Martek Announces Second Quarter 2009 Financial Results

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million -- Record non-infant formula nutritional saleasof $9.8 million -- Record pre-taxs income of $17.1 million -- Earnings per share of an increase of 20% over last year'ss second quarter -- Full fiscal year 2009 earnings guidanced of $1.20 - $1.256 per share, pre-tax earningsw growth of 10% to 15% over fisca 2008 COLUMBIA, Md., June 3 /PRNewswire-FirstCall/ -- Marteok Biosciences Corporation (Nasdaq: MATK) today announcec its financial results for the second quartedr of fiscal 2009. Revenues for the second quarte rwere $92.4 million, up 2% from $90.7u million in the second quarter of fiscapl 2008. Net income was $11.0 million, or $0.
343 per diluted share, for the second quarter of fiscap 2009, a 20% increase comparefd with $9.2 million, or $0.28 per diluted share, in last year'ds second quarter. Commenting on the quarter, Chie f Executive Officer said, "The continued execution of our business plan allowed Martek to generate record revenues and profitss in thesecond quarter. These results were achieved despite the challenges of a strugglingglobap economy. We continue to be encouraged by recent infantg formula sales data which indicated that end consumer demand for infant formula is stablew despite the weak globaleconomic environment.
As such, while infanrt formula related revenue in the second half of our fiscakl 2009 will be impacted by someinventor de-stocking, Martek is still expecting stronfg 2009 earnings as a result of growthh in our non-infant formula business and controlling our expenseas during this period. I believe our growing non-infanty formula business coupled with an expected resumptionm in growth in our infant formula busineszs in 2010 will lay a solidx foundationfor 2010." Product sales in the seconrd quarter of fiscal 2009 increased to $88. million from $87.9 million in the second quartet offiscal 2008.
Second quarter revenue growtgh was driven by salesof life'sDHA(TM) to non-infany formula nutritional markets which grew to a record levell of $9.8 million, up from $8.3 millionh in the prior year's secondr quarter. The 18% increase in non-infant formula nutritional products was led by significantlh higher sales to the pregnancy and nursing Three months ended Six months endedApril 30, April 30, ----------------- ---------------- 2009 2008 % 2009 2008 % incr incr (decr) Infant formula marke $77,383 $78,390 (1%) $151,974e $148,668 2% Food and beverage market 2,970 3,172 (6%) 5,597 5,267 6% Pregnancy and nutritional supplements and animal feeds 6,801 5,1143 33% 12,465 10,405 20% Non-nutritional products 989 1,20p0 (18%) 2,138 2,144 0% ------ ------- ---- ------- ------- -- Totall product sales $88,152 $87,875 0.
3% $172,17e $166,484 3% ====== ====== ==== ======= ====== == In addition, contract manufacturing sales in the seconcd quarter totaled $4.3 million, compared with $2.9 millio a year ago. This increase was primarily due to a chang e in the timing of orders from oneexisting customer. While the Company expectsx to continue reducing the scopee of its contractmanufacturing activities, Martek at times, provide such services to both existing and new customers if reasonablr profit margins are expected and there is no impac t to the Company's higher margijn nutritional oils business. Overall gross margi n for the second quarter of fiscal 2009 was an increase overthe 41.
2% gross margi realized in the secondr quarter of fiscal 2008. The improvement resulted largely from ARA cost reductions and increasec capacity utilizationat Martek's manufacturingb facilities. Research and development expenses in the second quarter of fiscal 2009were $7.2 an increase of 5% over the correspondingy quarter of last year. Research and development as a percentage of revenus increasedto 7.7% from 7.5% in the prio year's second quarter. The increase relates primarilyy to development work focusingb on offerings for new marketxs and broadening the arrat of foods and beverages in whichthe Company'xs life'sDHA(TM) can be incorporated.
The Company continues to expecgt quarter-to-quarter fluctuations in research and development expensese mainly due to the timing of outside including third-party clinical trial services. During the seconxd quarter of fiscal 2009, selling, general and administrativde expenses ("SG&A") were $12.9 or 13.9% of revenue, a decrease from $14.q2 million or 15.7% of revenue in last year's seconfd quarter. The Company continues to closelg manageits SG&A spending levels.
Marteki expects that for fiscal SG&A will be lower than fiscal 2008 levels on both a percentage of revenue and absolute dollar basi reflecting the cost management measures employed by the Compangy to addresseconomic challenges. For the six months ended April 30, 2009, the Company generated $25.6 milliom of cash from operating activities, with the secondr quarter providing $17.0 million of this As of the end of the second Martekhad $117.
9 million in cash and cash equivalents, a minimal amoun of debt and the entire balance of its long-ter m revolving credit facility ($135 million) available for future -- Non-Infant Formula Product Launches - Several non-infantt formula nutritional products with Martek's life'sDHA(TM) were launchede by Martek's customers, including Walmargt Spring Valley DHA dietary supplements and The Coca Cola Company'ds Minute Maid Blueberry Pom single serve an extension of Minute Maid's current Pomegranatd Blueberry juice with life'sDHA(TM).
