NEWS RELEASE
FOR IMMEDIATE RELEASE COMPANY CONTACT:
Stanley J. Musial
Chief Financial Officer
(302) 456-6789
www.sdix.com
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STRATEGIC DIAGNOSTICS REPORTS SECOND QUARTER AND SIX MONTH RESULTS
NEWARK, DEL., AUGUST 5, 2004 - 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
second quarter and six months ended June 30, 2004.
Revenues for the second quarter of 2004 decreased 15% to $5.4 million, compared
to $6.4 million for the second quarter of 2003. Net income in the second quarter
of 2004 was $148,000, or $0.01 per diluted share, compared to net income of
$211,000, or $0.01 per diluted share, in the second quarter of 2003. For the six
months ended June 30, 2004, revenues decreased 9% to $11.8 million, versus $12.9
million for the same period in 2003. Net income for the six months ended June
30, 2004 was $566,000, or $0.03 per diluted share, compared to net income of
$546,000, or $0.03 per diluted share, for the same period in the prior year.
Food safety revenues increased 7% to $1.4 million in the second quarter of 2004
compared to $1.3 million for the same quarter in the prior year, and increased
by 20% to $3.5 million for the six months ended June 30, 2004, compared to $3.0
million for the same period in the prior year. Food pathogen test sales, led by
sales of test kits for E. coli and Salmonella, grew by 46% during the second
quarter of 2004 and by 43% for the six months ended June 30, 2004, as compared
to the respective same periods in the prior year. Sales of the Company's
products to detect genetically modified (GM) traits were flat in the second
quarter of 2004 and increased by 16% for the six months ended June 30, 2004, as
compared to the respective same periods in the prior year. The 16% increase
primarily reflects, as previously reported, the Company's execution of a
sizeable sale associated with tests for soybean trait detection in the Brazilian
market.
Increases in food safety revenues were partially offset by continued reductions
in StarLink(TM) test kit sales, which were approximately $527,000 in the first
six months of 2004 compared to $792,000 in the same period in the prior year.
Production of the StarLink(TM) trait was discontinued in 2001, and the Company
expects the rate of testing for this trait to diminish at a more rapid rate.
Water quality revenues decreased 22% to $1.6 million for the second quarter of
2004 compared to $2.1 million for the same quarter in the prior year, and
decreased by 18% to $3.2 million for the six months ended June 30, 2004,
compared to $3.9 million for the same period in the prior year. This decline
reflects the previously mentioned decline in the number of remediation projects
and correlated use of on-site testing. Also contributing to the decline was
pricing pressure from direct competitors and lab-based testing services and the
Company's previously reported efforts to discontinue production and sales of low
margin products, including several "build to order" test kits. Remediation and
pesticide product line sales have declined at a faster rate than revenue
generation from new product introductions and sales; and large, one-time
equipment sales made during the "Orange" terror alert in the second quarter of
2003 have not been replaced by new sales.
Antibody revenues decreased 20% to $2.4 million for the second quarter of 2004
compared to $3 million for the same quarter in the prior year, and decreased by
15% to $5.1 million in the six months ended June 30, 2004, compared to $6.0
million for the same period in the prior year. This decrease reflects an
unexpected decline in demand for polyclonal antibody services in the first six
months of 2004 compared to the same period in the prior year. The number of
customers has remained constant, but the number of customer projects has dropped
from the high levels experienced in the second quarter of 2003. This decrease
also reflects the Company's continuing efforts to remediate or decline business
that results in non-margin producing revenue, including the discontinuation or
reduction of work under three management agreements for monoclonal antibody
services in low margin applications.
Gross profits (total revenues less manufacturing expenses) decreased to $2.9
million in the second quarter of 2004 compared to $3.6 million in the same
quarter of 2003, and for the six months ended June 30, 2004 declined $406,000,
or 6%, to $6.8 million as compared to $7.2 million for the same period in the
prior year. The decline for both periods reflects the lower revenue levels in
the 2004 periods compared to the same periods in 2003. Gross margin percentages
decreased slightly to 54% in the second quarter 2004 as compared to 55% for the
same quarter in 2003, and increased for the six months ended June 30, 2004, to
58% as compared to 56% in the same period of 2003. The increase in gross margin
percentages for the six months ended June 30, 2004 is a result of the reduced
manufacturing expenses as described below.
Manufacturing expenses decreased $388,000, or 13% to $2.5 million in the second
quarter of 2004 compared to $2.9 million in the same quarter of 2003, and for
the six months ended June 30, 2004 declined $721,000, or 13%, to $5.0 million as
compared to $5.7 million for the same period in the prior year. The decline for
both periods primarily reflects the lower revenue levels in the 2004 periods
compared to the same periods in 2003, and the benefit of the Company's ongoing
efforts on manufacturing process improvement and supply chain management.
