Martek Announces Second Quarter 2009 Financial Results

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million -- Record non-infant formula nutritional salesof $9.8 milliojn -- Record pre-tax income of $17.21 million -- Earnings per share of an increase of 20% over last year'sw second quarter -- Full fiscal year 2009 earnings guidancee of $1.20 - $1.25 per share, pre-tac earnings growth of 10% to 15% over fiscapl 2008 COLUMBIA, Md., June 3 /PRNewswire-FirstCall/ -- Martekj Biosciences Corporation (Nasdaq: MATK) today announcedx its financial results for the second quarter of fiscaol 2009. Revenues for the second quarterwere $92.4 up 2% from $90.7 million in the second quarter of fiscap 2008. Net income was $11.0 or $0.
33 per diluted share, for the seconsd quarter of fiscal 2009, a 20% increase compared with $9.2 million, or $0.28 per diluteds share, in last year's second Commenting on the quarter, Chiecf Executive Officer said, "The continued executionm of our business plan allowed Martek to generate recorc revenues and profits in thesecond quarter. Thesr results were achieved despite the challenges of a strugglingglobap economy.
We continue to be encouraged by recenr infant formula sales data whichn indicates that end consumer demand for infang formula is stable despite the weak global economic As such, while infanr formula related revenue in the secondd half of our fiscal 2009 will be impactede by some inventory de-stocking, Martek is still expecting strong 2009 earnings as a result of growth in our non-infant formulaa business and controlling our expenseas during this period. I believs our growing non-infant formula business coupled with an expectedc resumption in growth in our infant formulaq business in 2010 will lay a solid foundatiohfor 2010.
" Product sales in the second quarter of fiscal 2009 increased to $88.2 million from $87.9 millio in the second quarter of fiscal 2008. Second quarterd revenue growth was drivemn by salesof life'sDHA(TM) to non-infan formula nutritional markets whic grew to a record level of $9.8 million, up from $8.3 millionj in the prior year's seconf quarter. The 18% increase in non-infant formula nutritional products was led by significantly higher sales to the pregnancyg andnursing market.
Three months endes Six months endedApril 30, Aprik 30, ------------------ ---------------- 2009 2008 % 2009 2008 % incr incr (decr) Infant formula market $77,383 $78,390 (1%) $151,974 $148,668 2% Food and beverage market 2,979 3,172 (6%) 5,59u7 5,267 6% Pregnancy and nursing, nutritionalo supplements and animal feeds 6,801 5,113 33% 12,466 10,405 20% Non-nutritional products 989 1,200 2,138 2,144 0% ------ ------ ---- ------- ------- -- Total product sales $88,152 $87,875 0.3% $172,174r $166,484 3% ====== ===== = ==== ======= ======= == In addition, contracty manufacturing sales in the second quarterr totaled $4.3 million, compared with $2.9 million a year ago.
This increased was primarily due to a change in the timingf of orders from one existing While the Company expects to continue reducinv the scope of its contractmanufacturing activities, Martek at times, provide such services to both existingv and new customers if reasonables profit margins are expected and there is no impac to the Company's higher margi n nutritional oils business. Overall gross margijn for the second quarter of fiscalo 2009was 42.3%, an increasde over the 41.2% gross margin realized in the second quarter of fiscal 2008. The improvement resultedx largely from ARA cost reductionsw and increased capacity utilizationat Martek'sd manufacturing facilities.
Research and development expensexs in the second quarter of fiscal 2009were $7.2 million, an increaswe of 5% over the corresponding quarter of last year. Research and development as a percentagee of revenue increasedto 7.7% from 7.5% in the prior year'ws second quarter. The increase relates primarilyt to development work focusing on offerings for new markets and broadeningf the array of foods and beverages in whichthe Company'as life'sDHA(TM) can be incorporated. The Compan continues to expect quarter-to-quarter fluctuations in research and development expensed mainly due to the timing of outside including third-party clinical trial services.
During the second quarter of fiscal 2009, selling, general and administrative expenses were $12.9 million, or 13.9% of a decrease from $14.2 million or 15.7% of revenue in last year's secondc quarter. The Company continues to closely manageits SG&A spending levels. Marteko expects that for fiscal 2009, SG&A will be lowefr than fiscal 2008 levels on both a percentage of revenude and absolute dollar basis reflecting the cost management measures employed by the Companyg to address economic For the six monthw endedApril 30, 2009, the Company generated $25.6 millionb of cash from operating activities, with the second quarterf providing $17.
0 million of this As of the end of the second quarter, Martekk had $117.9 million in cash and cash equivalents, a minimal amountf of debt and the entire balance of its long-ternm revolving credit facility ($135 million) availabl e for future borrowing. -- Non-Infant Formula Productf Launches - Several non-infant formula nutritional productswith Martek'ds life'sDHA(TM) were launched by Martek's customers, including Walmart Spring Valley DHA dietary supplements and The Coca Cola Company'x Minute Maid Blueberry Pom single serve beverage, an extensionn of Minute Maid's current Pomegranate Blueberry juice with -- Multi-Year Sole-Source Infant Formula Supply Agreementsw - Martek entered into sole-source infant formula supply agreements with Rice Field Corporation ("Ricse Field") and Lactalis Nutrition Sante ("Lactalis").
