Exhibit 99.1
EMBREX REPORTS FULL YEAR AND FOURTH-QUARTER 2004 FINANCIAL RESULTS
- Fourth Quarter Pretax Income Negative Due to SOX Costs -
RESEARCH TRIANGLE PARK, N.C., March 15 /PRNewswire-FirstCall/ --
Embrex(R), Inc., The In Ovo Company(R), (Nasdaq: EMBX) today announced
financial results for the fourth-quarter ended December 31, 2004.
Highlights
- Fourth-quarter 2004 total revenues up 7%, or $0.8 million, over the same
period in 2003
- Total revenues for 2004 increased 6%, or $2.7 million over 2003, to $48.7
million over 2003
- Device revenues for 2004 increased 6%, or $2.7 million, compared to 2003
- 61% of 2004 device revenue increase occurred outside the United States
- Other income decreased $3.4 million from 2003, primarily attributable to
the $5.0 million financial settlement less legal expenses of $1.3 million
associated with Fort Dodge Animal Health in 2003
- Effective tax rate for 2004 was 26% compared to 9% for 2003
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,
---------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenues 12,269 11,507 48,717 46,025
Cost of revenues 5,405 4,892 20,147 18,914
Gross profit 6,864 6,615 28,570 27,111
Operating expenses 7,343 7,546 24,396 22,491
Other income (expense) 170 (79) 317 3,764
Income before income
taxes (309) (1,010) 4,491 8,384
Income tax expense
(benefit) (935) (813) 1,178 773
Net income $ 626 $ (197) $ 3,313 $ 7,611
Net income per share
of Common Stock:
Basic $ 0.08 $ (0.02) $ 0.42 $ 0.94
Diluted $ 0.08 $ (0.02) $ 0.40 $ 0.91
No. of shares used in per share
calculation:
Basic 7,911 8,117 7,954 8,119
Diluted 8,220 8,482 8,343 8,369
Results for Fourth Quarter 2004
For the quarter ended December 31, 2004, consolidated revenues were $12.3
million, a 7% increase compared to consolidated revenues of $11.5 million for
the fourth quarter of 2003.
Product sales decreased 7%, in the fourth-quarter 2004 compared to the same
period in 2003. Fourth-quarter 2004 device lease fees, a component of device
revenues, generated 6%, or $0.6 million, more revenue than the fourth 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 increased $0.3 million in the fourth quarter of 2004
compared to the fourth quarter of 2003. Overall, device revenues totaled $11.7
million for the fourth quarter of 2004 compared to $10.8 million for the same
period in 2003, representing an 8% increase year over year.
Fourth-quarter 2004 gross profit was $6.9 million, up $0.3 million compared
to the same period a year ago. This is primarily due to changes in Embrex's
product mix.
Operating expenses were down $0.2 million, or 3%, to $7.3 million in the
fourth quarter of 2004 compared to $7.5 million during the same period in 2003,
primarily due to decreases in research and development expenses that offset
increases in G&A and Sales & Marketing.
G&A expenses were $3.5 million for the fourth quarter of 2004, up $1.5
million or 75% compared to the same period of 2003. The increase in G&A expenses
from 2003 was primarily due to $0.6 million of expenses related to the
implementation of changes to internal controls for Sarbanes-Oxley (SOX)
compliance, increases in staff-related expenses driven by the Company's growth,
start-up costs for Embrex Poultry Health, and higher insurance premiums due to
increased insurance coverage. The balance of the increase was a reclassification
of patent-related legal expenses previously reflected in R&D.
Fourth quarter Sales & Marketing operating expenses increased $0.2 million
to $0.9 million from 2003 to 2004.
R&D expenses decreased $1.9 million primarily due to the purchase and
write-off of the gender sort system from Advanced Automation in 2003. The
write-off increased 2003 R&D expenses $2.3 million. Increased spending on
start-up manufacturing processes at the Embrex Poultry Health facility offset
some of the decrease.
Income tax benefit totaled $0.9 million for the fourth quarter of 2004 which
was $0.1 million more than the tax benefit in the same period in 2003.
Consolidated net income for the fourth quarter 2004 increased to $0.6
million, a four-fold increase over 2003 fourth quarter net loss of $0.2 million.
Diluted earnings per share were $0.08 for the fourth quarter 2004 versus ($0.02)
for the same period in 2003. This increase in net income is primarily
attributable to the write-off of the gender sort system purchased from Advance
Automation that decreased net income for the fourth quarter of 2003 by $2.3
million.
