Exhibit 99.1
EMBREX REPORTS SECOND QUARTER 2005 FINANCIAL RESULTS
RESEARCH TRIANGLE PARK, N.C., Aug. 2 /PRNewswire-FirstCall/ -- Embrex(R),
Inc., The In Ovo Company(R), (Nasdaq: EMBX) today announced financial results
for the second quarter ended June 30, 2005.
Highlights
* Second-quarter 2005 total revenues up 11% over second quarter 2004
* Second-quarter 2005 gross profit up 8% compared to same period in 2004
* Device revenues for second-quarter 2005 up 10% over the same period
of 2004
* Device revenues up 7% for first six-months of 2005 compared to first
half of 2004
* Product sales up 29% for second-quarter 2005 compared to same period
in 2004
* Product sales increased 67% for first six-months of 2005 compared to
first half of 2004
* International revenue grew by 20% for first six months of 2005 compared
to same period in 2004
* Test production pre-licensing serials (batches) of Inovocox(TM) in ovo
coccidiosis vaccine passed required tests; USDA-required field trials
of Inovocox(TM) set to begin in August
Financial Summary Table
Embrex, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands except per share amounts)
Three Months Six Months
Ended June 30 Ended June 30
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenues $ 13,018 $ 11,727 $ 25,781 $ 23,683
Cost of revenues 5,487 4,774 10,980 9,610
Gross profit 7,531 6,953 14,801 14,073
Operating expenses 6,159 5,546 12,463 10,942
Other income 73 97 216 129
Income before taxes 1,445 1,504 2,554 3,260
Income tax expense 199 698 698 1,345
Net income 1,246 $ 806 1,856 $ 1,915
Net income per share
of Common Stock:
Basic 0.16 $ 0.10 0.23 $ 0.24
Diluted 0.15 $ 0.10 0.22 $ 0.23
No. of shares
used in per share
calculation:
Basic 7,964 7,960 7,950 7,997
Diluted 8,278 8,268 8,275 8,308
Results for Second Quarter 2005
For the quarter ended June 30, 2005, consolidated revenues were $13.0
million, an 11% increase compared to consolidated revenues of $11.7 million
for the second quarter of 2004.
Product sales increased 29% or $0.2 million in the second quarter of 2005
compared to the same period in 2004. For second quarter 2005, device lease
fees, a component of device revenues, generated 9% or $1.0 million more in
comparison to the same period the prior year. 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 $0.1
million over second quarter 2004 to $0.2 million for the same period 2005.
Overall, device revenues totaled $12.2 million for the second quarter of 2005
compared to $11.1 million for the same period in 2004, representing a 10%
increase year over year.
Second quarter 2005 gross profit was $7.5 million, up $0.6 million
compared to the same period a year ago. This was primarily due to changes in
the Company's revenue mix and regional mix, which included higher product
sales and additional recurring device lease fees, particularly in Latin
America. However, as a consequence of the change in revenue mix and regional
mix, as well as higher material costs, gross margin decreased to 58% from 59%
for the same period in 2004.
Operating expenses were up 11% to $6.2 million in the second quarter of
2005 compared to $5.5 million during the same period in 2004 primarily due to
increases in general and administrative ("G&A") expenses, as well as sales and
marketing expenses.
G&A expenses were $2.7 million for the second quarter of 2005, compared to
$2.3 million for the same period of 2004. The increase in G&A expenses from
2004 is primarily due to increases in staff-related and third-party expenses
to support business growth, restricted stock expense, legal fees and
accounting fees related to Sarbanes-Oxley Act compliance.
Second-quarter 2005 Sales & Marketing expenses increased to $1.2 million
from $0.7 million for the same period in 2004 due to growth of the Global
Marketing group to support pre-launch activities of Inovocox(TM), as well as
the continued support of existing products. Additionally, sales and
marketing expenses that were previously allocated to cost of revenues in 2004
have been retained in sales and marketing expenses in 2005 due to departmental
reorganization.
Research and development ("R&D") expenses were down $0.3 million to $2.3
million for second quarter 2005 compared to the same period in 2004. This
decrease is primarily due to production-related expenses for validation costs
of USDA pre-licensing serials for Inovocox(TM) vaccine that were capitalized
in the second quarter of 2005 for the Embrex Poultry Health facility.
Income taxes totaled $0.2 million for second quarter 2005, compared to
$0.7 million for the same period in 2004. The income tax decrease is due to a
lower reported tax rate in second quarter 2005 of 14% compared to 46% for the
same period in 2004. The income tax expense decreased in 2005 due primarily
to the tax benefit recorded from the filing of amended tax returns for 2001
and 2002. The returns were amended to reflect the Company's claim for
extraterritorial income exclusion. The filings of these amended returns
represent discrete events that provided the Company tax benefits in the second
quarter of 2005. The reported tax rates for the second quarter 2005 and the
six-months ended June 30, 2005 would have been 48% and 47%, respectively, if
the tax returns were not amended.
