Exhibit 99.1
Embrex Reports Third Quarter 2004 Financial Results
RESEARCH TRIANGLE PARK, N.C., Nov. 2 /PRNewswire-FirstCall/ -- Embrex(R),
Inc., The In Ovo Company(R), (Nasdaq: EMBX) today announced financial results
for the third quarter ended September 30, 2004.
Highlights
* Third quarter 2004 revenues up 11% or $1.3 million over the same period
in 2003
* Third quarter 2004 gross profit increased 9% compared to the similar
period in 2003
* Total revenues for first nine-months 2004 increased $1.9 million to
$36.4 million or 6% over first nine-months of 2003
* Device revenues for the first nine-months of 2004 increased 5%, or
$1.8 million, compared to same period in 2003
* Other income decreased $3.7 million from the first nine months of 2003,
primarily attributable to the $5.0 million financial settlement less
legal expenses of $1.3 million associated with Fort Dodge Animal Health
in the first nine months of 2003
* Effective tax rate 44% for the first nine months of 2004 and 50% for
third quarter of 2004
Financial Summary Table
Embrex, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands except per share amounts)
Three Months Nine Months
Ended September 30 Ended September 30
2004 2003 2004 2003
Revenues 12,765 11,507 36,448 34,519
Cost of revenues 5,132 4,536 14,742 14,023
Gross profit 7,633 6,971 21,706 20,496
Operating expenses 6,112 5,279 17,052 14,946
Other income (expense) 18 (45) 148 3,844
Income before income taxes 1,539 1,647 4,802 9,394
Income tax expense (benefit) 769 (1,001) 2,113 1,586
Net income $770 $2,648 $2,689 $7,808
Net income per share of
Common Stock:
Basic $0.10 $0.32 $0.34 $0.96
Diluted $0.09 $0.32 $0.32 $0.93
No. of shares
used in per share calculation:
Basic 7,919 8,159 7,969 8,151
Diluted 8,290 8,398 8,313 8,358
Results for Third Quarter 2004
For the quarter ended September 30, 2004, consolidated revenues were
$12.8 million, an 11% increase compared to consolidated revenues of
$11.5 million for the third quarter of 2003.
Product sales increased $0.3 million, or 80%, in the third quarter 2004
compared to the same period in 2003. Third quarter 2004 device lease fees, a
component of device revenues, generated 11% or $1.2 million more than the
third quarter of 2003. These recurring fees generally contribute more than 90%
of device revenues. Device revenues also include device sales, which tend to
be sporadic in nature and which decreased $0.3 million in the third quarter of
2004 compared to the third quarter of 2003. Overall, device revenues totaled
$11.9 million for the third quarter of 2004 compared to $11.0 million for the
same period in 2003, representing an 8% increase year over year.
Third quarter 2004 gross profit was $7.6 million, up $0.7 million compared
to the same period a year ago. This is primarily due to an improvement in
Embrex's product mix.
Operating expenses were up $0.8 million, or 16%, to $6.1 million in the
third quarter of 2004 compared to $5.3 million during the same period in 2003
primarily due to increases in general and administrative ("G&A") expenses.
G&A expenses were $2.6 million for the third quarter of 2004, up
$0.8 million or 41% compared to the same period of 2003. The increase in G&A
expenses from 2003 was primarily due to increases in patent-related legal
expenses formerly reflected in R&D. Additionally, increases in staff-related
expenses driven by the Company's growth, start-up costs for Embrex Poultry
Health, higher insurance premiums due to increased insurance coverage, and
expenses related to the implementation of changes to internal controls for
Sarbanes-Oxley (SOX) compliance contributed to the G&A increase as well.
Third quarter Sales & Marketing operating expenses remained essentially
unchanged at $0.7 million from 2003 to 2004. Research and development ("R&D")
expenses remained nearly the same at $2.8 million for both the third quarter
of 2003 and 2004. Embrex continues to manage its R&D effort to leverage its
"know-how," patent position, market presence, and expenditures.
Income taxes totaled $0.8 million for third quarter 2004, a $1.8 million
increase over the same period in 2003 with an effective tax rate of 50% for
2004 third quarter. This increase was primarily due to the previously
reported income tax adjustment in the third quarter of 2003 related to the
Fort Dodge settlement. This adjustment was made following a tax review and
had the effect of reducing income taxes for the third quarter of 2003 by
$1.3 million, resulting in an income tax benefit in the third quarter of 2003.
Additionally, foreign withholding taxes and losses in certain international
operations are contributing to the higher effective tax rate.
Consolidated net income for the third quarter 2004 decreased to
$0.8 million, 71% lower than 2003 third quarter net income of $2.6 million.
