UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2004
Commission File No. 000-19495
Embrex, Inc.
(Exact name of registrant as specified in its charter)
| North Carolina | 56-1469825 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
| 1040 Swabia Court, Durham, NC | 27703 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone no. including area code: (919) 941-5185
Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes x No ¨
The number of shares of Common Stock, $0.01 par value, outstanding as of July 23, 2004 was 7,941,802.
EMBREX, INC.
| Part I |
Page | |||||||
| Financial Information: | ||||||||
| Item 1: Consolidated Financial Statements | ||||||||
| 3 of 25 | ||||||||
| 4 of 25 | ||||||||
| 5 of 25 | ||||||||
| 6 of 25 | ||||||||
| Item 2: | ||||||||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 of 25 | |||||||
| Item 3: | ||||||||
| 20 of 25 | ||||||||
| Item 4: | ||||||||
| 21 of 25 | ||||||||
| Part II |
||||||||
| Other Information: | ||||||||
| Item 1: Legal Proceedings | 21 of 25 | |||||||
| Item 2: Changes in Securities | 22 of 25 | |||||||
| Item 3: Defaults Upon Senior Securities | 22 of 25 | |||||||
| Item 4: Submission of Matters to a Vote of Security Holders | 22 of 25 | |||||||
| Item 5: Other Information | 23 of 25 | |||||||
| Item 6: Exhibits and Reports on Form 8-K | 23 of 25 | |||||||
| Signatures | 24 of 25 | |||||||
| Exhibit Index | 25 of 25 | |||||||
- 2 -
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Embrex, Inc.
(Dollars in thousands)
| June 30, (unaudited) |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ | 7,705 | $ | 9,629 | ||||
| Restricted cash |
282 | 373 | ||||||
| Accounts receivable – trade, net |
6,953 | 7,776 | ||||||
| Inventories: |
||||||||
| Materials and supplies |
2,016 | 1,928 | ||||||
| Product |
1,309 | 1,406 | ||||||
| Current deferred tax asset |
468 | 468 | ||||||
| Other current assets |
1,885 | 1,787 | ||||||
| Total Current Assets |
20,618 | 23,367 | ||||||
| Land |
147 | 147 | ||||||
| Devices under construction |
2,899 | 3,062 | ||||||
| Devices |
42,895 | 39,756 | ||||||
| Less accumulated depreciation |
(31,057 | ) | (29,920 | ) | ||||
| 11,838 | 9,836 | |||||||
| Equipment, Furniture and Fixtures |
27,567 | 26,205 | ||||||
| Less accumulated depreciation and amortization |
(8,741 | ) | (7,803 | ) | ||||
| 18,826 | 18,402 | |||||||
| Other Assets: |
||||||||
| Intangible assets(net of accumulated amortization of $411 in 2004 and $410 in 2003) |
3,181 | 2,746 | ||||||
| Long-term deferred tax asset |
1,805 | 2,155 | ||||||
| Other long-term assets |
0 | 2 | ||||||
| Total Other Assets |
4,986 | 4,903 | ||||||
| Total Assets |
$ | 59,314 | $ | 59,717 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current Liabilities |
||||||||
| Accounts payable |
$ | 610 | $ | 1,105 | ||||
| Accrued expenses |
3,803 | 4,507 | ||||||
| Deferred revenue |
567 | 586 | ||||||
| Product warranty accrual |
279 | 288 | ||||||
| Current portion of long-term debt |
238 | 1,128 | ||||||
| Current portion of capital lease obligations |
3 | 7 | ||||||
| Total Current Liabilities |
5,500 | 7,621 | ||||||
| Long-term debt, less current portion |
8,791 | 6,395 | ||||||
| Capital Lease Obligations, less current portion |
9 | 9 | ||||||
| Shareholders’ Equity |
||||||||
| Common Stock,$0.01 par value per share: |
||||||||
