Exhibit 99.1
Embrex Reports Full Year and Fourth Quarter 2003 Financial Results
RESEARCH TRIANGLE PARK, N.C., March 15 /PRNewswire-FirstCall/ --
Embrex(R), Inc., The In Ovo Company(SM), (Nasdaq: EMBX) today announced
financial results for the full year and fourth quarter ended December 31,
2003.
2003 Financial Highlights
* Full-year revenues of $46.0 million, up 2% over the same period 2002
* Full-year net income of $7.6 million, up 6% over the same period 2002,
which includes the litigation settlement from Fort Dodge Animal Health
and Gender Sort system acquisition write down
* Fourth-quarter 2003 revenues of $11.5 million, unchanged from fourth
quarter 2002
* Fourth-quarter 2003 net loss of ($0.2) million, which includes Gender
Sort system acquisition and write down of $2.3 million, compared to a
net income of $1.4 million for the same period in 2002
2003 Business Highlights
* Embrex's Newplex(TM) in ovo Newcastle disease vaccine received USDA
approval
* Four new patents broaden Embrex portfolio for Inovocox(TM) in ovo
coccidiosis vaccine and Gender Sort system
* Construction substantially completed on Embrex Poultry Heath biological
manufacturing facility for the Company's novel Inovocox(TM) in ovo
coccidiosis vaccine
* Embrex obtains $5.0 million litigation settlement from Fort Dodge
Animal Health
Financial Summary Table
Embrex, Inc.
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
Three Months (unaudited) Twelve Months
Ended December 31 Ended December 31
2003 2002 2003 2002
Revenues $11,507 $11,465 $46,025 $45,325
Cost of revenue 4,892 4,606 18,914 17,558
Gross profit 6,615 6,859 27,111 27,767
Operating expenses 7,546 5,181 22,491 19,269
Other income(expense) (80) (3) 3,764 122
Income (loss)
before taxes (1,011) 1,675 8,384 8,620
Income tax expense
(benefit) (814) 267 773 1,449
Net income (loss) $(197) $1,408 $7,611 $7,171
Net income (loss) per
share:
Basic ($0.02) $0.17 $0.94 $0.88
Diluted ($0.02) $0.16 $0.91 $0.82
No. of shares of
Common Stock used in
per share calculation:
Basic 8,117 8,153 8,119 8,116
Diluted 8,482 8,525 8,369 8,692
Fourth-quarter total revenues remained unchanged at $11.5 million for both
2003 and 2002. The Company's fourth-quarter device revenues of $10.7 million
increased $0.5 million over 2002 device revenues of $10.2 million. Revenues
from product sales decreased $0.3 million from $0.8 million in 2002 to
$0.5 million in 2003, partially offsetting this gain. In addition, other
revenues derived from grant and miscellaneous revenue decreased from
$0.4 million in the fourth quarter of 2002 to $0.2 million for the same period
of 2003. As noted in prior quarters, device sales (included in device
revenue) and other revenue such as grants or outside funding vary from
quarter-to-quarter.
Total operating expenses were $7.5 million for the fourth-quarter 2003
compared to $5.2 million for the same period in 2002. Research and
development expenses increased $2.4 million, primarily due to expenses of
$2.3 million associated with the write down of the Gender Sort system
purchased from Advanced Automation, Inc. Other expense increases were not
significant.
Fourth-quarter loss before taxes was ($1.0) million, or $2.7 million less
than 2002 income before taxes of $1.7 million. This loss is primarily due to
the Company's write down of the $2.3 million purchase of the Gender Sort
system from Advanced Automation. As a result of the loss before taxes of
$1.0 million, estimated income taxes for the fourth quarter of 2003 were
reduced. In addition the Company's evaluation of the year end deferred tax
asset resulted in a significant increase to the deferred tax asset and a
reduction in the provision for income taxes. Together the above items resulted
in a $1.0 million net reduction in income tax compared to fourth quarter 2002
income tax. Fourth-quarter net loss was ($0.2) million, a decrease of
$1.6 million in comparison to net income of $1.4 million for the same period
in 2002. Diluted earnings per share for the fourth-quarter were ($0.02) per
share on 8.5 million weighted average shares outstanding, compared to diluted
earnings of $0.16 per share on 8.5 million weighted average shares outstanding
for the same period in 2002.