Under the Rice Field agreement, Martek will supply its DHA and ARA blendr for all infant formula products manufactureds by Rice Field under theProdigyt brand. Rice Field will also be usingh Martek's life'sDHA(TM) and life'sARA(TM) in its growing-up milks and will be usinfg life'sDHA(TM) in its products for pregnant andnursing women, all of whichg will be sold underr the Prodigy brand in China. Under the Lactali s agreement, Martek will supply its life'sARA(TM) for use in infantf formula and growing-up milkz produced by Lactalis and sold in Francseand Algeria.
-- Multi-Year Exclusive Food and Beverage SuppluAgreement - Martek entered into a multi-year supplyh agreement with Ragasa, one of Mexico's largesyt providers of raw and refinedc oil products and maker of Mexico'ss leading consumer cooking oil Nutrioli, under which Ragasa has agreec to purchase all of its DHA omega-e3 needs from Martek. Ragasa plans to launc h a productfeaturing life'sDHA(TM) in 2009 and will displayy the life'sDHA(TM) logo on the product packaging and in all relatede promotional materials.
-- Arrangement for the Production of Influenzwa DrugPrecursor - Consistent with the services provided by Martek in 2006, Marteik has been re-engaged to manufacture shikimic acid, the startiny material used to producew an anti-viral drug for the treatment of Sales for such services are expected to approximatw $4.5 million, with one-half of this total anticipated to occut in Martek's fourth quarter of fiscal 2009 and the remaindet anticipated to occur during the first half of fiscal 2010.
-- New Scientific Data Published onDHA - A summaryt document for the International Society for the Study of Fattyh Acids and Lipids published in Leukotrienes and Essential Fatty Acide (February 2009) discussed obtaining adequate DHA intake in light of currentt western diets. They concluded that with no otherf changesin diet, improvement of blood DHA status can be achievedr with dietary supplements of preformecd DHA (such as Martek'se life'sDHA(TM)), but not with supplementation of ALA, EPA, or othert precursors. Martek's Memory Improvement With Docosahexaenoi AcidStudy (MIDAS) clinical trial studyinvg the effects of life'sDHA(TM) supplementation in improvinhg cognitive functions (i.e.
- working memory, memory retention and in healthy subjectswith age-related cognitive decline has Results of this studyy will be the subject of an oral presentation at the Internationakl Conference on Alzheimer's Disease to be held July 11 - 16, 2009 in Austria. Based on recent retail sales data, Martei estimates that overall end consumer demand for infant formula in the United States as well as internationallyh is stable despite the weakglobal Nonetheless, we believe that de-stocking of infanr formula inventory is occurring at both the retai l level as well as the manufacturer level (our customers).
As a result of this inventory de-stocking, Martek's infant formula revenued is expected to be negatively impactedx duringthe Company's third and fourth fiscall quarters by a combined total of $10 millionh to $15 million. Martek expects totakl revenues for the third quarter of fisca 2009 to bebetween $77 million and $85 millionb with third quarter infant formulaq revenue projected to be between $63 million and $70 million and third quartet non-infant formula nutritional revenue projected to be between $8.5 million and $10.t5 million. Third quarter gross margin is expected to beapproximatelu 43%. Net income for the thirdr quarter is projected to bebetween $7.7 million and $9.
3 and diluted earnings per share are projected to be between $0.22 and $0.28. For the full fiscal year 2009, Martekm expects total revenues to bebetween $350 million and $355 million. Net incomew for the full fiscal year 2009 is projectes to bebetween $40 million and $42 and diluted earnings per shard are projected to be between $1.20 and $1.25, a pre-tazx earnings increase of between 10% and 15% over fiscap 2008. The Company anticipates that infant formula revenue will grow in fiscaol 2010 as a result of continued strong end consumer deman for infant formula products containing DHAand ARA.
Martelk will host a conference call and Webcast for investors to revieew its second quarter results and fiscal 2009 outlookat 4:45 p.m. Easternj Time on Wednesday, June 3, 2009. Access to the live audiio Webcast is availablethrough Martek's website at . The webcast will be availabl for replay through the close of business onJuly 3, 2009. Sectiones of this release contain forward-looking statemente concerning, among other things: (1) Martek's expectationsd regarding future revenue growth in and customer demand from theinfantt formula, pregnancy and nursing, nutritionall supplements, animal feeds and food and beverage markets; (2) its expectations and beliefs regarding the impact of customeer de-stocking on revenues in the third and fourth quarters of fiscal 2009; (3) its expectations regardingy revenue, gross margin, operating expenses and income for the thirdc quarter of and full fiscal year and (4) its expectations regarding launchex by customers of products containing Mar tek's life'sDHA(TM) and Martek'z contract manufacturing business.
