NEWS RELEASE
FOR IMMEDIATE RELEASE
COMPANY CONTACT: INVESTORS CONTACT:
Anthony J. Simonetta Hayden Communications
Chief Financial Officer Brett Maas (brett@haydenir.com)
(302) 456-6789 Matt Hayden (matt@haydenir.com)
ww.sdix.com (843) 272-4653
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STRATEGIC DIAGNOSTICS REPORTS FIRST QUARTER RESULTS
REVENUE INCREASES 3.2%; FOOD PATHOGEN SALES INCREASE 108%;
NEW DISTRIBUTION PARTNERS
NEWARK, DEL., MAY 5, 2005 - STRATEGIC DIAGNOSTICS INC. (NASDAQ: SDIX) - a
leading provider of biotechnology-based detection solutions for a broad range of
food, water, agricultural, industrial, environmental and scientific
applications, today reported financial results for the first quarter ended March
31, 2005.
Revenues for the first quarter of 2005 increased 3.2% to $6.56 million, compared
to $6.35 million for the first quarter of 2004. Included in revenues in the
first quarter of 2004 was $156,000 of revenue associated with the Company's sale
of certain "catalog" antibody inventories that were written-off in the fourth
quarter of 2003. Revenues for the first quarter of 2005 continued to be impacted
by anticipated reductions in StarLink(TM) test kit sales, which decreased to
$172,000 in the first quarter of 2005, compared to $236,000 in the first quarter
of 2004. Sales of the Company's test kits used in Monsanto's Value Capture
Program, which totaled $425,000 in the first quarter of 2004, decreased to
$294,000 in the first quarter of 2005 due to order pattern and court decisions
in Brazil that resulted in the temporary ban of the Program as well as decisions
to allow the planting of GMO soy in certain Brazilian states.
In the first quarter of 2005, the Company began to make payments associated with
royalties on sales of technology used in the manufacture of certain test kits.
These payments, totaling $69,000, will be a component of cost of such products
sold going forward.
Consequently, for the quarter ended March 31, 2005, gross profit (defined as
total revenues less manufacturing costs) decreased 2.0% to $3.65 million,
compared to $3.73 million in the prior year quarter and gross margins decreased
from 58.7% in 2004 to 55.7% in 2005.
Operating expenses for the first quarter increased 4.3% to $5.99 million,
compared to $5.74 million for the first quarter of 2004. The increase was
primarily due to the Company's investment in the commercialization of new
technologies for the research and high throughput production of antibodies,
totaling $132,000, the royalty obligation noted above and a bad debt reserve for
a financially troubled customer, totaling $45,000, all incurred during the
quarter ended March 31, 2005.
Research and development spending was $642,000 or 9.8% of net revenues in the
first quarter of 2005, compared to $587,000 or 9.2% of net revenues in the first
quarter of 2004.
Selling, general and administrative expenses were $2.44 million in the first
quarter of 2005, compared to $2.53 million in the same quarter in the prior
year. Included in selling, general and administrative expenses in the first
quarter of 2004 was $100,000 associated with the termination of a distribution
reseller agreement for an instrument that electronically interprets strip test
lines, which the Company determined was not going to be marketable.
Pre-tax income totaled $597,000 for the three months ended March 31, 2005,
compared to pre-tax income of $617,000 for the same period in 2004. Net income
in the first quarter of 2005 and 2004 was $418,000 or $0.02 per diluted share.
Matthew H. Knight, the Company's President and Chief Executive Officer,
commented: "We are encouraged by the continued quarter over quarter progress the
Company has made since the beginning of 2004 and the fact that we continue to
report consistent profitability despite new investments in growth initiatives,
the inclusion of royalty payments, and the impact of non-recurring revenues in
2004. As mentioned, there were a variety of anticipated factors that obscured
our improving fundamental performance. Nevertheless, we equaled our
profitability on a comparable quarter basis, thus demonstrating a stronger
Company with a better operating structure and diversified revenue base. We are
well-positioned for growth in the markets we serve and expect to build upon our
first quarter performance during the remainder of 2005."
Mr. Knight continued, "We continue to place emphasis on our core competencies
that allow us to create products and services which deliver measurable Return on
Investment for our customers. We are still at the beginning stages of exploiting
opportunities in water quality testing and aggressively expanding our Genetic
Antibody initiative. Our recently signed distribution agreements with DuPont
Qualicon and US Biosystems (USB) help create growth opportunities for our world
class technologies in the food safety and environmental testing markets.
Domestically, we continue to see rapid growth in our food pathogen detection
business as our assays continually demonstrate superior technical and cost
performance in customer applications. We are excited about our opportunities and
believe our core competencies and product expertise position us for success in a
variety of growth markets."
FOOD SAFETY PRODUCTS
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Food safety revenues were $2.50 million in the first quarter of 2005, compared
to $2.23 million in the first quarter of 2004, an increase of 12.1%. Food
pathogen test sales in the first quarter of 2005 were up over 108% compared to
the same quarter of 2004. These increases are a continuation of the positive
trend that saw such sales increase 119.0%, 78.0% and 39.0% for the fourth, third
and second quarters of 2004, respectively, compared to the corresponding 2003
periods. Today the Company announced that it has entered into an exclusive
distribution agreement with DuPont Qualicon. Under the agreement, SDI's lateral
flow tests for the detection of food pathogens will be marketed outside the
United States by DuPont Qualicon as the DuPont(TM) Lateral Flow System(TM).
