IRIS International Announces Fourth Quarter and Full Year 2011 Revenue and Financial Results

• Record revenue of $33.1 million in Q4 2011; 13% growth over Q4 2010
• Gross margin of 52% in Q4 2011
• GAAP EPS of $0.16 in Q4 2011; Non-GAAP diluted EPS was $0.15 per share
• Reaffirming 2012 guidance of revenues in a range from $127 million to $131 million and EPS of $0.30 to $0.35 per share

CHATSWORTH, Calif., March 1, 2012 (GLOBE NEWSWIRE) -- IRIS International, Inc. (Nasdaq:IRIS), a leading manufacturer of automated in-vitro diagnostics systems and consumables, and a provider of high value personalized medicine solutions, today announced financial results for the fourth quarter and full year ended December 31, 2011.

Fourth Quarter 2011 Performance Highlights

• Achieved revenue of $33.1 million for the fourth quarter ended December 31, 2011, representing 13% growth over Q4 2010.
• Increased Iris Diagnostics Division (IDD) sales by 13% to $29.2 million as compared to $25.8 million in the prior year period.
• Realized gross margin of 52% for the fourth quarter 2011 compared to 48% in the prior year period.
• NADiA^® ProsVue™ prognostic prostate cancer test is now commercially available with the initial launch underway, after receiving 510(k) clearance from the FDA in September 2011 and CE Mark approval in October 2011.
• Generated $5.7 million in cash from operations in 2011, with cash and cash equivalents reported at $23.5 million as of December 31, 2011, an increase of $4.6 million from 3Q 2011.
• Reported net income for Q4 2011 of $2.9 million, versus net income of $0.5 million in Q4 2010. EPS was $0.16 in Q4 2011 versus $0.03 in Q4 2010.

"We are pleased to announce our fourth quarter and full year 2011 results with record revenue reflecting strong growth in our diagnostics business. The annual record number of instruments sold was driven by strong demand in most regions, with consumable sales showing double-digit growth primarily due to the large installed base. The strong instrument placements gives us confidence that our recurring revenues will continue to grow at double-digit rates as a result of our expanding installed base of iRICELL workstations and iChem VELOCITY," stated César M. García, Chairman, President and Chief Executive Officer of IRIS International.

"Since the restructuring of the Personalized Medicine business, we realized expense reductions and enhanced profitability in the fourth quarter 2011, which we expect to carry into future periods. I am particularly pleased to announce that NADiA ProsVue is now commercially available and we are collecting our first samples. We look forward to continuing our initial launch throughout 2012 and the long-term commercial success of ProsVue," Mr. García added.

"We continue to make significant progress on our 3GEMS urinalysis and hematology development programs. In January, our 3GEMS Hematology program achieved another milestone which triggers a payment from our Japanese partner in Q1 2012. In addition, the Iris Sample Processing division recently announced a distribution agreement with Fisher HealthCare for our new automated FISH platform product, ThermoBrite Elite. The ThermoBrite Elite will be launched this quarter and is expected to result in significant growth in our Sample Processing Division, upon initiation of shipments later this month. Our continued healthy revenue growth coupled with cost reduction initiatives are expected to drive higher revenue and earnings growth in 2012."

Fourth Quarter 2011 Financial Results

Consolidated revenues of $33.1 million for Q4 2011 represented growth of 13% versus Q4 2010 consolidated revenues of $29.3 million. For the fourth quarter ended December 31, 2011, IDD sales increased 13% year over year to $29.2 million as compared to $25.8 million in the prior year period, driven by strong growth of instrument sales globally.

IDD instrument sales of $11.2 million represented 12% growth over Q4 2010, driven primarily by strong sales in all regions in the quarter. IDD consumables and service revenue of $18.1 million in Q4 2011 represented 14% growth over Q4 2010 and accounted for 55% of sales in the quarter driven primarily by our larger domestic and international installed base.

Revenue at the Iris Sample Processing Division increased 14% to $3.9 million for Q4 2011, when compared with revenue of $3.4 million in Q4 2010, the increase primarily attributable to the timing of sales to our major OEM accounts.

