EXHIBIT 99.1
EMBREX REPORTS FULL-YEAR AND FOURTH-QUARTER 2005 FINANCIAL RESULTS
RESEARCH TRIANGLE PARK, N.C., March 8 /PRNewswire-FirstCall/ -- Embrex(R),
Inc., The In Ovo Company(R), (Nasdaq: EMBX) today announced financial results
for the full year and the fourth quarter ended December 31, 2005.
Highlights
- Fourth-quarter 2005 total revenues up 10%, or $1.2 million, over the
same period in 2004
- Fourth-quarter 2005 net income lower due to tax adjustments made in
fourth-quarter 2004
- Total revenues for 2005 increased 8%, or $3.9 million, over 2004 to
$52.6 million
- Recurring device revenues for 2005 increased from $44.3 million to $47.9
million, up 8% over 2004
- 66% of 2005 device revenue increase generated from non-U.S. customers
- Inovocox(TM) in ovo coccidiosis vaccine application submitted to USDA in
December 2005
Financial Summary Table
Embrex, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Twelve Months
Ended December 31, Ended December 31,
-------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
(unaudited)
Revenues $ 13,483 $ 12,269 $ 52,592 $ 48,717
Cost of revenues 5,723 5,405 22,334 20,147
Gross profit 7,760 6,864 30,258 28,570
Operating expenses 7,587 7,343 26,688 24,396
Other income 126 170 433 317
Income (loss) before
income taxes 299 (309) 4,003 4,491
Income tax expense
(benefit) (132) (935) 1,056 1,178
Net income $ 431 $ 626 $ 2,947 $ 3,313
Net income per share of
Common Stock:
Basic $ 0.05 $ 0.08 $ 0.37 $ 0.42
Diluted $ 0.05 $ 0.08 $ 0.35 $ 0.40
No. of shares used in
per share calculation:
Basic 8,106 7,911 8,007 7,954
Diluted 8,471 8,220 8,353 8,343
Results for Fourth Quarter 2005
For the quarter ended December 31, 2005, consolidated revenues were $13.5
million, a 10% increase compared to consolidated revenues of $12.3 million for
the fourth quarter of 2004.
Product sales increased to $1.0 million in the fourth-quarter 2005,
compared to $0.5 million for the same period in 2004. Fourth-quarter 2005 device
lease fees, a component of device revenues, generated $1.1 million more revenue
than fourth-quarter 2004. These recurring fees generally contribute more than
90% to device revenues. Device sales decreased $0.5 million in the
fourth-quarter 2005 compared to the fourth-quarter 2004. Device sales are
another component of device revenues and are sporadic in nature. Device revenues
totaled $12.2 million for the fourth quarter of 2005 compared to $11.7 million
for the same period in 2004, representing a 5% increase year over year.
Fourth-quarter 2005 gross profit was $7.8 million, up $0.9 million, a 13%
increase compared to the same period a year ago. Gross margin increased to 58%
from 56% for the same period in 2004 as a result of the change in regional mix
and product mix, which includes higher product sales, additional recurring
device lease fees, particularly in Latin America, lower device sales and higher
material costs.
Operating expenses were up 3%, or $0.2 million, over fourth quarter 2004 to
$7.6 million for the same period in 2005. The increase was primarily due to
higher expenses in Sales and Marketing, which were partially offset by decreases
in G&A expenses.
G&A expenses were $3.3 million for the fourth quarter of 2005, down $0.2
million compared to the same period of 2004. The decrease in G&A expenses from
2004 was primarily due to lower legal and accounting fees, to support internal
controls for Sarbanes-Oxley compliance.
Fourth quarter Sales & Marketing operating expenses increased $0.4 million
to $1.3 million from 2004 to 2005. The increase is due primarily to expansion in
Latin American operations, pre-launch activities for Inovocox(TM) vaccine, and
continued support of existing products.
R&D expenses increased $0.1 million primarily due to increased
salary-related expenses to support start-up of Embrex Poultry Health.
Fourth-quarter 2005 income tax benefit totaled $0.1 million, compared to
the tax benefit of $0.9 million for the same period in 2004. The tax benefit
decreased year over year primarily due to an adjustment made in fourth-quarter
2004 for amended income tax returns.
Consolidated net income for the fourth quarter 2005 was $0.4 million, a
$0.2 million decrease in comparison to the same period the prior year. Diluted
earnings per share were $0.05 for the fourth quarter 2005 versus $0.08 for the
same period in 2004. The decrease in net income is primarily attributable to the
lower tax benefit received in 2005, which occurred as a result of adjustments
made in fourth-quarter 2004 for amended tax returns.