Total net income for the second quarter of 2005 was $1.2 million, compared
to net income of $0.8 million for the same quarter in 2004. The increase in
second quarter 2005 net income as compared to the same period in 2004 was
primarily due to $0.5 million for the adjustment related to pre-licensing
serials for the Inovocox(TM) vaccine, in addition to a $0.5 million decrease
in income tax expense in connection with the amended tax returns described
above. Diluted earnings per share were $0.15 for second quarter 2005 versus
$0.10 for the same period in 2004.
Results of First Six-Months of 2005
Revenues totaled $25.8 million for the first half of 2005, representing an
increase of 9% over 2004 first-half revenues of $23.7 million. Device revenues
amounted to $24.1 million for the first half of 2005, an increase of 7% over
2004 first-half revenues of $22.6 million. Most of the device revenue increase
was attributable to a 9% increase in recurring device lease fees, which was
partially offset by a $0.5 million decrease in device sales. A $0.6 million,
or 67%, increase in product revenue resulted from increased Bursaplex(R)
sales. The increase in device fee revenues contributed to a 5% increase in
first-half 2005 gross profit of $14.8 million from $14.1 million for the same
period in 2004. This was primarily due to changes in the Company's revenue
mix and regional mix, which included higher product sales and additional
recurring device lease fees, particularly in Latin America. However, as a
consequence of the change in revenue mix and regional mix, as well as higher
material costs, gross margin decreased to 57% from 59% for the same period in
2004.
Total operating expenses amounted to $12.5 million for the first half of
2005 versus $10.9 million for the first half of 2004. First half 2005 G&A
expenses increased 9% over 2004 to $5.3 million due primarily to additional
staff-related expenses supporting business growth, as well as increases in
legal fees relating to patents and Sarbanes-Oxley Act compliance. In
addition, expense increases relating to accounting fees for internal controls
for Sarbanes-Oxley Act compliance, restricted stock expense and additional
property taxes related to the Embrex Poultry Health manufacturing facility
contributed to the increase in G&A expenses. First-half Sales & Marketing
expenses increased from $1.3 million in 2004 to $2.2 million in 2005. The
expense increase was due to growth of the Global Marketing group to support
pre-launch activities of Inovocox(TM), as well as the continued support of
existing products. Additionally, sales and marketing expenses that were
previously allocated to cost of revenues in 2004 have been retained in sales
and marketing expenses in 2005 due to departmental reorganization. Research
and development expenses increased from $4.8 million in the first half of 2004
to $5.0 million for the same period of 2005 due to increased staff-related
expenses and Gender Sort development work.
Income taxes totaled $0.7 million for the first half of 2005, as compared
to $1.3 million for the same period in 2004. The reported tax rate for the
first half of 2005 was 27% compared to the 41% reported tax rate for the first
half of 2004. The income tax expense was lower in first half 2005 due
primarily to the tax benefit recorded from the filing of amended tax returns,
as well as a decrease in pre-tax net income as compared to the same period in
2004. The returns were amended to reflect Embrex's claim for the
extraterritorial income exclusion in 2001 and 2002.
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 $0.4 million to $5.7 million for the first half of 2005
from $6.1 million during the same period of 2004. At June 30, 2005, cash and
cash equivalents totaling $1.9 million were $2.6 million lower than the $4.5
million on hand at December 31, 2004. This was principally due to expenditures
of $7.3 million for additional devices and other equipment, a $1.5 million
reduction in non-debt current liabilities, and a $0.9 million investment in
patents and other non-current assets. This was partially offset by $5.2
million provided by net income and non-cash items, such as depreciation and
amortization, and reductions in accounts receivable and other current assets.
"After first-quarter 2005 total revenue growth of 7%, we are especially
pleased to see second quarter revenue growth of 11% compared to the same
period of 2004. Also, we're pleased to report recurring revenues for device
fees increased 9% for both the quarter and the year-to-date, driven by our
rapidly growing presence in Brazil, which is now our second largest revenue
producing country after the United States," said Randall Marcuson, President
and Chief Executive Officer of Embrex. "Product sales also are up
significantly - 67% year over year - largely in Asia as that region continues
to recover from the effects of avian influenza. Overall, Embrex is benefiting
from its international expansion as 74% of our year-over-year revenue growth
occurred outside the United States."