Consolidated gross margin was 52% for the fourth quarter 2011 versus 48% reported for the prior period, or 49% excluding the impact from the Arista segment. IDD instrument gross margin improved to 38% for Q4 2011 versus 29% in Q4 2010. The increase was primarily driven by efficiency improvements related to higher production volume of iChemVELOCITY and the integrated iRICELL workstation. The prior year period was impacted by higher foreign sourced product costs caused by premium pricing on our last order from our Japanese supplier. IDD consumables and service gross margin was 61% for Q4 2011, as compared to 60% in the year ago period. The increase is primarily attributable to improved service margins and higher utilization of our chemistry strips facility, partially offset by higher costs of Japanese sourced chemistry strips relating to unfavorable foreign currency translations. Gross margin for the Sample Processing segment was 56% for Q4 2011 versus 51% in the prior year quarter, the increase primarily due to higher sales volume, favorable product mix and cost reductions.

The net income for Q4 2011 was $2.9 million, versus net income of $0.5 million in Q4 2010. The effective tax rate for the fourth quarter was 28% compared with a tax benefit in the fourth quarter of 2010. Our tax rate in Q4 benefitted from the realization of $271,000 in California enterprise zone tax credits.

The Company's balance sheet remains strong with an improved cash and cash equivalents balance of $23.5 million and no debt as of December 31, 2011 versus $18.9 million in cash & equivalents as of September 30, 2011. The sequential quarterly increase in cash is primarily attributable to the strength of our underlying businesses and a reduction in funding to our Arista CLIA laboratory.

Full Year 2011 Financial Results

Consolidated revenues for full year 2011 were $118.3 million, an increase of 10% from the $107.7 million reported for full year 2010.  For full year 2011, IDD sales increased 11% year over year to $103.6 million as compared to $93.2 million in the prior year period, driven by strong growth in international instrument sales in all regions, and particularly in the Asia Pacific region.

IDD instrument sales of $33.9 million for full year 2011 represented 6% growth over 2010. IDD consumables and service revenue of $69.7 million for 2011 represented 14% growth over 2010 and accounted for 59% of sales driven primarily by our larger installed base.

Revenue at the Iris Sample Processing Division increased 1% to $14.5 million for full year 2011, when compared with revenue of $14.4 million for full year 2010. Revenues were favorably impacted by strong sales to US distribution partners and partially offset by weaker sales internationally, particularly in Eastern Europe.

Consolidated gross margin was 51% for full year 2011 versus 51% reported for 2010. Excluding the impact from the Arista segment, gross margin was 52% for 2011 and 51% in 2010. IDD instrument gross margin improved to 39% for full year 2011 versus 34% for full year 2010. The increase was primarily driven by efficiency improvements related to higher production volume of iChemVELOCITY and an integrated iRICELL workstation as well as higher costs associated with our Japanese-sourced chemistry analyzer in 2010. IDD consumables and service gross margin was 58% for full year 2011, as compared to 60% in 2010, the decrease primarily resulting from higher costs of Japanese sourced chemistry strips due to the appreciation of the Yen versus a year ago. Gross margin for the Sample Processing segment was 55% for full year 2011 versus 54% in the prior year. The increase was primarily due to favorable product mix and cost reduction initiatives.

The net loss for full year 2011 was $1.2 million, versus net income of $3.0 million for full year 2010. Excluding one-time impairment and restructuring charges in 2011, non-GAAP net income was $4.3 million for full year 2011. Net loss per share for 2011 was ($0.07) and excluding one-time charges mentioned previously, non-GAAP earnings per share was $0.22.

2012 Company Outlook   

The company is reaffirming its full year 2012 revenue guidance range of $127 million - $131 million, representing 7-11% growth over 2011. The company is reaffirming its full year 2012 EPS guidance range of $0.30 - $0.35, which includes the sales and marketing expense related to the launch and market development of ProsVue in the US. The company anticipates R&D expense to approximate 15% to 16% of sales in 2012.

Conference Call

IRIS International will host a conference call today at 4:30 p.m. Eastern time, 1:30 p.m. Pacific time. To participate, dial 1-877-870-9220 approximately 10 minutes before the conference call is scheduled to begin. Hold for the operator and reference the IRIS International conference call. International callers should dial 973-638-3437. The conference call may also be accessed by means of a live audio webcast on our website at http://proiris.com. The conference web cast will be archived and available for replay for 30 days from the date of the broadcast.

About IRIS International, Inc.