| Authorized - 30,000,000 shares; Issued and outstanding - 7,936,121 net of 1,630,316 treasury shares and 8,152,974 net of 1,389,116 treasury shares at June 30, 2004 and December 31, 2003, respectively |
95 | 94 | ||||||
| Additional paid-in capital |
64,646 | 63,572 | ||||||
| Accumulated other comprehensive loss |
(549 | ) | (322 | ) | ||||
| Deferred compensation |
(858 | ) | (369 | ) | ||||
| Retained earnings (accumulated deficit) |
965 | (948 | ) | |||||
| Treasury stock |
(19,285 | ) | (16,335 | ) | ||||
| Total Shareholders’ Equity |
45,014 | 45,692 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 59,314 | $ | 59,717 | ||||
- 3 -
Embrex, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
| Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues |
||||||||||||||||
| Device revenues |
$ | 11,052 | $ | 11,579 | $ | 22,553 | $ | 21,690 | ||||||||
| Product sales |
560 | 409 | 852 | 1,062 | ||||||||||||
| Other revenue |
115 | 125 | 278 | 259 | ||||||||||||
| Total Revenues |
11,727 | 12,113 | 23,683 | 23,011 | ||||||||||||
| Cost of Device Revenues and Product Sales |
4,774 | 5,333 | 9,610 | 9,486 | ||||||||||||
| Gross Profit |
6,953 | 6,780 | 14,073 | 13,525 | ||||||||||||
| Operating Expenses |
||||||||||||||||
| General and administrative |
2,302 | 1,174 | 4,854 | 3,256 | ||||||||||||
| Sales and marketing |
689 | 724 | 1,334 | 1,501 | ||||||||||||
| Research and development |
2,555 | 2,608 | 4,754 | 4,910 | ||||||||||||
| Total Operating Expenses |
5,546 | 4,506 | 10,942 | 9,667 | ||||||||||||
| Operating Income |
1,407 | 2,274 | 3,131 | 3,858 | ||||||||||||
| Other Income (Expense) |
||||||||||||||||
| Interest income |
20 | 31 | 41 | 88 | ||||||||||||
| Interest expense |
(4 | ) | (4 | ) | (16 | ) | (1 | ) | ||||||||
| Foreign currency gain (loss) |
81 | (34 | ) | 104 | 11 | |||||||||||
| Other Income |
-0- | 3,791 | -0- | 3,791 | ||||||||||||
| Total Other Income |
97 | 3,784 | 129 | 3,889 | ||||||||||||
| Income Before Tax Expense |
1,504 | 6,058 | 3,260 | 7,747 | ||||||||||||
| Income Tax Expense |
698 | 2,173 | 1,345 | 2,587 | ||||||||||||
| Net Income |
$ | 806 | $ | 3,885 | $ | 1,915 | $ | 5,160 | ||||||||
| Net Income per share of Common Stock: |
||||||||||||||||
| Basic |
$ | 0.10 | $ | 0.48 | $ | 0.24 | $ | 0.63 | ||||||||
| Diluted |
$ | 0.10 | $ | 0.46 | $ | 0.23 | $ | 0.62 | ||||||||
| Number of Shares Used in Per Share Calculation: |
||||||||||||||||
| Basic |
7,960 | 8,143 | 7,997 | 8,194 | ||||||||||||
| Diluted |
8,268 | 8,379 | 8,308 | 8,381 | ||||||||||||
- 4 -
Embrex, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| Six Months Ended June 30 |
||||||||
| 2004 |
2003 |
|||||||
| Operating Activities |
||||||||
| Net income |
$ | 1,915 | $ | 5,160 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
2,821 | 2,597 | ||||||
| Gain (loss) on sale of fixed assets |
3 | (6 | ) | |||||
| Change in restricted cash |
91 | -0- | ||||||
| Change in deferred tax asset |
350 | (300 | ) | |||||
| Restricted stock amortization |
121 | -0- | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, inventories and other current assets |
733 | (1,993 | ) | |||||
| Accounts payable, accrued expenses, deferred revenue and warranty accrual |
(1,227 | ) | 2,023 | |||||
| Net Cash Provided By Operating Activities |
4,807 | 7,481 | ||||||
| Investing Activities |
||||||||
| Land acquisition |
-0- | (18 | ) | |||||
| Purchases of devices, equipment, furniture and fixtures |
(5,053 | ) | ||||||