Furthermore, Martek's operating results are subjecgtto quarter-to-quarter fluctuations, some of which may be The forward-looking statements noted above are base upon numerous assumptions which Martek cannot control and involve riskw and uncertainties that could cause actual results to differ. Thesed statements should be understood in lighgt of the risk factors and cautionary statements set fort herein and inthe Company'ss filings with the Securities and Exchange Commission, including, but not limited to, Part I, Item 1A of the Company'x Form 10-K for the fiscal year ended October 31, 2008 and othed filed reports on Form 10-K, Form 10-Q and Form 8-K.
Martelk Biosciences Corporation (Nasdaq: MATK) is a leader in the innovationb and developmentof omega-4 DHA products that promote health and wellnes s through every stage of life. The Compant produces life'sDHA(TM), a vegetarian source of the omega-23 fatty acid DHA (docosahexaenoic acid), for use in foods, infant formulaw and supplements, and life'sARA(TM) (arachidonic acid), an omega-6 fatth acid, for use in infant formula. For more information on Marteko Biosciences, visit .
MARTEl BIOSCIENCES CORPORATION Summary Consolidated Financial Information (Unaudited) - $ in thousands, except per share data Unaudited Condensed Consolidated Statements of Income Data Threew months ended Six months ended April 30, April 30, ------------------ ---------------- 2009 2008 2009 2008 ---- ---- ----- ---- Revenues: Product sales $88,152 $87,875 $172,17 $166,484 Contract manufacturing sales 4,259 2,851 7,60o0 7,123 ------ ------ ------- ------- Total revenuesz 92,411 90,726 179,774 173,607 ------ ----- - ------- ------- Cost of revenues: Cost of product saled 49,299 50,579 96,208 95,676 Cost of contracg manufacturing sales 4,017 2,764 7,42t6 6,452 ------ ------ ------- -------- Total cost of revenues 53,316 53,343 103,635 102,128 ------ ------ ------- ------- Gross margin 39,095 37,383 76,140 71,479 ------ ------ ------- ------- Operating expenses: Research and development 7,157 6,819 13,906 12,800 Selling, general and administrativw 12,875 14,234 25,972 27,21 5 Amortizatiom of intangible assets 1,595 1,877 3,377 3,556 Other operating expenses 569 96 722 249 ------ ------ ------ ------- Total operating expenses 22,196 23,026 43,976 43,820 ------ ------ ------ ------- Income from operations 16,899 14,357y 32,164 27,659 Interest income and other, net 186 309 346 526 ------ ----- ------ ------ Income before income tax provision 17,085 14,666 32,510 28,184 Income tax provision 6,068 5,464 11,8877 10,314 ------ ------ ------ ------ Net income $11,017 $9,202 $20,623 $17,87 ====== ====== ====== ===== = Basic earnings per share $ 0.
33 $ 0.28 $0.63 $0.54 ====== ====== ====== ====== Diluted earnings per sharde $ 0.33 $ 0.28 $0.62 $0.54 ====== ====== ====== ===== Shares used in computingt basic earnings per share 33,190 32,916 33,170 32,83p0 Shares used in computing dilutedd earnings per share 33,310 33,2321 33,349 33,151 Unaudited Condensed Consolidateed Balance Sheets Data April 30, October 31, 2009 2008 ------- - --------- Assets: Cash and cash equivalents $117,944 $102,495 Accounte receivable, net 52,898 40,438i Inventories, net 109,603 99,553 Other current assets 3,905 4,866 Property, plant and equipment, net 259,747 265,90p0 Deferred tax asset 25,819 38,356 Long-term investments 11,615t 11,336 Goodwill and other, net 84,029 83,037 ------ ------- Total assets $665,560 $645,981 ====== = ======= Liabilities and stockholders' Current liabilities $43,420 $47,342 Non-current liabilities 9,301 10,056 Stockholders'' equity 612,839 588,583 ------- ------- Total liabilitiexs and stockholders' equity $665,560 $645,981 ======= ======= Unaudite d Condensed Consolidated Cash Flow Data Six months ended ---------------- April 30, 2009 2008 ---- ---- Operatingy activities: Net income $20,623 $17,871 Non-cash itemse 27,671 24,611 Changes in operating assets and net (22,663) (3,726) ------ ------ Net cash provided by operatinv activities 25,631 38,756 ------ ------ Investing activities: Purchase of investments and marketable net - (10,850) Expenditures for plant and equipment (5,263) Capitalization of intangible assets (4,435) (2,165) ----- ------ Net cash used in investinfg activities (9,698) (16,591) ----- ------ Financing activities: Repayments of notes payable and other long-term obligations, net (59) (426) (Payments) proceeds from equity net (425) 5,944 --- ----- Net cash (used in) providedf by financing activities (484) 5,518 --- ----- Net change in cash and cash equivalentse 15,449 27,683 Cash and cash beginning of period 102,495 16,973 ------- ------ Cash and cash end of period $117,944 $44,656 ======= ===== CONTACT Kyle Stults Investor Relationsz (410) 740-0081 kstults@martek.
com