Results of Full-Year 2005
Consolidated revenues in 2005 totaled $52.6 million, an increase of 8% over
2004 revenues of $48.7 million. Device revenues totaled $48.7 million for 2005,
up 6% over 2004 revenues of $46.2 million. Most of the device revenue increase
was attributable to an 8%, or $3.6 million, increase in recurring device lease
fees. This was due to expansion in the Inovoject(R) system customer base, as
well as new Egg Remover(R) system installations. Other revenue increased 31%
from $0.5 million in 2004 to $0.7 million in 2005. A $1.1 million increase in
product sales from Bursaplex(R) sales also contributed to the increase in
consolidated revenues.
Consolidated gross profit for 2005 was $30.3 million, a 6% increase over
gross profit of $28.6 million for the same period in 2004. Consolidated gross
margin in 2005 was 58% versus 59% in 2004.
Consolidated operating expenses were $26.7 million for 2005 versus $24.4
million for 2004. G&A expenses were $11.5 million in 2005, up 5% from $11.0
million in 2004. The increase in G&A expenses from 2004 to 2005 was principally
due to higher expenses related to our expansion in Brazil, restricted stock
expense, patent-related legal fees, and accounting fees for internal controls in
compliance with the Sarbanes-Oxley Act.
Sales and Marketing expenses increased $1.6 million, from $2.9 million in
2004 to $4.5 million in 2005. This increase was due to additional marketing
personnel to assist with expansion in Latin American operations, pre-launch
activities of Inovocox(TM) vaccine and ongoing 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 because certain sales and marketing expenses are now related to the support
rather than the sale of the Company's products.
Research and development expenses were $10.7 million in 2005, a $0.2
million increase from $10.5 million in 2004. The increase in R&D expense from
2004 to 2005 is primarily due to increased staff-related expenses related to
start-up of Embrex Poultry Health, in addition to Gender Sort development work.
Most Gender Sort expenses occurred in the first half of 2005 before active work
efforts on the project were suspended at the beginning of the third-quarter
2005.
Other Income for 2005 increased $0.1 million over 2004 to $0.4 million, due
to interest income received from higher interest rates on cash held in non-U.S.
regions, as well as foreign currency translation gains.
Embrex's net income was $2.9 million for 2005, down 11% in comparison to
net income of $3.3 million in 2004. Diluted net income per common share was
$0.35 for 2005 based on 8.4 million average shares outstanding, compared to
diluted net income per common share of $0.40 based on 8.3 million average shares
outstanding for 2004.
The effective tax rate for both 2004 and 2005 was 26%. Income taxes totaled
$1.1 million in 2005, a $0.1 million decrease in comparison to 2004 income taxes
of $1.2 million. The decrease in income tax expense over 2004 was due to lower
2005 pre-tax income.
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 increased to $10.5 million in 2005, up $0.1 million from $10.4
million in 2004. This increase is mainly due to growth in capital expenditures
to support business growth, which increased depreciation expenses year over
year.
At December 31, 2005, the Company's cash and cash equivalents balances
totaled $2.0 million compared to $4.5 million and $9.6 million at December 31,
2004 and 2003, respectively. During 2005, approximately $11 million of cash flow
was generated by operating activities. Of this, nearly $3 million was generated
by net income, $7.2 million in cash flows from operations was related to
depreciation and amortization, including restricted stock amortization, and the
balance was primarily as a result of changes in working capital. Cash from
operations was invested in nearly $15 million of capital expenditures, of which
$10 million or approximately 70% was used to acquire revenue generating devices,
such as Inovoject(R) and Egg Remover(R) systems. Approximately $1.4 million of
cash was provided from the issuance of Common Stock related to the exercise of
stock options and purchases under the Employee Stock Purchase Plan. Repayments
of long-term debt used to fund most of the Inovocox manufacturing facility
consumed $0.4 million. Consequently, the Company consumed $2.6 million of cash
during 2005. Cash consumption during 2004 amounted to $5.7 million, and was $3.1
million higher than 2005 due primarily to $3.5 million of share repurchases that
did not occur in 2005.
"Continued international growth played an important role in enabling us to
meet our 2005 revenue target of $52.5 million or greater. Growth has been
especially strong in Latin America where revenues are up by 76% over last year,
led by Brazil, and in Asia, which is up by 40% year-over-year as that region
continues to recover from avian influenza. Likewise, our U.S. business continued
to grow despite being mature and under some competitive pressure. I am proud
that our performance enabled us to meet our revenue target despite considerable
challenges within the domestic and global poultry industries," said Randall L.
Marcuson, President and Chief Executive Officer.
"We believe we are well positioned for 2006 and look forward to updating
you on how our Inovocox(TM) in ovo coccidiosis application progresses at the
USDA. As targeted, we submitted the complete registration dossier with the U.S.
