856,000 18,244,000 16,807,000
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Diluted net income (loss) per share $ 0.01 $ 0.05 $ (0.04) $ 0.11
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Shares used in computing diluted net income
net income (loss) per share 18,941,000 17,473,000 18,244,000 17,353,000
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