Results of Full-Year 2004
Consolidated revenues in 2004 totaled $48.7 million, an increase of 6% over
2003 revenues of $46.0 million. Device revenues totaled $46.2 million for 2004,
an increase of 6% over 2003 revenues of $43.5 million. Most of the device
revenue increase was attributable to a 7%, or $3.0 million, increase in
recurring device lease fees. This was due to an increase in the Inovoject(R)
system customer base, and new Egg Remover(R) system installations. Other
revenues decreased 12% from $0.6 million in 2003 to $0.5 million in 2004. A 3%
increase in product revenue, consisting primarily of Bursaplex(R) sales, also
contributed to the increase in consolidated revenues. Gross profit for 2004 was
$28.6 million, a 5% increase over gross profit of $27.1 million for the same
period in 2003.
Consolidated gross margin remained at 59% from 2003 to 2004.
Consolidated operating expenses were $24.4 million for 2004 versus $22.5
million for 2003. G&A expenses were $11.0 million in 2004, up 54% from $7.1
million in 2003. The increase in G&A expenses from 2003 to 2004 was principally
due to continued growth of expenses for the Company's Inovocox(TM) production
facility, $0.9 million related to accounting and internal controls to comply
with the Sarbanes-Oxley Act, increased insurance premiums due to increased
property and product liability exposures, patent-related legal fees previously
recorded as R&D expense, and staff-related increases in support of the business.
2004 Sales and Marketing expenses increased $0.1 million from $2.8 million
in 2003 to $2.9 million for 2004. This increase is due to additional personnel
in Marketing to market and support the Company's devices and to prepare and
support Inovocox(TM) after registration is achieved.
Research and development expenses were $10.5 million in 2004, a $2.1 million
decrease from $12.5 million in 2003. The decrease in R&D expense from 2003 to
2004 is primarily due to the write-off of the gender sort system purchased from
Advanced Automation, which increased 2003 R&D expenses by $2.3 million.
Other income decreased $3.4 million from 2003 to $0.3 million for the same
period of 2004, primarily attributable to the $5.0 million financial settlement
less legal expenses of $1.3 million associated with Fort Dodge. This resulted in
net income of $7.6 million for 2003, which decreased 56% to $3.3 million in
2004. Diluted net income per common share was $0.40 for 2004 based on 8.3
million average shares outstanding, compared to diluted net income per common
share of $0.91 based on 8.4 million average shares outstanding for 2003. The
2003 net income includes $3.7 million, or $0.44 per share attributable to the
Fort Dodge settlement.
The effective tax rate of 9% for 2003 increased to 26% for 2004. Income
Taxes totaled $1.2 million in 2004, a $0.4 million increase from $0.8 million in
2003. Income tax expense and the effective tax rate increased over 2003 due to a
$0.2 million increase in the valuation allowance versus a $1.7 million decrease
in 2003, a lower R&D tax credit calculation in 2004 compared to 2003, an
increase in 2004 business activities in foreign markets compared to 2003, and
the use of NOL's in Embrex Europe for the 2003 Fort Dodge settlement during
2003. These were partially offset by miscellaneous decreases including
adjustments for amended income tax returns and the reevaluation of tax and
inventory accruals.
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 $3.3 million to $10.4 million for 2004 from $13.7 million
for 2003. This is primarily due to the non-recurring $3.7 million Ft. Dodge
settlement in 2003.
At December 31, 2004, cash and cash equivalents totaling $4.5 million were
$5.1 million lower than the $9.6 million on hand at December 31, 2003. This was
principally due to a $4.3 million decrease in cash provided by long-term debt,
as well as the $4.3 million decrease in net income resulting from the $5.0
million settlement with Fort Dodge in 2003 and an increase in Sarbanes- Oxley
related expenses. A $2.2 million increase in cash used to repurchase shares of
common stock also contributed to the decrease in cash balances. Investing
activities, primarily device purchases, and other capital expenditures consumed
$12.6 million and the Embrex Poultry Health facility required $1.3 million. This
was partially offset by a $2.7 million decrease in cash used for investing in
capital expenditures, the issuance of common stock for $0.7 million, and the
issuance of $2.1 million of long-term debt from BB&T as a part of our
construction/term loan.