Fourth-quarter 2003 gross margin decreased from 60% to 57% reported in the
comparable quarter of 2002 primarily due to Advanced Technology Program (ATP)
grant funding with no associated cost of revenue received during the fourth
quarter of 2002 that did not recur in 2003.
The Company uses earnings before interest, taxes, depreciation and
amortization (EBITDA) as an additional performance measure. The Company
believes that EBITDA, which is a non-GAAP financial measure, provides
investors with supplemental information about the Company's financial
performance. In compliance with the Securities and Exchange Commission's
Regulation G, the Company has provided a reconciliation of EBITDA to GAAP net
income, following the financial statements below. EBITDA was $0.4 million for
the fourth quarter of 2003, a decrease of 87% or $2.7 million compared to the
same period in 2002. It includes a $2.3 million write down of the Gender Sort
system purchased from Advanced Automation.
Results of Full-Year 2003
For the full-year ended December 31, 2003, total revenues were
$46.0 million, a 2% increase over total revenues of $45.3 million for the
full-year 2002. This is primarily attributable to an 8%, or $3.3 million
increase in device revenues which was offset by product sales that declined by
$1.1 million and other revenue from grants and research and development
funding that decreased by $1.5 million year over year.
Full-year 2003 gross margin was 59%, down from 61% in 2002 primarily due
to lower ATP funding and 2002 funding from Cobb-Vantress that did not recur in
2003, each of which had no associated cost of revenue.
Operating expenses were up 17% to $22.5 million in 2003 compared to
$19.3 million in 2002. Operating expenses for 2003 include a $2.3 million
write down for the Gender Sort system purchased from Advanced Automation.
General and administrative (G&A) expenses were $7.1 million in 2003, up 8%
from $6.6 million in 2002. The increase in G&A expenses from 2002 to 2003 was
primarily due to increased expenses related to legal and accounting services
incurred to comply with the Sarbanes-Oxley Act; additional facilities support;
the Company's Inovocox(TM) facility under construction; increased insurance
premiums due to increased property and product liability coverage as well as
an overall increase in premium rates for the 2003 insurance market; and staff-
related increases in support of the business.
Sales and marketing expenses totaled $2.8 million in 2003, an increase of
12% over 2002 expenses of $2.5 million. The increase from 2002 to 2003 is
primarily due to increased sales tax assessments, increased sales and
marketing efforts and staff-related increases to support the business.
R&D expenses were $12.5 million in 2003 compared to $10.2 million in 2002.
The increase from 2002 to 2003 is primarily due to the $2.3 million write down
of the Gender Sort system purchased from Advanced Automation.
Total other income was $3.8 million in 2003, a $3.6 million increase over
2002. This is primarily attributable to the $5.0 million Fort Dodge litigation
settlement in June 2003, which contributed $3.7 million of other income to the
second quarter of 2003 after accounting for legal expenses.
Income before taxes for 2003 was $8.4 million, or $0.2 million less than
2002 income before taxes of $8.6 million. Income taxes totaled $0.8 million
for 2003, a $0.7 million decrease in comparison to 2002. The effective tax
rate for 2003 was 9% in comparison to 17% in 2002. The lower effective tax
rate for 2003 was the result of the deferred tax asset evaluation that
increased the deferred tax asset and lowered the recorded income tax provision
expense. Due to net operating loss carry forwards in Embrex Europe, Ltd.,
which offset the income tax effect of the Fort Dodge settlement, there was no
income tax provision recorded for the settlement in 2003. Consolidated net
income for 2003 increased to $7.6 million, 6% higher than 2002 net income of
$7.2 million. The increase in 2003 net income compared to 2002 was primarily
due to the $3.7 million settlement of the Company's litigation with Fort Dodge
net of legal expenses, offset by the $2.3 million write down of the Gender
Sort system. Net income per common share was $0.91 for 2003 based on 8.4
million weighted-average diluted shares outstanding, compared to net income of
$0.82 per share based on 8.7 million weighted average diluted shares
outstanding in 2002.