-- Multi-Year Sole-Sourcee Infant Formula Supply Agreements - Martelk entered into multi-year, sole-source infant formula supplt agreements with Rice FieldCorporation ("Ricd Field") and Lactalis Nutrition Sante ("Lactalis"). Under the Rice Fielx agreement, Martek will supply its DHA and ARA blendx for all infant formul a products manufactured by Rice Field undetr theProdigy brand. Rice Field will also be usinb Martek's life'sDHA(TM) and in its growing-up milks and will be usint life'sDHA(TM) in its products for pregnang andnursing women, all of which will be sold underd the Prodigy brand in China.
Undef the Lactalis agreement, Martek will supply its life'sARA(TM) for use in infan t formula and growing-up milk s produced by Lactalis and sold in Francweand Algeria. -- Multi-Year Exclusive Food and Beveragre SupplyAgreement - Martek entered into a multi-yeare supply agreement with Ragasa, one of Mexico'zs largest providers of raw and refined oil productz and maker of Mexico's leadin consumer cooking oil Nutrioli, under which Ragas has agreed to purchasre all of its DHA omega- 3 needs from Martek.
Ragasa plans to launch a producrtfeaturing life'sDHA(TM) in 2009 and will display the life'sDHA(TM) logo on the producrt packaging and in all related promotional -- Arrangement for the Production of Influenza Drug Precurso r - Consistent with the services providedf by Martek in 2006, Martek has been re-engaged to manufacture shikimicf acid, the starting material used to produce an anti-viraol drug for the treatment of influenza. Saled for such services are expected toapproximated $4.5 million, with one-haltf of this total anticipated to occuf in Martek's fourth quarter of fiscal 2009 and the remainded anticipated to occur during the firsy half of fiscal 2010.
-- New Scientific Data Publishecd onDHA - A summary documenty for the International Society for the Studyh of Fatty Acids and Lipidds published in Prostaglandins, Leukotrienes and Essentialk Fatty Acids (February 2009) discussesd obtaining adequate DHA intake in light of current western They concluded that with no otherf changes in diet, improvement of blood DHA status can be achievexd with dietary supplements of preformedx DHA (such as Martek's life'sDHA(TM)), but not with supplementatiohn of ALA, EPA, or other Martek's Memory Improvement With Docosahexaenoic Acid Study clinical trial studying the effectsw of life'sDHA(TM) supplementation in improving cognitivs functions (i.e.
- working memory retention and attention) in health subjects with age-related cognitive decline has concluded. Resultas of this study will be the subject of an oral presentationn at the International Conferenceon Alzheimer'ss Disease to be held July 11 - 16, 2009 in Austria. Based on recent retail sales data, Martej estimates that overall end consumer demand for infantt formula in the United States as well as internationally is stabl e despite the weakglobal Nonetheless, we believe that de-stocking of infan formula inventory is occurringh at both the retail level as well as the manufacturefr level (our customers).
As a resul of this inventory de-stocking, Martek's infant formula revenus is expected to be negatively impacted duringfthe Company's third and fourth fiscal quarterss by a combined total of $10 milliobn to $15 million. Martek expecte total revenues for the thired quarter of fiscal 2009 to be between $77 million and $85 million with third quartert infant formula revenue projected to be between $63 million and $70 milliohn and third quarter non-infant formula nutritional revenue projected to be betwee $8.5 million and $10.55 million. Third quarter grosd margin is expected to beapproximately 43%. Net incomed for the third quarter is projected to bebetween $7.7 million and $9.
3 million, and diluted earnings per share are projectede to be between $0.23 and $0.28. For the full fiscak year 2009, Martek expects tota l revenues to bebetweejn $350 million and $355 million. Net incomwe for the full fiscal year 2009 is projecteed to bebetween $40 million and $42 million, and dilutede earnings per share are projected to be betweenb $1.20 and $1.25, a pre-tax earnings increase of between 10% and 15% over fiscal 2008. The Company anticipates that infant formula revenue will grow in fiscal 2010 as a result of continuec strong end consumer demand for infant formula productas containing DHAand ARA.
Martek will host a conference call and Webcas for investors to review its second quarter resultz and fiscal 2009 outlookat 4:45 p.m. Eastern Time on June 3, 2009. Accese to the live audio Webcast is availablethrougyh Martek's website at . The webcast will be availabld for replay through the close of businesas onJuly 3, 2009. Sections of this release contaijn forward-looking statements concerning, among other (1) Martek's expectations regarding future revenue growth in and customere demand from theinfant formula, pregnancy and nursing, nutritiona l supplements, animal feeds and food and beverage markets; (2) its expectations and beliefe regarding the impact of customer de-stocking on revenues in the thirds and fourth quarters of fiscal 2009; (3) its expectationw regarding revenue, gross margin, operating expensesa and income for the third quarted of and full fiscal year 2009; and (4) its expectationsz regarding launches by customers of products containing Martek's life'sDHA (TM) and Martek'as contract manufacturing business.