"Diversity in a company's product portfolio and geographic reach is a well
documented strategy of success and it was proven at Embrex in 2004. As Asia
continued to struggle against avian influenza outbreaks, Brazil and North
America offset the impact with continued growth. All Embrex regions were
profitable this quarter, except for Latin America which was impacted by upfront
costs associated with growth in machine installations - a nice problem to have,"
said Randall L. Marcuson, President and Chief Executive Officer. "We believe our
market performance in a challenging year was good. Had Asia not had avian
influenza we believe it would have been very good. We made much of it up as we
worked to improve our gross profit in the face of the revenue challenge.
Unfortunately, the costs associated with implementation of the requirements of
Sarbanes-Oxley were substantial. The magnitude of those costs only became
apparent at the end of 2004 and during the closing process in January and
February after we were advised of additional costs by our independent auditors."
Embrex's management, led by Mr. Marcuson, will discuss fourth-quarter
financial results in a conference call on March 16 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 4587442. 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 16 to midnight ET March 31, by dialing 800-642-1687 (domestic and
Canada), or (706) 645-9291 (international), conference ID 4587442. 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(R), 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 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.
Please see Embrex's Form 10-K filed with the SEC for detailed GAAP financial
statements.
Consolidated Statement of Operations
(In thousands except per share amounts)
Three Months (Unaudited) Twelve Months
Ended December 31, Ended December 31,
---------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenues
Device revenues $ 11,660 $ 10,750 $ 46,157 $ 43,458
Product sales 481 519 2,037 1,970
Other revenue 128 238 523 597
Total revenues 12,269 11,507 48,717 46,025
Cost of device revenues
and product sales 5,405 4,892 20,147 18,914
6,864 6,615 28,570 27,111
Gross profit
Operating expenses:
General & administrative 3,498 1,996 10,983 7,119
Sales & marketing 893 675 2,939 2,832
Research & development 2,952 4,875 10,474 12,540
Total operating expenses 7,343 7,546 24,396 22,491
Operating income (479) (931) 4,174 4,620
Other income (expense)
Interest income 23 32 87 163
Interest expense (3) (10) (29) (20)
Other income (expense) 150 (101) 259 3,621
Total other income (expense) 170 (79) 317 3,764
Income before income
tax expense (309) (1,010) 4,491 8,384
Income tax expense
(benefit) (935) (813) 1,178 773
Net income $ 626 $ (197) $ 3,313 $ 7,611
Net income per share
of Common Stock:
Basic $ 0.08 $ (0.02) $ 0.42 $ 0.94
Diluted $ 0.08 $ (0.02) $ 0.40 $ 0.91
No. of shares used in per
share calculation:
Basic 7,911 8,117 7,954 8,119
Diluted 8,220 8,482 8,343 8,369
EBITDA $ 1,282 $ 392 $ 10,399 $ 13,724
GAAP Reconciliation of Net Income to EBITDA
(In thousands)
Three Months Twelve Months
Ended December 31, Ended December 31,
---------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net income $ 626 $ (197) $ 3,313 $ 7,611
Add back:
Depreciation and amortization 1,588 1,392 5,879 5,320
Interest expense 3 10 29 20
Income tax expense (benefit) (935) (813) 1,178 773
EBITDA $ 1,282 $ 392 $ 10,399 $ 13,724
Condensed Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2004 2003
------------ ------------
ASSETS
Current assets $ 19,507 $ 23,367
Non-current assets 43,073 36,350
Total assets $ 62,580 $ 59,717
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities $ 7,040 $ 7,621
Non-current liabilities 8,518 6,404
Shareholders' equity 47,022 45,692
Total liabilities and shareholders' equity $ 62,580 $ 59,717
Condensed Consolidated Statements of Cash Flows
(in thousands)
Twelve Months Ended
December 31
---------------------------
2004 2003
------------ ------------
Net cash provided by operating activities $ 9,606 $ 9,783
Net cash used in investing activities (13,923) (16,603)
Net cash provided by (used in)
financing activities (1,361) 7,459
Change in cash and cash equivalents (5,678) 639
Currency translation adjustments 518 951
Cash and cash equivalents at beginning
of period 9,629 8,039
Cash and cash equivalents at end of period $ 4,469 $ 9,629
CONTACT: Ellen T. Moore
Vice President, Investor Relations
& Corporate Communications
(919) 314-2561
SOURCE Embrex, Inc.
-0- 03/15/2005
/CONTACT: Ellen T. Moore, Vice President, Investor Relations & Corporate
Communications of Embrex, Inc., +1-919-314-2561/
/Web site: http://www.embrex.com /