EMBX Embrex

Embrex Reports First Quarter 2004 Financial Results RESEARCH TRIANGLE PARK, N.C., May 4 /PRNewswire-FirstCall/ -- Embrex(R), Inc., The In Ovo Company(SM), today announced financial results for the first quarter ended March 31, 2004. Financial Highlights - First-quarter 2004 revenues of $12.0 million increased $1.1 million or 10% from first quarter 2003 - First-quarter 2004 net income of $1.1 million decreased $0.2 million from net income of $1.3 million for the same period in 2003, primarily due to a higher effective tax rate in 2004 Business Highlights - Embrex completes construction of first manufacturing plant to produce Inovocox(TM) vaccine - Brazil's second largest poultry producer, Perdigao, agrees to convert several hatcheries to Embrex's Inovoject(R) vaccination system - Established Embrex de Mexico in April to address the world's fourth largest poultry market Financial Summary Table Embrex, Inc. Condensed Consolidated Statement of Operations (In thousands except per share amounts) Three Months (unaudited) Ended March 31 2004 2003 Revenues $11,956 $10,898 Cost of revenues 4,836 4,153 Gross profit 7,120 6,745 Operating expenses 5,396 5,162 Other income 32 106 Income before taxes 1,756 1,689 Income tax expense 647 414 Net income $1,109 $1,275 Net income per share: Basic $0.14 $0.16 Diluted $0.13 $0.15 No. of shares of Common Stock used in per share calculation: Basic 8,034 8,154 Diluted 8,346 8,383 Results for First Quarter 2004 For the quarter ended March 31, 2004, total revenues were $12.0 million, a 10% increase over total revenues of $10.9 million for the first quarter of 2003. This is primarily attributable to a 14%, or $1.4 million increase primarily in device revenue which was offset by product sales that declined by $0.4 million. Other revenue from grants increased by less than $0.1 million and did not materially contribute to the change between quarters. First quarter 2004 gross profit was $7.1 million up from $6.7 million compared to the same period a year ago. This change was primarily due to revenues from additional devices placed with customers. Operating expenses were up 5% to $5.4 million in the first quarter of 2004 compared to $5.2 million during the same period in 2003 due primarily to increases in general and administrative ("G&A") expenses. G&A expenses were $2.6 million for the first quarter of 2004, up $0.5 million or 23% compared to the same period of 2003. The increase in G&A expenses from 2003 was primarily due to increases in patent-related legal fees, accounting fees related primarily to internal controls for compliance with the Sarbanes-Oxley Act, as well as staff-related and software expenses in support of the business. Higher premiums due to broader insurance coverage also contributed to the increase. First quarter Sales & Marketing operating expenses decreased $0.1 million from $0.8 million in 2003 to $0.7 million in 2004. This decrease is mainly due to sales tax assessments that occurred in the first quarter of 2003 that did not recur in 2004. Research and development ("R&D") expenses decreased $0.1 million from $2.3 million for the first quarter of 2003 to $2.2 million for the same period of 2004. The decrease is principally due to a change in the recording of patent-related legal fees from R&D to G&A, and lower contract R&D expenses. The Company continues to manage its research and development effort to leverage its know-how, patent position, market presence and expenditures. Income taxes totaled $0.6 million for first quarter 2004, a $0.2 million increase from $0.4 million for the same period in 2003. The effective tax rate for 2004 first quarter was 37% in comparison to the 25% tax rate in the first quarter of 2003. The income tax expense for first quarter of 2004 increased over the same period of 2003 due to the recognition of deferred tax assets in 2003. In addition, profits in international operations subject to U.S. taxes are contributing to the higher effective tax rate. Consolidated net income for the first quarter of 2004 decreased to $1.1 million, 13% lower than 2003 net income of $1.3 million. Diluted earnings per share were $0.15 for first quarter 2003 and $0.13 for the same period in 2004. The decrease in first quarter 2004 net income compared to 2003 was primarily due to the higher effective tax rate. 