Research and development spending was $1.3 million, or 11% of net revenues, for
the six months ended June 30, 2004, compared to $1.3 million, or 10% of net
revenues, for the same period in the prior year.
Selling, general and administrative expenses decreased $471,000 to $2.1 million
for the second quarter of 2004 compared to the same quarter in the prior year,
and decreased by $330,000 to $4.7 million in the six months ended June 30, 2004,
compared to the same period in the prior year. Included in the selling, general
and administrative expenses for the three month and six month periods ended June
30, 2003, was a $315,000 provision for severance and related expenses associated
with the Company's termination of its former CEO in May 2003. Also in the second
quarter 2004, the Company benefited from the recovery of a $100,000 receivable
it had written off in 2001.
Pre-tax income totaled $201,000 and $818,000 for the three month and six month
periods ended June 30, 2004, respectively, compared to pre-tax income of
$309,000 and $821,000 for the same respective periods in the prior year.
Commenting on the results, Matthew H. Knight, the Company's President and CEO,
stated: "We continue our efforts to become a better Company with the ability to
deliver reproducible and sustainable growth to our shareholders. Our management
team is leading the organization through a challenging but necessary
transition."
In the sales and marketing organization, we continue to retool. New sales people
are being recruited and trained to focus on bringing SDI solutions to our
customers. We are increasing the number of direct sales professionals,
increasing their sales and technical expertise, re-engineering customer service,
bringing new focus to distribution, and bringing new marketing discipline to the
entire organization. This is a very difficult process, and one that has the
highest sense of urgency within the Company."
Conference Call
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A conference call to review second quarter results is scheduled for 11:00 a.m.
EDT today. The dial-in number for the live conference call will be 877-407-8031
(201-689-8031 outside the U.S.). A live webcast of the conference call will be
available on the Company's website, www.sdix.com, as well as www.vcall.com. For
those who cannot listen to the live broadcast, an audio replay of the call will
be available on each of these websites for 90 days. Telephone replays of the
call will be available from 2:00 p.m. EDT on August 5 through 11:59 p.m. on
August 6. To listen to the telephone replay, dial 877-660-6853 (201-612-7415
outside the U.S.) and enter account number 1628 and conference ID 112938.
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. FeedChek(TM), Trait Chek(TM), GMO QuickChek(TM), and GMO Chek(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", "could",
"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 SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
JUNE 30, December 31,
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2004 2003
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ASSETS
Current Assets:
Cash and cash equivalents $ 6,359 $ 5,158
Receivables, net 3,837 3,795
Inventories 3,081 3,230
Deferred tax asset 1,083 1,336
Other current assets 674 502
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Total current assets 15,034 14,021
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Property and equipment, net 3,671 3,947
Other assets 3 3
Deferred tax asset 8,347 8,347
Intangible assets, net 6,878 6,957
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Total assets $33,933 $ 33,275
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 682 $ 788
Accrued expenses 1,295 1,342
Current portion of long term debt 486 211
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Total current liabilities 2,463 2,341
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Long-term debt 878 983
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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, 19,236,381
and 19,200,488 issued and outstanding at June 30, 2004 and December
31, 2003, respectively 192 192
Additional paid-in capital 36,211 36,140
Accumulated deficit (5,696) (6,262)
Deferred compensation (202) (192)
Cumulative translation adjustments 87 73
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Total stockholders' equity
30,592 29,951
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Total liabilities and stockholders' equity $33,933 $ 33,275
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STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
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2004 2003 2004 2003
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NET REVENUES:
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Product related $ 5,420 $ 6,417 $ 11,770 $ 12,782
Contract and other - - - 115
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Total net revenues 5,420 6,417 11,770 12,897
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OPERATING EXPENSES:
Manufacturing 2,476 2,864 4,996 5,717
Research and development 609 618 1,298 1,334
Selling, general and administrative 2,144 2,615 4,672 5,002
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Total operating expenses 5,229 6,097 10,966 12,053
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Operating income 191 320 804 844
Interest income (expense), net 10 (11) 14 (23)
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Income before taxes 201 309 818 821
Income tax expense 53 98 252 275
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Net income 148 211 566 546
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Basic net income per share $ 0.01 $ 0.01 $ 0.03 $ 0.03
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Shares used in computing basic
net income per share 19,236,000 18,942,000 19,236,000 18,941,000
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Diluted net income per share $ 0.01 $ 0.01 $ 0.03 $ 0.03
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Shares used in computing diluted
net income per share 19,674,000 19,591,000 19,719,000 19,542,000
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