Diluted earnings per share were $0.09 for third quarter 2004 versus $0.32 for
the same period in 2003. This decrease in net income is primarily attributable
to the previously reported income tax adjustment in the third quarter 2003
related to the Fort Dodge settlement that increased net income for the third
quarter of 2003 by $1.3 million. As discussed above, operating expense
increases of $0.8 million in third quarter 2004 as compared to the same period
in 2003 contributed to the decrease in net income as well.
Results of First Nine-months of 2004
Consolidated revenues totaled $36.4 million for the first nine months of
2004, up 6% over the same period revenues of $34.5 million in 2003. Device
revenues were $34.5 million for the first nine months of 2004, an increase of
5% over 2003 first nine months revenues of $32.7 million. Most of the device
revenue increase was attributable to an 8%, or $2.4 million, increase in
recurring device lease fees. The device lease fee revenue increase was
partially offset by a $0.6 million decrease in device sales. A 7% increase in
product revenue, consisting primarily of Bursaplex(R) sales, also contributed
to the increase in consolidated revenues. Gross profit for the first nine
months of 2004 was $21.7 million, a 6% increase over gross profit of
$20.5 million for the same period in 2003.
Consolidated gross margin for the first nine months of 2004 increased from
59% in 2003 to 60% for the same period in 2004.
Consolidated operating expenses amounted to $17.1 million for the first
nine months of 2004 versus $14.9 million for the first nine months of 2003.
G&A expenses were $2.4 million higher during the first nine months of 2004 due
primarily to a $0.7 million increase in legal fees. This increase was caused
by the second quarter 2003 reclassification of $1.2 million of Fort Dodge
litigation fees from G&A operating expense to "other income" in the "other
income (expense)" section of the statement of operations. The
reclassification matched the cost of the litigation with the $5.0 million
settlement received from Fort Dodge. The remaining $1.7 million increase is
due to several other factors, including increased accounting fees related
primarily to implementation of changes to internal controls for compliance
with the Sarbanes-Oxley Act, additional staff-related and software expenses
supporting the business and its growth, and the start-up of Embrex Poultry
Health, higher premiums due to increased insurance coverage, and additional
property taxes related to the Embrex Poultry Health facility. Patent-related
legal expenses previously recorded as R&D expense also contributed to the
increase in G&A expenses, as well as the termination in 2003 of a federal
Advanced Technology Program (ATP) grant, which had absorbed a portion of G&A
expenses as overhead. 2003 Sales and Marketing expenses decreased
$0.1 million from $2.2 million in the first nine months of 2003 to
$2.1 million for the same period of 2004. This decrease is mainly due to
sales tax assessments that occurred in the first nine months of 2003 that did
not recur in 2004. Research and development expenses decreased $0.1 million
as well, to $7.5 million for the first nine months of 2004.
The effective tax rate of 17% during the first nine months of 2003
increased to 44% for the first nine months of 2004. The increase in the
effective tax rate is primarily due to the recognition of deferred tax assets
in 2003. Additionally, foreign withholding taxes and losses in certain
international operations are contributing to the higher effective tax rate.
Other income decreased $3.8 million for the first nine months of 2003 to
$0.1 million for the same period of 2004, primarily attributable to the
$5.0 million financial settlement less legal expenses of $1.2 million
associated with Fort Dodge in the first nine months of 2003. This resulted in
a net income of $7.8 million for the first nine months of 2003, which
decreased 66% to $2.7 million for the same period in 2004. Diluted net income
per common share was $0.32 for the first nine months of 2004 based on
8.3 million average shares outstanding, compared to diluted net income per
common share of $0.93 based on 8.4 million average shares outstanding in the
first nine months of 2003. The 2003 net income includes $3.4 million, or
$0.41 per share attributable to the Fort Dodge settlement.
Embrex uses earnings before interest, taxes, depreciation and amortization
(EBITDA) as an additional performance measure. Embrex believes that EBITDA,
which is a non-GAAP financial measure, provides investors with supplemental
information about its 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 decreased $4.2 million to $9.1 million for the first nine months of
2004 from $13.3 million during the same period of 2003. At September 30,
2004, cash and cash equivalents totaling $5.8 million were $3.8 million lower
than the $9.6 million on hand at December 31, 2003. This was principally due
to $9.9 million of capital investment to complete the Embrex Poultry Health
biological manufacturing facility and to purchase additional devices and other
equipment. In addition, $3.5 million was used to repurchase shares of Embrex's
common stock and $0.7 million was used to pay down its line of credit. These
were partially offset by $7.5 million of cash provided by operations,
$0.6 million received in connection with the exercise of stock options, and
$2.2 million received from the construction loan financing the Embrex Poultry
Health biological manufacturing facility.