EBITDA increased 1% to $13.7 million for 2003 from $13.6 million during
the same period of 2002. At December 31, 2003, cash and cash equivalents
totaling $9.6 million were $1.6 million higher than the $8.0 million on hand
at December 31, 2002. This was principally due to cash received from
financing the construction of the Embrex Poultry Health facility and a
favorable currency translation adjustment, offset by a $2.1 million decrease
in cash provided by operations and an $8.2 million increase in cash used for
investing in capital expenditures. EBITDA includes the $3.7 million
settlement of the Company's litigation with Fort Dodge net of legal expenses,
and the $2.3 million purchase and write down of the Gender Sort system from
Advanced Automation.
"The highlights at the beginning of this release demonstrate that Embrex
is poised to enter a new era in the field of in ovo technology. We broadened
our patent base, constructed our first vaccine manufacturing facility, and
modestly grew our Inovoject(R) system and other device revenues in the face of
global industry challenges and the appearance of limited competitive
activity," said Randall L. Marcuson, President and Chief Executive Officer of
Embrex. "Approximately a year ago, despite recognizing we would face certain
industry challenges, we decided to continue investing in key research and
development programs. Today, we believe we made the right decision. Our
Inovocox(TM) vaccine program remained on track and on budget while
advancements in our Gender Sort program lead us to believe we will have
sampling and assay techniques that improve our chances for application to a
broader market that includes the broiler industry - despite a delay in the
overall project. As we continue to move these projects forward, 2004 will be
another investment year for us. While we anticipate modest growth in the near
term, we continue to believe these projects represent significant potential
for the company."
Embrex's management, led by President and CEO Randall L. Marcuson, will
discuss fourth-quarter and full-year financial results and 2004 outlook and
plans in a conference call on March 17 at 11:00 AM ET. To join the conference
call, dial (877) 866-3175 (domestic and Canada), or (706) 679-7358
(international), identify Randall Marcuson as the conference leader, and
provide conference identification number 5950486.
The live conference call will be publicly available online
at www.embrex.com . Click the Investor Info button and then on the Live
Webcast icon. A telephone replay will be available from 2 p.m. ET March 17 to
midnight ET March 31, by dialing 800-642-1687 (domestic and Canada), or (706)
645-9291 (international), conference ID 5950486. A replay of the call can
also be accessed via the company's website using the same instructions as
above for the live webcast.
About Embrex
Embrex, Inc., The In Ovo Company(SM), headquartered in Research Triangle
Park, NC, is an international agricultural biotechnology company engaged in
the development of innovative in ovo (in the egg) solutions that meet the
needs of today's global poultry industry. The company's unique integration of
several scientific and engineering disciplines enables it to be the leading
provider of in ovo, value-added solutions with its automated injection and
detection devices as well as its select vaccines. For additional information,
visit the company web site at www.embrex.com .
The tables attached to this release are an integral part of this release.
This release contains forward-looking statements, including statements with
respect to future financial results, products, services, and markets. These
statements involve risks and uncertainties that could cause actual results to
differ materially. Risks include without limitation the degree of growth in
the poultry industry in the U.S. and globally, possible decreases in
production by our customers, market acceptance and cost of expansion in new
geographic markets and with new products, including the Company's ability to
penetrate new markets and the degree of market acceptance of new products, the
complete commercial development of potential future products on a cost
effective basis, including with respect to Gender Sort and Inovocox, and the
ability to obtain regulatory approval of products. Such approval is dependent
upon a number of factors, such as results of trials, the discretion of
regulatory officials, and potential changes in regulations. Additional
information on these risks and other factors, which could affect the Company's
financial results, is included in the Company's Forms 10-K, 10-Q and other
filings with the Securities and Exchange Commission.