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 increased 7% to $3.2 million for the first quarter of 2004 from $3.0 million during the same period of 2003. At March 31, 2004, cash and cash equivalents totaling $9.5 million were $0.1 million lower than the $9.6 million on hand at December 31, 2003. This was principally due to using $2.3 million of cash to complete the Embrex Poultry Health biological manufacturing facility and purchase additional devices and other equipment. In addition $1.2 million was used to repurchase shares of the Company's common stock and $1.1 million was used to partially pay down the Company's line of credit. These were partially offset by $2.5 million of cash provided by operations, $0.1 million received in connection with the exercise of stock options and $1.7 million received from the construction loan financing the Embrex Poultry Health biological manufacturing facility. "During the first quarter of 2004, the global poultry industry was especially unpredictable, and we were pleased with the first-quarter revenue increase in such an environment," said Randall L. Marcuson, President and Chief Executive Officer of Embrex. "While avian influenza has had an impact on our Asian operations, we are continuing to pursue Newplex(TM) vaccine registrations and business development to be well positioned as the market recovers. We have remained focused on our efforts in other areas, such as Brazil, Europe and the Middle East, and last week continued our geographic expansion by officially launching Embrex de Mexico to the world's fourth largest poultry producing country during the ANECA poultry conference in Mexico. In the United States, we have worked diligently to maintain and increase our customer base and place additional Egg Remover(R) systems." Added Marcuson: "The first quarter also marked a milestone for Embrex with the opening of our new Inovocox(TM) vaccine manufacturing facility in Scotland County, North Carolina -- the first such endeavor for the company. Although this only marks the beginning of the steps necessary for regulatory approval of the facility and vaccine, we are proud that the construction project has come in essentially on time and within budget." Embrex's management, led by Mr. Marcuson, will discuss first-quarter financial results and 2004 outlook and plans in a conference call on May 5 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 6737141. 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 May 5 to midnight ET May 19, by dialing 800-642-1687 (domestic and Canada), or (706) 645-9291 (international), conference ID 6737141. 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 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, potential 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 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. CONTACT: Ellen T. Moore Vice President, Investor Relations & Corporate Communications (919) 314-2561 Please see Embrex's Form 10-Q filed with the SEC for detailed GAAP financial statements. Embrex, Inc. Consolidated Statements of Operations (In thousands except per share amounts) Three Months (unaudited) Ended March 31, 2004 2003 Revenues Device revenues $11,501 $10,111 Product sales 292 653 Other revenue 163 134 Total revenues 11,956 10,898 Cost of device revenues and product sales 4,836 4,153 Gross profit 7,120 6,745 Operating expenses: General & administrative 2,552 2,082 Sales & marketing 645 777 Research & development 2,199 2,303 Total operating expenses 5,396 5,162 Operating income 1,724 1,583 Other income (expense) Interest income 21 57 Interest expense (12) 4 Foreign currency gain 23 45 Total other income 32 106 Income before taxes 1,756 1,689 Income tax expense 647 414 Net income $1,109 $1,275 Net income per share: Basic $0.14 $0.16 Diluted $0.13 $0.15 No. of shares of Common Stock used in per share calculation: Basic 8,034 8,154 Diluted 8,346 8,383 EBITDA $3,165 $2,957 Condensed Consolidated Balance Sheets (In thousands) March 31, December 31, 2004 2003 (unaudited) ASSETS Current assets $22,207 $23,367 Non-current assets 37,092 36,350 Total assets $59,299 $59,717 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities $5,427 $7,621 Non-current liabilities 8,064 6,404 Shareholders' equity 45,808 45,692 Total liabilities and shareholders' equity $59,299 $59,717 Condensed Consolidated Statements of Cash Flows (In thousands) Three Months Ended March 31 (unaudited) 2004 2003 Net cash provided by operating activities $2,508 2,185 Net cash used in investing activities (2,302) (3,141) Net cash used in financing activities (476) (302) Decrease in cash and cash equivalents (270) (1,258) Currency translation adjustments 95 (31) Cash and cash equivalents at beginning of period 9,629 8,039 Cash and cash equivalents at end of period $9,454 $6,750 GAAP Reconciliation of Net Income to EBITDA (In thousands) Three Months Ended March 31 (unaudited) 2004 2003 Net income 1,109 $1,275 Add back: Depreciation and amortization 1,397 1,271 Interest expense 12 (4) Tax expense 647 414 EBITDA $3,165 $2,956 DATASOURCE: Embrex, Inc. CONTACT: Ellen T. Moore, Vice President, Investor Relations & Corporate Communications of Embrex, Inc., +1-919-314-2561 Web site: http://www.embrex.com/

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