Strategic Diagnostics Inc., a leading provider of immunoassay-based GMO ("Genetically Modified Organism'') test kits, today reported financial results for the second quarter ended June 30, 2000. Net revenues were $5.8 million, versus $5.5 million in the prior year's quarter, an increase of 6%. Operating income for the quarter was $532,000 versus $428,000 in the prior year, an increase of 24%. Net income included income tax expense of $180,000 in the second quarter of 2000. The income tax expense is a non-cash expense as it relates to the utilization of the Company's net operating tax-loss carryforwards, which have been previously recognized for financial reporting purposes. No income tax expense was included in 1999 and net income declined slightly to
$265,000 versus $305, 000 in the prior year. On a fully diluted, per share basis, earnings were $.02 per share in both periods. 

For the six months ended June 30, 2000, net revenues increased 23% to $11.6 million, from $9.4 million in the prior year. Operating income for the six months was $867,000 versus $584,000 in the prior year, an increase of 48%. Year-over-year net income comparisons for the six-month period were also impacted by the provision for income taxes. Net income for the current period was $569,000, or $.03 per diluted share, versus a loss of $3.0 million, or ($.23) per diluted share in the prior year. Revenue increases for the three and six months ended June 30, 2000 continue to be primarily attributable to increased sales in the antibody and to a lesser extent, the agriculture markets. 

The activities for the second quarter were focused on preparations for meeting the expected demand for our GMO test kits in the upcoming U.S. harvest that begins in September 2000. Most recently the Company has completed the validation of two additional GMO test kits for corn. These new test kits, now being released, combined with the Company's existing line of GMO test kits, enable customers to test now for every trait currently in significant commercial production in corn. We have also now completed the final validation of test kits for the significant traits in sugar beets and canola. The Company's complement of GMO test kits now encompasses traits in the major agricultural crops where genetic technology is in commercial production, corn, soybeans, canola, and sugar beets. 

We believe the market for GMO test kits has been expanding rapidly since the introduction of the Company's first test kit for soybeans in July 1999. This belief is supported by the testing of the 1999 soybean harvest where 5% of the total U.S. production is estimated to have been tested compared with no testing in the year before. Furthermore, the Company's market information indicates that the rate of testing was 8% of the Brazilian soybean harvest that was completed in March 2000, again compared with no testing the year before. However, the rate of the expansion of this market for the upcoming U.S. harvest has been difficult to anticipate. Based on a survey by the Company of its customers, including grain elevators and intermediate grain processors, we believe that approximately 15% of the U.S. soybean harvest that begins in September will be tested. This same survey, conducted in the second quarter of 1999, indicated that few, if any,
customers would be adopting testing protocols for last year's harvest. Many factors, including weather and the rate of adoption of testing protocols by the Company's customers will affect the timing and amount of the demand for these kits between the third and fourth quarters. 

During the second quarter, field evaluations of the Company's recently acquired mycotoxin test kits indicated enhancements were necessary to meet the Company's quality standards. We have been working with the developer, Beacon Analytical Systems and the performance characteristics for one of the three mycotoxin tests currently meet the necessary requirements and this test is now commercially available. As a result of the additional time required to implement the quality enhancements, the Company delayed the commercial sale of these test kits in the second quarter and expects lower sales of these test kits in the third and fourth quarters than previously anticipated. For the year 2000, as a result of this delay, the Company expects that sales of
these test kits will be approximately $1-2 million less than previously anticipated. With these improved performance characteristics, the Company expects to build a market leadership position in mycotoxin testing over the next several years. 

Commenting on the results for the quarter, Richard C. Birkmeyer, President and CEO of SDI, stated, "The Company has begun the shift from a product focus to a market focus. We have organized the Sales and Marketing resources into four discrete business units, Agriculture, Antibodies, Food and Water Quality. Our objective is to link existing products with new products, either developed internally or acquired, that provide our customers the ability to make informed analytical decisions. 

Mr. Birkmeyer continued, "In our water business, we have begun to evaluate additional products that will link our existing polymer and pesticide tests to provide our customers comprehensive analytical data. These efforts, coupled with our expanded offering of agricultural products, directly reflects our commitment to shift to a market focus. We are pleased with the progress we made during the quarter, and the efforts we have expended to prepare for the increase in business activity we expect in the second half of the year.''  

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) is a pending trademark for SDI. 

Company news release
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