Added Marcuson: "We are also pleased with the progress we've made with our
Inovocox(TM) vaccine. The pre-licensing serials we needed to manufacture for
required safety, potency and purity testing were produced and passed the
required tests. We're truly proud of this accomplishment by a new production
team, in a new facility with a new product. These batches will be used in
USDA-required field trials beginning in August at several locations. Assuming
these trial results are positive, we plan to submit these to the USDA in the
fourth quarter of 2005. While we are hopeful for a timely review, it is up to
the USDA to determine their review schedule. All in all, the first half of
2005 has been solid and we remain comfortable with our full-year revenue
projection of $52.5 million or slightly better."
Embrex's management, led by Mr. Marcuson, will discuss second-quarter
financial results in a conference call on August 3 at 11:00 AM EDT. To join
the conference call, dial (877) 866-3175 (domestic and Canada), or (706) 679-
7358 (international), identify Randall Marcuson as the conference leader.
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. EDT August 3 to
midnight EDT August 17, by dialing 800-642-1687 (domestic and Canada), or
(706) 645-9291 (international), conference ID 7986122. 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
Celebrating its 20th anniversary, Embrex, Inc., The In Ovo Company(R),
headquartered in Research Triangle Park, NC, is an international 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 United States and globally, competition arising in
the United States and elsewhere, 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 ability of Embrex's contract manufacturers to
support our products, the complete commercial development of potential future
products on a cost effective basis, including Inovocox(TM), 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-Q filed with the SEC for detailed GAAP
financial statements.
CONTACT: Ellen Corliss Moore
Vice President, Investor Relations
& Corporate Communications
(919) 314-2561
Consolidated Statement of Operations
(In thousands except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
(unaudited) (unaudited)
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenues
Device revenues $ 12,172 $ 11,052 $ 24,094 $ 22,553
Product sales 724 560 1,423 852
Other revenue 122 115 264 278
Total revenues 13,018 11,727 25,781 23,683
Cost of device revenues
and product sales 5,487 4,774 10,980 9,610
Gross profit 7,531 6,953 14,801 14,073
Operating expenses
General & administrative 2,694 2,302 5,268 4,854
Sales & marketing 1,216 689 2,195 1,334
Research & development 2,249 2,555 5,000 4,754
Total operating expenses 6,159 5,546 12,463 10,942
Operating income 1,372 1,407 2,338 3,131
Other income (expense)
Interest income 42 20 64 41
Interest expense (19) (4) (25) (16)
Foreign currency gain 50 81 177 104
Total other income 73 97 216 129
Income before tax expense 1,445 1,504 2,554 3,260
Income tax expense 199 698 698 1,345
Net income $ 1,246 $ 806 $ 1,856 $ 1,915
Net income per share
of Common Stock:
Basic $ 0.16 $ 0.10 $ 0.23 $ 0.24
Diluted $ 0.15 $ 0.10 $ 0.22 $ 0.23
No. of shares used in
per share calculation:
Basic 7,964 7,960 7,950 7,997
Diluted 8,278 8,268 8,275 8,308
EBITDA $ 3,037 $ 2,932 $ 5,696 $ 6,097
GAAP Reconciliation of Net Income to EBITDA
(In thousands)
Three Months Six Months
Ended June 30 Ended June 30
(unaudited) (unaudited)
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net income $ 1,246 $ 806 $ 1,856 $ 1,915
Add back:
Depreciation and amortization 1,573 1,424 3,117 2,821
Interest expense 19 4 25 16
Tax expense 199 698 698 1,345
EBITDA $ 3,037 $ 2,932 $ 5,696 $ 6,097
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 30,
2005 2004
(unaudited) (unaudited)
------------ ------------
ASSETS
Current assets $ 15,662 $ 19,507
Non-current assets 47,951 43,073
Total assets $ 63,613 $ 62,580
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 5,530 $ 7,040
Non-current liabilities 8,310 8,518
Shareholders' equity $ 49,773 $ 47,022
Total liabilities and shareholders' equity $ 63,613 $ 62,580
Condensed Consolidated Statements of Cash Flows
(in thousands)
Six Months
Ended June 30
(unaudited)
----------------------------
2005 2004
------------ ------------
Net cash provided by operating activities $ 5,186 $ 4,807
Net cash used in investing activities (8,161) (5,523)
Net cash provided by (used in) financing activities 172 (981)
Decrease in cash and cash equivalents (2,803) (1,697)
Currency translation adjustments 224 (227)
Cash and cash equivalents at beginning of period 4,469 9,629
Cash and cash equivalents at end of period $ 1,890 $ 7,705
SOURCE Embrex, Inc.
-0- 08/02/2005
/CONTACT: Ellen Corliss Moore, Vice President, Investor Relations &
Corporate Communications of Embrex, Inc., +1-919-314-2561 /
/Web site: http://www.embrex.com/