Embrex(R), Bursaplex(R), Newplex(TM), Inovoject(R), Inovocox(TM), Egg
Remover(R), Vaccine Saver(R), and The In Ovo Company(SM) are trademarks of
Embrex, Inc.
Financial Tables Follow
Please see Embrex's Form 10-K filed with the SEC for detailed GAAP
financial statements.
Embrex, Inc.
Consolidated Statements of Operations
(In thousands except per share amounts)
Three Months(unaudited) Twelve Months
Ended December 31, Ended December 31,
2003 2002 2003 2002
Revenues
Device revenues $10,750 $10,206 $43,458 $40,160
Product sales 519 764 1,970 3,079
Other revenues 238 495 597 2,086
Total revenues 11,507 11,465 46,025 45,325
Cost of revenue 4,892 4,606 18,914 17,558
Gross profit 6,615 6,859 27,111 27,767
Operating expenses:
General &
administrative 1,996 1,911 7,119 6,571
Sales & marketing 675 703 2,832 2,536
Research &
development 4,875 2,567 12,540 10,162
Total operating
expenses 7,546 5,181 22,491 19,269
Operating profit (loss) (931) 1,678 4,620 8,498
Other income (expense)
Interest income 32 66 163 225
Interest expense 10 (49) 20 (62)
Foreign currency
gain (loss) (14) (20) - 0 - (41)
Other income
(expense) (87) - 0 - 3,621 - 0 -
Total other income
(expense) (79) (3) 3,764 122
Income (loss)
before taxes (1,010) 1,675 8,384 8,620
Income tax expense
(benefit) (813) 267 773 1,449
Net income (loss) ($197) $1,408 $7,611 $7,171
Net income per share:
Basic ($0.02) $0.17 $0.94 $0.88
Diluted ($0.02) $0.16 $0.91 $0.82
No. of shares of
Common Stock used
in per share
calculation:
Basic 8,117 8,153 8,119 8,116
Diluted 8,482 8,525 8,369 8,692
EBITDA $392 $3,082 $13,724 $13,560
Condensed Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2003 2002
ASSETS
Current assets $23,367 $18,808
Non-current assets 36,350 23,205
Total assets $59,717 $42,013
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities $7,621 $4,803
Non-current liabilities 6,404 46
Shareholders' equity 45,692 37,164
Total liabilities and
shareholders' equity $59,717 $42,013
Condensed Consolidated Statements of Cash Flows
(In thousands)
Twelve Months Ended
December 30
2003 2002
Net cash provided by operating activities $9,783 11,853
Net cash used in Investing Activities (16,603) (8,403)
Net cash provided by financing activities 7,459 1,179
Increase in cash and cash equivalents 639 4,629
Currency translation adjustments 951 (497)
Cash and cash equivalents at
beginning of period 8,039 3,907
Cash and cash equivalents at end of period $8,039 $9,629
GAAP Reconciliation of Net Income to EBITDA
(In thousands)
Three Months Twelve Months
Ended December 30 Ended December 31
2003 2002 2003 2002
Net income (loss) ($197) $1,408 $7,611 $7,171
Add back:
Depreciation and
amortization 1,392 1,361 5,320 4,878
Interest expense 10 (49) 20 62
Tax expense (813) 267 773 1,449
(benefit)
EBITDA $392 $3,082 $13,724 $13,560
CONTACT: Ellen T. Moore
Vice President, Investor Relations
& Corporate Communications
(919) 314-2561
SOURCE Embrex, Inc.
-0- 03/15/2004
/CONTACT: Ellen T. Moore, Vice President, Investor Relations & Corporate
Communications of Embrex, Inc., +1-919-314-2561/
/Web site: http://www.embrex.com/
(EMBX)
CO: Embrex, Inc.
ST: North Carolina
IN: BIO MTC AGR
SU: ERN MAV CCA