WATER AND ENVIRONMENTAL PRODUCTS
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Revenue decreased 16.4% to $1.22 million for the first quarter of 2005, compared
to $1.46 million for the same quarter in the prior year. The decline relates
primarily to a continued decrease in the number of remediation projects and
correlated use of on-site testing in the U.S. Pricing pressure from direct
competitors and lab-based testing services also contributed to the decline. The
Company recently announced the signing of a distribution agreement with USB, a
leading provider of environmental testing and data management services
headquartered in Boca Raton, Florida. USB has become a preferred channel
partner, marketing the Company's line of environmental test kits in conjunction
with complementary laboratory based services. It is expected that this
combination will bring new customers better value and help increase awareness of
the many benefits of the Company's RapidAssay(R) line of EPA approved assays.
Water quality monitoring continues to be an emerging but unproven opportunity
for the Company and it is an area of focus for the management team. The Company
has active development programs with a variety of well-known, brand-name food
manufacturers and continues to gain momentum in this area. The quality of the
water which comprises a key ingredient in food preparation is of paramount
importance, and this fact is just beginning to be recognized by the industry.
ANTIBODY PRODUCTS
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Antibody revenues increased 7% to $2.84 million for the first quarter of 2005
compared to $2.66 million for the same quarter in the prior year. The increase
in the first quarter of 2005 over the prior year, in addition to a 10% increase
in the fourth quarter of 2004, compared to the same quarter in the prior year,
is an extension of a continuing improvement in business, which saw a steep
decline in revenues in the first half of 2004. The 2004 decline was associated
with several large, one-time customer projects in that year, and the
discontinuation of low margin business. Included in antibody revenues in the
first quarter of 2004 was $156,000 associated with inventories that were
written-off during 2003. Custom and made-to-order antibody services and products
are a core competency of the Company and management is encouraged by the
continued improvement in this key business area. In 2005, the Company began
investing in a new research and production facility to commercialize important
new technologies for high throughput production of antibodies and has hired two
expert scientists to drive this effort. This technology is specifically targeted
at the rapidly developing proteomics market and the enablement of customer
research, development and commercialization in the diagnostics, pharmaceutical
and research markets. The Company's marketing plans are on schedule, and the
introduction of the first commercial product, mouse polyclonal antibodies, is
expected by the end of the fourth quarter of 2005.
CONFERENCE CALL
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A conference call to review first quarter results is scheduled for 4:30 p.m.
Eastern-time 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 7:30 p.m. Eastern-time on
May 5 through 11:59 p.m. on May 6. To listen to the telephone replay, dial
877-660-6853 (201-612-7415 outside the U.S.) and enter account number 286 and
conference ID 150190.
About Strategic Diagnostics Inc.
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SDI develops and markets biotechnology based detection solutions for a broad
range of food, water, agricultural, industrial, environmental and scientific
applications. By leveraging its expertise in immunology, proteomics,
bio-luminescence, and other bio-reactive technologies with innovative
application and production capabilities, the Company is able to provide
sophisticated diagnostic testing and immunoreagent systems to a diverse customer
base serving multiple vertical markets. SDI also serves the research, human
diagnostic and pharmaceutical sectors with a wide range of services including
complete outsourcing for the production of monoclonal and polyclonal antibodies
used in commercialized products offered by leading diagnostic and pharmaceutical
companies. 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 first 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)
MARCH 31, December 31,
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2005 2004
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ASSETS
Current Assets:
Cash and cash equivalents $ 7,947 $ 8,096
Receivables, net 3,965 3,858
Inventories 3,150 3,090
Deferred tax asset 892 1,071
Other current assets 1,004 336
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Total current assets 16,958 16,451
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Property and equipment, net 3,647 3,605
Other assets 5 2
Deferred tax asset 8,157 8,288
Intangible assets, net 6,956 6,996
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Total assets $ 35,723 $ 35,342
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 452 $ 868
Accrued expenses 1,651 1,525
Current portion of long term debt 211 211
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Total current liabilities 2,314 2,604
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Long-term debt 720 773
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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,
19,570,339 and 19,379,602 issued and outstanding
at March 31, 2005 and December 31, 2004, respectively 196 194
Additional paid-in capital 37,125 36,596
Accumulated deficit (4,341) (4,759)
Deferred compensation (411) (206)
Cumulative translation adjustments 120 140
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Total stockholders' equity 32,689 31,965
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Total liabilities and stockholders' equity $ 35,723 $ 35,342
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The accompanying notes are an integral part of these statements.
STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
THREE MONTHS
ENDED MARCH 31,
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2005 2004
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NET REVENUES:
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Product related $ 6,555 $ 6,350
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Total net revenues 6,555 6,350
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OPERATING EXPENSES:
Manufacturing 2,901 2,622
Research and development 642 587
Selling, general and administrative 2,442 2,528
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Total operating expenses 5,985 5,737
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Operating income 570 613
Interest income (expense), net 27 4
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Income before taxes 597 617
Income tax expense 179 199
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Net income 418 418
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Basic net income per share $ 0.02 $ 0.02
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Shares used in computing basic
net income per share 19,458,000 19,211,000
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Diluted net income per share $ 0.02 $ 0.02
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Shares used in computing diluted
net income per share 19,615,000 19,742,000
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The accompanying notes are an integral part of these statements.