IRIS International, Inc. is a leading global in vitro diagnostics company focused on products that analyze particles and living cell forms and structures, or morphology of a variety of body fluids. The Company's products leverage its strengths in flow imaging technology, particle recognition and automation to bring efficiency to hospital and commercial laboratories. The initial applications for its technology have been in the urinalysis market and the Company is the leading worldwide provider of automated urine microscopy and chemistry systems, with an installed base of approximately 3,600 systems in more than 50 countries. The Company is expanding its core imaging and morphology expertise into related markets, including applications in hematology and body fluids. In addition, the Company's personalized medicine group has a high complexity CLIA-certified laboratory for the further development and commercialization of the Company's NADiA ultra-sensitive nucleic acid detection immunoassay platform, with applications in oncology and infectious disease. For more information, please visit www.proiris.com.

Safe Harbor Provision

This press release contains forward-looking statements made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, the Company's views on future financial performance, market growth, capital requirements, regulatory developments, new product introductions and acquisitions, and are generally identified by phrases such as "thinks," "anticipates," "believes," "estimates," "expects," "intends," ,"plans," and similar words. Forward-looking statements are not guarantees of future performance and are inherently subject to uncertainties and other factors which could cause actual results to differ materially from the forward-looking statement. These statements are based upon, among other things, assumptions made by, and information currently available to, management, including management's own knowledge and assessment of the Company's industry, R&D initiatives, competition and capital requirements. Other factors and uncertainties that could affect the Company's forward-looking statements include, among other things, the following: identification of feasible new product initiatives, management of R&D efforts and the resulting successful development of new products and product platforms; obtaining regulatory approvals for new and enhanced products; acceptance by customers of the Company's products; integration of acquired businesses; substantial expansion of international sales; reliance on key suppliers; the potential need for changes in long-term strategy in response to future developments; future advances in diagnostic testing methods and procedures; potential changes in government regulations and healthcare policies, both of which could adversely affect the economics of the diagnostic testing procedures automated by the Company's products; rapid technological change in the microelectronics and software industries; and competitive factors, including pricing pressures and the introduction by others of new products with similar or better functionality than our products. These and other risks are more fully described in the Company's filings with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which should be read in conjunction herewith for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements. The financial results presented in this press release are subject to change pending the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2011. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

"GAAP" refers to financial information presented in accordance with generally accepted accounting principles in the United States.

To supplement the condensed consolidated financial statements and discussion presented on a GAAP basis, this press release includes non-GAAP financial measures with respect to the three month and twelve month periods ended December 31, 2011.  Management uses non-GAAP financial measures because it believes the appropriate analysis of our profitability cannot be effectively considered while incorporating the effect of unusual items and charges that have not been experienced consistently in prior periods. Also, management believes these non-GAAP measures facilitate the comparison of our historical results to our competitors. The Company is reporting herein the following non-GAAP financial measures: "adjusted net income," and "adjusted diluted earnings per share." These non-GAAP financial measures are not in accordance with or an alternative to GAAP.

Adjusted net income excludes items which are considered unusual and the related incremental tax effect of these items. Adjusted diluted earnings per share excludes the effect of the same items described above from diluted earnings per share. Reconciliations of net income (loss), the GAAP measure most directly comparable to adjusted net income, and diluted earnings (loss) per share, the GAAP measure most directly comparable to adjusted diluted earnings per share, are provided on the attached schedule.

The presentation of historical non-GAAP financial measures is not meant to be considered in isolation from or as a substitute for results prepared in accordance with GAAP. We use these non-GAAP measures to supplement net earnings and other corresponding measures on a basis prepared in conformance with GAAP. These non-GAAP financial measures reflect additional ways of viewing aspects of our operations that when viewed with our GAAP results provide a more complete understanding of factors and trends affecting our business. However, investors should understand that the excluded items are actual expenses that may impact the cash available to us for other uses. We strongly encourage investors to consider both net earnings (loss) and cash flows determined under GAAP as compared to the non-GAAP measures presented and to perform their own analysis, as appropriate.

Reconciling Items to Non-GAAP Financial Measures

The non-GAAP measures described above exclude the following items:

a) Arista and IDD restructuring related costs – For the three month period ended December 31, 2011, we recorded a restructuring related benefit of $209,000 as a result of a negotiated settlement of our lease contract at Arista. For the twelve month period ended December 31, 2011, we recorded restructuring related expenses of $1.6 million.

b) Arista impairment charge - For the twelve month period ended December 31 2011, we recorded an impairment charge of $5.8 million related to the Arista restructuring.