"As our revenues show -- especially the recurring portion from device fees
- -- Embrex has improved its position in a very challenging global poultry
market," said Randall Marcuson, President and Chief Executive Officer of
Embrex. "Although parts of Asia remain troubled by avian influenza-induced
production and trade issues, Embrex remains pleased that we are doing as well
in that region as we are with year-to-date revenues in that region essentially
the same as 2003. Egg set increases in the United States, and strong growth
in Brazil has contributed to our solid growth year over year. We're also
pleased with the outcome of our initial Inovoject(TM) trials in Mexico and
received news in early October that Newplex(TM) Newcastle vaccine had received
regulatory approval in Turkey."
Embrex's management, led by Mr. Marcuson, will discuss third-quarter
financial results in a conference call on November 3 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 1371785. The live
conference call will be publicly available online at http://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 November 3 to midnight ET November 17,
by dialing 800-642-1687 (domestic and Canada), or (706) 645-9291
(international), conference ID#8897611. 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(R), 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 http://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, competition arising in the
United States, possible decreases in production by our customers, avian
disease outbreaks in Embrex's markets, 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 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(R) are trademarks of
Embrex, Inc.
CONTACT: Ellen T. Moore
Vice President, Investor Relations
& Corporate Communications
(919) 314-2561
Financial Tables Follow
Please see Embrex's Form 10-Q filed with the SEC for detailed GAAP
financial statements.
Consolidated Statement of Operations
(In thousands except per share amounts)
Three Months Nine Months
(unaudited) (unaudited)
Ended September 30, Ended September 30,
2004 2003 2004 2003
Revenues
Device revenues $11,944 $11,018 $34,496 $32,708
Product sales 703 390 1,556 1,452
Other revenue 118 99 396 359
Total revenues 12,765 11,507 36,448 34,519
Cost of device revenues and
product sales 5,132 4,536 14,742 14,023
7,633 6,971 21,706 20,496
Gross profit
Operating expenses:
General & administrative 2,631 1,868 7,484 5,123
Sales & marketing 713 656 2,046 2,157
Research & development 2,768 2,755 7,522 7,666
Total operating expenses 6,112 5,279 17,052 14,946
Operating income 1,521 1,692 4,654 5,550
Other income (expense)
Interest income 23 42 65 130
Interest expense (10) (9) (26) (10)
Foreign currency gain 5 3 109 14
Other income (expense) - (81) - 3,710
Total other income (expense) 18 (45) 148 3,844
Income before income tax
expense 1,539 1,647 4,802 9,394
Income tax expense (benefit) 769 (1,001) 2,113 1,586
Net income $770 $2,648 $2,689 $7,808
Net income per share of
Common Stock:
Basic $0.10 $0.32 $0.34 $0.96
Diluted $0.09 $0.32 $0.32 $0.93
No. of shares used in per share
calculation:
Basic 7,919 8,159 7,969 8,151
Diluted 8,290 8,398 8,313 8,358
EBITDA $3,019 $2,982 $9,119 $13,332
GAAP Reconciliation of Net Income to EBITDA
(In thousands)
Three Months Nine Months
(unaudited) (unaudited)
Ended September 30 Ended September 30
2004 2003 2004 2003
Net income $770 $2,648 $2,689 $7,808
Add back:
Depreciation and amortization 1,470 1,326 4,291 3,928
Interest expense 10 9 26 10
Income tax expense (benefit) 769 (1,001) 2,113 1,586
EBITDA $3,019 $2,982 $9,119 $13,332
Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2004 2003
(unaudited)
ASSETS
Current assets $20,033 $23,367
Non-current assets 41,195 36,350
Total assets $61,228 $59,717
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $6,913 $7,621
Non-current liabilities 8,647 6,404
Shareholders' equity 45,668 45,692
Total liabilities and shareholders' equity $61,228 $59,717
Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine Months (unaudited)
Ended September 30
2004 2003
Net cash provided by operating activities $7,519 $9,596
Net cash used in investing activities (9,978) (12,765)
Net cash used in financing activities (1,418) 5,111
Increase/decrease in cash and cash equivalents (3,877) 1,942
Currency translation adjustments 27 635
Cash and cash equivalents at beginning of period 9,629 8,039
Cash and cash equivalents at end of period $5,779 $10,616
SOURCE Embrex, Inc.
-0- 11/02/2004
/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.; In Ovo Company
ST: North Carolina
IN: AGR BIO HEA MTC
SU: ERN CCA MAV