NEWARK, DE, Aug. 5, 2004 (BUSINESS WIRE) -- Strategic Diagnostics Inc., a provider of antibody products and analytical test kits for the food safety and water quality markets, reported negative financial results for the second quarter and six months ended June 30.
Revenues for the second quarter of 2004 decreased 15% to $5.4 million, compared to $6.4 million for the same period in 2003. Net income for the quarter 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, revenues decreased 9% to $11.8 million, versus $12.9 million for the same period in 2003. Net income for the six monthswas $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 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 period, compared to $3.0 million for that timeframe a year earlier. 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 period, 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, 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 about $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™ 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 period a year earlier, and decreased by 18% to $3.2 million for the six months period, compared to $3.9 million for year ago timeframe. 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 compared to $3 million for the same quarter in the prior year, and decreased by 15% to $5.1 million in the six months timeframe, 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 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 2003's second quarter. 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 timeframe 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 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.
About Strategic Diagnostics Inc.
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, the company 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, Trait Chek, GMO QuickChek, and GMO Chek are pending trademarks for SDI.
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