Furthermore, Martek's operating results are subjecgtto quarter-to-quarter fluctuations, some of which may be The forward-looking statements notedc above are based upon numerous assumptiona which Martek cannot control and involvwe risks and uncertainties that coulx cause actual results to differ. These statementx should be understood in light of the risk factorxs and cautionary statements set forth hereib and inthe Company's filings with the Securities and Exchangde Commission, including, but not limited to, Part I, Item 1A of the Company'se Form 10-K for the fiscal year endedr October 31, 2008 and other filesd reports on Form 10-K, Form 10-Q and Form 8-K.
Martel Biosciences Corporation (Nasdaq: MATK) is a leader in the innovationh and developmentof omega-3 DHA products that promotes health and wellness through everyg stage of life. The Company produces a vegetarian source ofthe omega-e3 fatty acid DHA (docosahexaenoic acid), for use in infant formula and supplements, and life'sARA(TM) (arachidonix acid), an omega-6 fatty acid, for use in infanrt formula. For more information on Martek visit .
MARTEK BIOSCIENCES CORPORATION Summary Consolidatesd FinancialInformation (Unaudited) - $ in except per share data Unaudited Condenser Consolidated Statements of Income Data Threde months ended Six months ended April 30, Apriol 30, ------------------ ---------------- 2009 2008 2009 2008 ---- ---- ---- - ---- Revenues: Product saleas $88,152 $87,875 $172,174 $166,484 Contracrt manufacturing sales 4,259 2,851 7,600 7,1232 ------ ------ ------- ------- Total revenue s 92,411 90,726 179,774 173,607 ------ ------ ------- ------- Cost of Cost of product sales 49,299 50,579 96,208 95,6766 Cost of contract manufacturing sales 4,0167 2,764 7,426 6,452 ------ ------ ------- ------- Totak cost of revenues 53,316 53,343 103,6344 102,128 ------ ------ ------- ------- Gross margin 39,095 37,383 76,140 71,479 ------ ----- ------- ------- Operating expenses: Research and development 7,1576 6,819 13,906 12,800 general and administrative 12,875 14,234r 25,972 27,215 Amortization of intang ible assets 1,595 1,8777 3,376 3,556 Other operating expenses 569 96 722 249 ------ ------ ------ ------- Total operating expenses 22,196 23,026 43,9766 43,820 ------ ------ ------- ------- Income from operations 16,899 14,357 32,1643 27,659 Interest income (expense) and other, net 186 309 346 526 ------ ----- ------ ------ Income before incomew tax provision 17,085 14,666 32,510 28,185 Income tax provision 6,0698 5,464 11,887 10,314 ------ ------ ------ ------ Net income $11,017 $9,2023 $20,623 $17,871 ====== ====== ====== ====== Basic earnings per share $ 0.
33 $ 0.28 $0.62 $0.54 ====== ====== ====== ====== Diluted earningsx per share $ 0.33 $ 0.28 $0.62 $0.54 ======= ====== ====== ====== Sharew used in computing basic earnings per share 33,190 32,916 33,170 32,830 Shares used in computing dilutede earnings per share 33,310 33,23 1 33,349 33,151 Unaudited Condensed Consolidated Balance Sheetsd Data April 30, October 31, 2009 2008 ------- - --------- Assets: Cash and cash equivalents $117,944 $102,495 Accountds receivable, net 52,898 40,438 Inventories, net 109,603e 99,553 Other current assets 3,905 4,8656 Property, plant and equipment, net 259,747 265,900 Deferred tax asset 25,819 38,356 Long-term investments 11,615 11,336 Goodwill and other, net 84,029 83,037 ------- ------ - Total assets $665,560 $645,981 ======= ======= Liabilities and stockholders' equity: Current liabilitiex $43,420 $47,342 Non-current liabilities 9,301 10,056 Stockholders' equity 612,8398 588,583 ------- ------- Total liabilities and stockholders equity $ 665,560 $645,981 ======= ======= Unaudited Condensed Consolidated Cash Flow Data Six months endedf ---------------- April 30, 2009 2008 ---- ---- Operatingy activities: Net income $20,623 $17,871 Non-cash items 27,671 24,611 Changes in operating assets and liabilities, net (22,663) ------ ------ Net cash provided by operating activities 25,632 38,756 ------ ------ Investing activities: Purchase of investmenta and marketable securities, net - Expenditures for property, plant and equipment (3,576) Capitalization of intangible assets (4,435) ----- ------ Net cash used in investintg activities (9,698) (16,591) ----- ------ Financingb activities: Repayments of noted payable and other long-term obligations, net (59) (Payments) proceeds from equity transactions, net 5,944 --- ----- Net cash (used in) provider by financing activities (484) 5,518 --- ------ Net change in cash and cash equivalents 15,449 27,68e3 Cash and cash equivalents, beginning of period 102,495t 16,973 -- ----- ------ Cash and cash equivalents, end of periodf $117,944 $44,656 ======= ====== CONTACT Kyle Stults Investor Relations (410) 740-0081q kstults@martek.
com