Department of Agriculture in December 2005 and now await their review. However,
we believe the real unknown factor to watch in 2006 is avian influenza and the
impact it will have on the global poultry industry. Much will depend upon how
well avian influenza is managed around the world and consumer response to the
threat," said Marcuson.
In other business, on March 6, 2006 the Embrex Board of Directors approved
the renewal of Embrex's Shareholder Rights Plan, which is designed to protect
shareholders' long-term value and provide for fair and equal treatment for all
shareholders in the event that an unsolicited attempt is made to acquire Embrex.
The renewed plan updates and replaces the Company's current Shareholder Rights
Plan that expires March 21, 2006, and is not being adopted in response to any
specific effort to acquire control of Embrex.
Embrex's management, led by Mr. Marcuson, will discuss fourth-quarter and
full-year 2005 financial results in a conference call on March 9 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 5576902. 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 9 to midnight ET March 23, by dialing 800-642-1687
(domestic and Canada), or (706) 645-9291 (international), conference ID 5576902.
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 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, such as Newplex(TM), and the
ability of Embrex's contract manufacturers to support such products. Additional
risks include 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 Inovocox(TM), the
availability of adequate supplies, 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. Corliss
Vice President, Investor Relations
& Corporate Communications
(919) 314-2561
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 Twelve Months
Ended December 31, Ended December 31,
-------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
(unaudited)
Revenues
Device revenues $ 12,232 $ 11,660 $ 48,741 $ 46,157
Product sales 1,023 481 3,167 2,037
Other revenue 228 128 684 523
Total revenues 13,483 12,269 52,592 48,717
Cost of device revenues
and product sales 5,723 5,405 22,334 20,147
Gross profit 7,760 6,864 30,258 28,570
Operating expenses:
General &
administrative 3,278 3,498 11,487 10,983
Sales & marketing 1,294 893 4,509 2,939
Research & development 3,015 2,952 10,692 10,474
Total operating expenses 7,587 7,343 26,688 24,396
Operating income (loss) 173 (479) 3,570 4,174
Other income (expense)
Interest income 55 23 163 87
Interest expense (1) (3) (29) (29)
Other income (expense) 72 150 299 259
Total other income
(expense) 126 170 433 317
Income (loss) before
income tax expense 299 (309) 4,003 4,491
Income tax expense
(benefit) (132) (935) 1,056 1,178
Net income $ 431 $ 626 $ 2,947 $ 3,313
Net income per share of
Common Stock:
Basic $ 0.05 $ 0.08 $ 0.37 $ 0.42
Diluted $ 0.05 $ 0.08 $ 0.35 $ 0.40
No. of shares used in
per share calculation:
Basic 8,106 7,911 8,007 7,954
Diluted 8,471 8,220 8,353 8,343
EBITDA $ 2,039 $ 1,282 $ 10,496 $ 10,399
GAAP Reconciliation of Net Income to EBITDA
(In thousands)
Three Months Twelve Months
Ended December 31, Ended December 31,
-------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
(unaudited) (unaudited)
Net income $ 431 $ 626 $ 2,947 $ 3,313
Add back:
Depreciation and
amortization 1,739 1,588 6,463 5,879
Interest expense 1 3 29 29
Income tax expense
(benefit) (132) (935) 1,056 1,178
EBITDA $ 2,039 $ 1,282 $ 10,496 $ 10,399
Condensed Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2005 2004
------------ ------------
ASSETS
Current assets $ 17,329 $ 19,507
Non-current assets 50,145 43,073
Total assets $ 67,474 $ 62,580
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 6,883 $ 7,040
Non-current liabilities 8,144 8,518
Shareholders' equity 52,447 47,022
Total liabilities and shareholders' equity $ 67,474 $ 62,580
Condensed Consolidated Statements of Cash Flows
(in thousands)
Twelve Months Ended
December 31,
-----------------------
2005 2004
----------- --------
Net cash provided by operating activities $ 11,000 $ 9,606
Net cash used in investing activities (14,613) (13,923)
Net cash provided by (used in) financing activities 966 (1,361)
Change in cash and cash equivalents (2,647) (5,678)
Currency translation adjustments 153 518
Cash and cash equivalents at beginning of period 4,469 9,629
Cash and cash equivalents at end of period $ 1,975 $ 4,469
SOURCE Embrex, Inc.
-0- 03/08/2006
/CONTACT: Ellen T. Corliss, Vice President, Investor Relations & Corporate
Communications of Embrex, Inc., +1-919-314-2561/
/First Call Analyst: /
/FCMN Contact: /
/Web site: http://www.embrex.com /